Strictly Necessary Cookie should be enabled at all times so that we can save your preferences for cookie settings.
If you disable this cookie, we will not be able to save your preferences. This means that every time you visit this website you will need to enable or disable cookies again.
Thanks, Gary.
Well, let’s see. I am long all the silvery metals and hopeful. Long USD / JPY in case it goes the other way. And long Treasuries in case we see a deflationary shock.
Funny thing is, they can actually go up altogether, regardless of the fundamentals.
I guess, next week may be the time to go long oil again?
At some point next week, stocks should complete an ICL (maybe oil as well) and gold should form a daily cycle top. It still needs to break the daily cycle trend line first before dropping into its next DCL. That trend line is at about 1320-25. So a break of that level next week would be the signal to start looking for a short term top.
Wow, Gary, thanks for those concrete timeframes. That is definitely helpful. If I understand correctly it would be an ICL when stocks go really down next week. If not so much, but bounce strong on Monday already, would it be just a DCL with an ICL later? ALEX and SURF expect a YCL maybe a bit later this year. Well, I got cautiously long stocks already.
I listened to Rick Ackerman on the KE-Report, who thinks gold will at least go just above 1400 in the next move, but he didn’t mention anything concrete for the short term…silver to at least 22 sth. Rick also thinks that already a slight rally ( 0,5 % in the S & P) may cause short covering which would increasingly feed on itself.
Have a good weekend Gary.
timesframes and numbers
How far down for gold next DCL maybe around 1270 – 1280?
Gary, are you saying that if the dollar continues to slide down and weaken then that boosts the DOW up.
That there is an inverse relationship at work here.
The Jobs Report internals said about 493,000 people left the job force and stopped looking for work.
In October, 161,000 people cut the cable cord and the trend continues monthly in a big way.
Healthcare premiums, copays and high deductibles are killing people’s finances.
Got word my Healthcare premiums are going up 75 percent in 2017…..on a standard plan not a premium plan.
Seeing signs of anecdotal weakness in the economy, oil falling to $44 when most were touting $60.
Ya, I know, it is really terrible. My premiums are going up to about 500 percent. I guess I’m making too much money in silver.
Ya, I know what you mean. My premiums are going up too. I need to make more money in silver to pay for the extra premiums.
You missed PAYROLLS in your post, most always forget payrolls which were up 2.8%, that my friend is inflationary… jobs are only a small portion of the NFP that many always overlook.
I cannot accept what you are saying in todays post about the dollar crashing Gary because there is already an existing dollar shortage and insufficient liquidity to fund markets. Things that are in shortage generally rise in value against their competitors. Your chart suggests the dollar could fall all the way back to the lows seen in the summer of 2014. A complete retrace from where it started in other words. Can I suggest that you take a longer term view and use a monthly chart instead. You may just change your mind from a technical perspective. The dollar will soar and we have likely already started the ascent. It is going to stretch the cycles so far in the process that nobody here will be able to read it or trade it properly.
I think the starting point for for determining what might happen next with the dollar should be concerns over global liquidity levels and unrepayable debts. If M1 is in decline but debt is expanding worldwide then we are heading into a deeper deflation. A rising dollar will also impact most commodities that are priced in USD and oil prices will almost certainly keep falling. There are certainly good reasons that so many funds have gone to high cash allocations as another example or why corporate and other US government bonds with pathetic little yield are still being oversubscribed. Who in their right mind buys those bonds? I would suggest it is people who understand the dynamics of the interplay of excessive debt versus the liquidity available and who want to be positioned not for interest coupons but rather to be holding near-dollar instruments. They see the writing on the wall perhaps as buying power will increase which is a benefit unto itself and separate from either bond price increases or interest rate streams. The only reason gold will succeed in such an environment is because it is still considered to be near-money and a good alternative to dollars themselves. But it usually weakens versus dollars and informs us about the state of inflation or deflation within the global economy. Its success is still far from certain in a broad deflation although I am positive we will not be able to discuss that reasonably with anyone here on this site until it actually transpires. So I won’t get any deeper into that topic. Anyway, getting back to the point, as debts worldwide borrowed in dollars must be repaid in increasingly scarce dollars and with the dollar value itself then rising as a result of shortages we will see a significant pickup in the default rates of private borrowers, business and nations that are unable to meet the higher obligations brought on by dollars being repriced in their own currencies. A deflation is where this is heading and one outcome will be dollar hoarding thus exacerbating the economic decline that usually accompanies a default cycle. If you need to know, a dollar shortage is the very definition of how a deflation is brought on and it is caused by a lack of liquidity versus demands for currency for all ordinary reasons. Debt is just one of those. We should therefore be fearful of a dollar that soars relative to other currencies and all the more so if we have not been the best of savers. Sadly though, the Euro chart is telling us that is exactly where we are going. Our biggest concern is going to be a dollar that flies and sets of a global default calamity in the process. That is what happened in the 1930’s as students of that time period will know. The stock market crash of 29 was really just symptomatic of a larger credit problem. And just to lighten up your day a little, most derivatives are priced in dollars. So this should be more than a usual deflation as a result. What we probably need most right now is another round of QE’s to flood the globe with urgently needed dollar liquidity. And it may still happen as fiscal initiatives are unlikely to fill the void. In the meantime, you are going to get crushed if you take short dollar trades and I would strongly advise against it except on the briefest of timelines. But hey, fill your boots. Someone’s got to be on the losing end of this stick. Unfortunately its going to be almost everybody this time around. There are very few refuges when we hit the end of a credit cycle.
