|
You see, we do not have the same monetary backdrop as back in 2008.
Back then money supply growth measures were decelerating and going down (in some
cases into negative territory). This is definitely not the case today. Money
supply measures are accelerating and at multi-year highs. The growth rates
are not what they were in 2009 and 2010 though, which is partially what has
been holding precious metals back. This is set to change as we work through
2014 however, which will be discussed further below in our discussion on the
approaching hyperinflation you will need to prepare for. In the meantime, and
to give you concrete technical evidence as to why the HUI will in fact
eventually test the two-thirds retrace at 338 (think either this fall /
winter or next year), I give you a detailed HUI / SPX Ratio plot showing that
this relationship is just finishing an extended 19-month decline that should
lead to a decent bounce; but, because this was only the first wave (wave a)
in a larger degree a b c corrective
sequence, we should expect more relative weakness later on. (See Figure 7)
Figure 7
Whats more, and as can be seen above, with respect to
the degree of a bounce to expect in the HUI over coming months,
unfortunately, unless the SPX is destined for the stratosphere, its
not likely the HUI takes out existing highs at 638 established some 19-months
ago now. Such a feat would require the HUI / SPX Ratio to retrace above 50%
and the SPX to vex above 1600, which, as far as probabilities are concerned,
is not likely using history and physics as guides. A more likely outcome,
assuming the SPX tops out somewhere around 1600, which is best case scenario
if the VIX is to remain within the realm of reality, is in fact a signatured
50% retrace, which again, if the SPX tops out at 1600, would suggest a move
back to the highs at 640ish should be aggressively faded, given a move to 700
(as Dave suggests is possible), is not out of the realm of possibility with
only slight excesses above the metrics discussed above. On the negative side
of possibilities, if the HUI / SPX only retraces 32.8%, as you can see above,
this would mean the HUI only makes it up to 525, as we have discussed
previously. This becomes a more likely outcome the longer the Franco Nevada
(FNV) / HUI Ratio remains subdued. (See Figure 8)
Figure 8
So, perhaps it will be a move somewhere in between the 50 and 200 MAs,
with the 155 EMA (Trend Definer) the most likely target given its
unknown to most market participants. This is what I would expect if the FNV /
HUI Ratio is not allowed to run higher in order to
complete the larger degree sequence presented above before beginning a
correction. Remember, its during that correction that
precious metals will be in growth mode (not income), which should propel
gold, for example, well over $2,000. Time is running out in this regard if
precious metals are to make a run higher before the deflationary influences expected
to grip macro conditions beginning in the second half of this year as suppose
to kick in, so I for one, would like to see an extension this week with all
the shenanigans going on (think financial repression) as
unlikely as this may be.
Fast forward to today, and we are looking for capitulations in the
above ratios this week to coincide with options expiry, seasonals, and the
G-20 meeting.
So, dont forget to buy.
Good investing all.
Captain Hook
The above was an excerpt from commentary that originally appeared at Treasure Chests for the benefit of subscribers on Wednesday,
January 30th, 2013.
Copyright © 2013
treasurechests.info Inc. All rights reserved.
Treasure Chests is a market timing
service specializing in value-based position trading in the precious metals
and equity markets with an orientation geared to identifying
intermediate-term swing trading opportunities. Specific opportunities are
identified utilizing a combination of fundamental, technical, and
inter-market analysis. This style of investing has proven very successful for
wealthy and sophisticated investors, as it reduces risk and enhances returns
when the methodology is applied effectively. Those interested in discovering
more about how the strategies described above can enhance your wealth should
visit our web site at Treasure Chests.
Disclaimer: The above is a matter of opinion and is not intended
as investment advice. Information and analysis above are derived from sources
and utilizing methods believed reliable, but we cannot accept responsibility
for any trading losses you may incur as a result of this analysis. Comments
within the text should not be construed as specific recommendations to buy or
sell securities. Individuals should consult with their broker and personal
financial advisors before engaging in any trading activities. We are not
registered brokers or advisors. Certain statements included herein may
constitute "forward-looking statements" with the meaning of certain
securities legislative measures. Such forward-looking statements involve
known and unknown risks, uncertainties and other factors that may cause the
actual results, performance or achievements of the above mentioned companies,
and / or industry results, to be materially different from any future
results, performance or achievements expressed or implied by such
forward-looking statements. Do your own due diligence.
|
|