My last missive was entitled "Gold's Relative Strength Index indicating a bottom is here,"
and it was dispatched at noon on Thursday but was written that morning after
I had tweeted out the following:
Michael
Ballanger @MiningJunkie
With the move in the relative strength to sub-30, I am opening a 25%
position in the GLD July $120 calls @ $1.40 looking for $127 by expiry.
6:35 AM - 21 Jun 2018
That morning the gold market plunged to $1,262.40 and it was that drop
that enabled me to scoop those calls at $0.05 above the all-time contract low
at $1.40. I have since added and expect that the lows are in for the gold and
silver markets for 2018. We might have one final attempt in the next three
weeks to probe the sub-$1,270 zone but the RSI reading at 125 last Thursday
in the latter part of the session spoke volumes but only after we got the
reversal back above the $1,270 level and the coincident bounce in RSI back to
the mid-40s (on the 10-day chart).
In a nutshell, what we have in place now for the precious metals is a
perfect storm of oversold technicals, compelling fundamentals, geopolitical
drivers, and absolutely abysmal sentiment going into the month of July, which
typically marks the onset of the positive gold-silver seasonality period that
extends through to November. There is also one other condition that is
overwhelmingly bullish and it is that the precious metals are the unequivocal
recipients of a MASSIVE serving of total and abject investor APATHY.
Here is why I say that. I am a member of a marina in Honey Harbour that
has a parking lot full of Mercedes, BMW, Audi and high-end trucks all blown
out with the maximum of toys, not to mention the million-dollar vessels tied
up in their slips. We had a "Member Appreciation Night" a week ago
and as I was wandering around saying hello to all of the members
("working the room"), I asked each and every one of them this
question: "What importance do you place on gold and silver as a
strategic portfolio weighting?" IF I got a look that implied a "WTF
are you talking about?" I countered with, "Sorry, Buffy, what I
meant to say was "Do you have any gold or silver in any of your
accounts?" If the response was "I leave that to my advisor but tell
me—SHOULD I?", biting upon the knuckles of my right fist, I immediately
avoided the urge to mount the nearest soapbox and sound off with one of my
classic rants and simply "took note."
Well, you can imagine the results of my totally biased and unscientific
survey—not one of my fellow yachting compadres has any degree of interest in
gold and/or silver. No one cares. Not one person. Adding insult to
injury, they were, to a soul, absolute EXPERTS on condominiums, rental
properties, residential real estate and REITS, all of which have been
exceptionally superb investments for them all and especially since they
reside in the heart of the largest bubble in global real estate prices EVER.
I can't blame them for being focused on "that which has worked" and
ignorant of "that which has sucked," which is always the state of
investor psychology AT MAJOR INFLECTION POINTS. And that is, in my opinion,
precisely where we are—at a major inflection point in global trends. It might
be the singular most important inflection point in history.
It is a different ball game this summer versus any other summer since 2008
because the Federal Reserve has made a watermark shift in policy. It is
applying the brakes to a steamrolling economy, one which is finally
responding to unprecedented monetary stimulus and market interventions. It is
rolling back all of the market safeguards that allowed the "Buy the
Dip" crowd to puff out their chests and strut their collective
"stuff" in an all-encompassing mass confusion of the importance of
brains relative to Fed-induced bull markets. I won't bore you all with my
anti-bank, anti-government vitriol that you have all heard before because the
reality is that blind idiocy has made obscene fortunes in the last ten years
since the world all agreed to bail out the thieving bankers as opposed to
those of us that have adhered to the principles of sound money and
constitutional prudence.
The logic of owning an asset that has survived 5,000 years of
parliamentary, dictatorial, oligarchial, and omni-sectarian profligracy
seemed brilliant in 2007 for all of the right reasons but let's face it, you
can only listen to your car saleman brother-in-law boasting about his FANG
profits for so long before your head goes into a serious speed wobble. (I
know mine has…) My point is this: One needs the patience of a cheetah, crouching
in the sub-African grasslands, slowly awaiting the arrival of the herd of
dehydrated elands all moving in a dangerous and desperate course toward the
waterhole, ready at first notice to set off on a rip-roaring assault at the
unfortunate slowest of the herd. I will NOT submit myself either in
investment posturing or psychological capitulation to do anything but await
the arrival of the herd. It is coming; the spoils are just beyond the tree
line; the feast will be wondrous.
Never doubt it for as much as a breath. If you blink, it will be gone.
Charts courtesy of Michael Ballanger.
Michael Ballanger Disclaimer:
This letter makes no guarantee or warranty on the accuracy or completeness of
the data provided. Nothing contained herein is intended or shall be deemed to
be investment advice, implied or otherwise. This letter represents my views
and replicates trades that I am making but nothing more than that. Always
consult your registered advisor to assist you with your investments. I accept
no liability for any loss arising from the use of the data contained on this
letter. Options and junior mining stocks contain a high level of risk that
may result in the loss of part or all invested capital and therefore are
suitable for experienced and professional investors and traders only. One
should be familiar with the risks involved in junior mining and options
trading and we recommend consulting a financial adviser if you feel you do
not understand the risks involved.