That has never been the pattern. Inflation always comes first, then deflation. That has never changed and it’s why everyone got caught on the wrong side of all markets at the end of last year and the beginning of this one.
And to think there is a shortage of dollars is ludicrous. There are literally trillions and trillions of them locked up in the bond market. Once that bubble pops, and it’s probably already in the process of doing so, all those dollars will come flooding back into assets causing bubbles in stocks and commodities. no different than what happened in the 70’s and early 80’s.
It’s never different this time.
If inflation comes first then you might be able to explain the sharp drop in most commodity prices over the past half dozen years on the heels of the housing meltdown. Those are deflationary forces that brought energy, industrial metals, real estate and agricultural products to the kinds of lows we saw. So this is not the typical scenario where inflation comes first and deflation comes second. Heck, I am not even sure that is a correct statement because it needs to be qualified by some kind of time periods.
When you mention the trillions of dollars locked up in bonds that will flood into other assets I also have to disagree. What you refer to is essentially the “money on the sidelines” idea where outflows of capital in one asset class can buoy another category.
The problem with that idea though is that every bond or similar debt in existence must be bought or sold by someone at some point in time and is held to maturity unless the issuer defaults. In other words, money cannot flow out of bonds in the way you imagine because the bond will not cease to exist by virtue of the sale. It must be bought by someone else in order for the seller to sell it and thus there is no material change in the number of dollars invested there. Only a change in ownership.
You also mentioned that there is no level of debt that cannot be printed away by a government intent on eliminating the problem of overindebtedness and willing to sacrifice its currency. That may be true where its own internal debt is concerned. However in the case of external (to the US) dollar denominated debt and dollar bonds there is no easy answer and it is most certainly outside the control of the Federal Reserve of US Government to act upon.
There are trillions of dollars or such debts in existence at this time. The vast majority of it is not debt that must be paid to any US domiciled bank, private individual, government or corporation either. That is because those debts that are denominated in dollars are actually created outside the country between banks, individuals or corporate entities and the transactions are completely distinct from domestic debt issuance.
What they are in simple terms are obligations that must be repaid in dollars, regardless of the currency that is ordinarily used in that foreign country or by the parties involved. Most of these are not even visible where they are not tracked in detail so the statistics on such deals is incomplete. Dollar bonds is another area where interest bearing debt is issued by sovereigns in need of financing but in order to attract buyers the bonds must be priced and issued in dollars or nobody would buy them. Can you imagine for a second owning Venezuelan bonds that were priced and sold in Bolivars?
Of course not. And that is just one way that dollar obligations are created outside the system we are most comfortable understanding. Dollar bonds are obviously more easily tracked because of their nature and we do know several trillion of those are in the market. All told, the BIS estimates there is upwards of Ten Trillion dollars in dollar credit and dollar bonds that exist outside the US.
