Monthly Archives: July 2016

SIGN OF A BUBBLE – HINT, IT ISN’T IN THE STOCK MARKET

I find this almost hilarious. Several well known commentators have come out with a recent piece warning that there is extreme complacency in the stock market, and a top is forming soon. They go on to suggest that one should protect themselves by buying bonds.

First off they are kidding themselves if they think there is complacency in the stock market. The ROBO ratio is still at levels usually only seen at intermediate degree sell offs. This is the ratio of retail put buying  to call buying. The most clueless traders are buying puts at a feverish pace. Does this sound like complacency?

On the other hand they suggest buying bonds. Bonds have been in a 36 year bull market. This has gone on so long that in most of the world we now have negative interest rates. Think about that. You are paying a bankrupt government for the privilege of loaning them money. This has to be the most illogical concept imaginable, and I would say a sign of the most extreme complacency, maybe ever seen in history. Yet these analysts feel that stocks are ready to collapse, so you should buy bonds.

Seriously you can’t make this stuff up. This is how illogical traders get during bubbles. Common sense just goes right out the window.

I have news for these guys, the bubble isn’t in the stock market.

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CHARTS OF THE DAY – DON’T FORGET TO LOOK AT THE WEEKLY CHARTS

The Weekly Charts for Nasdaq, Gold, Miners, France, UK, Germany, US Dollar and the Euro.

Most traders are so short term oriented that they forget to look at the weekly charts. The weeklies will tell you the intermediate trend. It’s never safe to trade against the intermediate trend unless it is very late in the intermediate cycle.

weekly charts
weekly charts
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SMT WEEKEND REPORT

SMT WEEKEND REPORT

In the weekend report I’m going to discuss the impending bear market in the dollar. More than anything over the next several months you have to get this call right. It’s what is going to drive the bubble phase in stocks and gold in the years ahead, and I still see many many traders stuck assuming the dollar is the prettiest pig in the pen when in fact it was the first currency to fall in 2001 and it will almost certainly be the first currency to crash in the coming inflationary wave. 

The rally from May of 2014 to the top at 100 last year will turn out to be one of the greatest head fakes in history, and it has set the stage for what should turn out to be an inflationary period on a scale similar to, but opposite the deflationary period of the 1930’s.

This is an important weekend report. I urge everyone to at least get a monthly subscription and start to prepare for what is coming.

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CHART OF THE DAY – DOLLAR BEAR MARKET

Dollar Bear Market

The first stage in a bear market begins with a severe drop below the 200 day moving average. This serves as the shot across the bow warning. Then there is usually at least one more attempt to recover the 200. When it fails the bear market starts in earnest. The dollar has dropped below the 200 this morning.

dollar bear market
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CHART OF THE DAY – NASDAQ PULLING THE MARKET UP, AND DOWN

NASDAQ PULLING THE MARKET UP, AND DOWN

Markets don’t generally go through a major resistance zone on the first try. Notice it took the S&P 5 tries before it could break through the 2015 high.

I think we can expect the same thing when the Nasdaq tests the all-time highs. It should pull back, and I expect it will take the rest of the markets down with it. Nasdaq will likely pull back to the 5,000 level.

nasdaq
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CHART OF THE DAY – EVERYTHING GOING UP TOGETHER

EVERYTHING GOING UP TOGETHER

Just like I said, all assets are going up together. Sure, there will be brief periods where something will diverge for a few weeks or months. But the natural state of markets is for everything to rise during periods of global QE.

I knew this would resume once the manipulation of the gold market ended. I know of no other analyst that saw this coming. Why? Because all the other analysts assumed that gold was in a natural bear market. It wasn’t. The bear market in gold was created by suspension of the position limit rules allowing one or two big players to control price.

I continue to see clueless analysts expecting the stock market to collapse and gold to soar. Folks, if the stock market collapses it would be a massive deflationary event, and I’ve got news for you, during a deflation gold is going to crash as well. We aren’t going to have deflation. Open your eyes. Everything is screaming that inflation is coming, not deflation.

everything going up together
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