That’s a big deal. It cannot be printed away by anybody. It can only be repaid in the currency it was issued in or it can be defaulted upon by the borrower. When and if the dollar surges higher as I expect we should therefore anticipate a crisis in International debt markets to develop. We probably won’t notice or even care that a Swiss household who borrowed in dollars for their mortgage goes bankrupt but we certainly will hear about it when a South America or Eastern European country comes up empty handed on their payment date.
On your last point about there being no shortage of dollars we will just have to disagree. I am not making that information up however. It is a fact and a matter of record which you can easily research for yourself. Part of the reason it is not obvious is because of the points I brought up above where dollar debt is external to the US. If the dollar rises sharply versus the euro as the charts suggest there will be a scramble to extinguish some of that debt and the existing dollar shortage will become acute.
In other words, go long dollars. The Sovereign debt crisis is almost here.
Yawn you should go trade baseball cards you absolutely have no clue what your talking about and garuntee you are no trader I’ll put 1000 says your not your to clueless …
Yawn…
Great chart, Gary. Really puts things in perspective.
No it does not. You had best Google on “dollar shortage” and set yourself straight on exactly what that means for the world before you make a big mistake. Every other investment including gold is going to be priced off of what the major worlds reserve currency does next. Get this fundamental idea wrong and you can be wiped out with the wrong investment strategy. Not that I care what you do. People who worship gold generally get what they deserve.
Go away troll you’ve been wrong for weeks now. Cafrulnwith this one folks he’s clueless…
reading Trump’s “Contract with voters “, I think if he wins forget about dollar weakness, it will strength significantly, oil producers got major boost, means oil price down, general strength in US economy follows. Don’t see a recession for at least couple years..
I would generally agree with that Victor. What is going to throw a lot of people off in the next while is that even as the dollar strengthens it will mean weakness in other currencies. So we will be hearing a lot of stories about high inflation in peripheral economies even as oil prices and other commodities are pricing lower in the US. Europe will be one excellent example of this happening if the euro does indeed fall 20 to 30% as the chart suggests. That is of course defacto inflation as the currency weakens. More recently we have seen inflation rise in England as the pound crashed. And yet like us they still have generally low growth and basement level interest rates. It is all stagflationary as hell and sure to make most there miserable. So lets keep in mind that the reality of a strong currency for the worlds lead economy and currency (US and USD) should not be mixed up with the stories from abroad that will conflict with the deflation narrative taking place here. In fact, inflation can rage out of control in other parts of the world during a debt deflation. Venezuela and Egypt are just two of the most recent examples but others will surely follow as debts become increasingly hard for foreign borrowers to pay back in hard money. And no, I don’t mean gold; I mean USD.
This is where so many people have it wrong. Everyone is assuming we are going to repeat 2008.
There is a massive difference between now and 2008.
In 2008 the debt bubble was in the private sector. Namely in over leveraged real estate. There was no other outcome than for a deflationary crash from that. Why?
Because people can’t print money.
It’s the same reason why some of the European countries are facing deflation. They can’t print euros.
But this time the debt bubble isn’t in the the private sector. The debt bubble is in government debt. As long as governments have access to a printing press there is no way that debt can be deflationary. There is simple no level of debt that can’t be printed away if a government is willing to sacrifice its currency. And as we’ve seen over the last 8 years, more and more governments have been willing to go down this path.
So there is no way this can end other than the same way it’s ended every other time in history. Eventually money printing will cause another series of bubbles and once it hits the commodity markets as an inflationary spike, then and only then will it result in a collapse of the economy and a deflationary crash as it collapses the global economy (the same way inflation collapsed the economy in 2008).
Blah blah blah… You know what guys? There is 80% chance that Pedestrian is wrong. Why? Cos he kept using news, using perceived fundamentals to substantiate a case. Little to no TA. I have learned one thing. Charts are more accurate, fundamentals can take forever to materialize.
its never different this time… nice one Gary will be using that!
Pedestrian: You come to this blog out of no where and make a lot of noise about what you think you know. Do you have another blog somewhere that one could check to see how your past predictions have turned out? I, for one, would be interested to read some of your past pearls of wisdom.
I doubt it, besides who would read it ? He doesn’t make money he just lip flaps his gums then when hes wrong he stops posting … typical troll
pedestrian is long winded
Some say when trump wins, dollar rally, some say drop. Chart says…. I just know when FBI reinvestigation out, dollar drops. Also some say due to uncertainty, Investors going to sell dollars. Let’s see.