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Trend
Long Term ~ Bearish- Need a monthly close above 1800 to confirm the bull market final phase underway. Need a monthly close above 1560 to neutralize the trend.
Medium Term ~ Bearish- Need a monthly close above 1255 to remove bearish trend.
Intermediate Term ~ Bearish– Need close above 1172-1182 for higher TREND.
Short Term ~Neutral– Market short term cycles due to peak between last Friday and this Tuesday
Initial Resistance 1128-1135 2nd tier 1154-1160
Support 1103-1112 2nd tier 1072-1082
Our last resistance listed 2nd tier at 1122-1125 and the price high since then has been 1126.
We have often discussed in our newsletter that the inflation or loss of purchasing power we see in prices is NOT a result of RAW COMMODITY inflation. Rather it is a result of massive price increases in government taxes, permits, licenses, fees, services, excise and a host of other charges to support the massive bureaucracy, spending and pensions for the huge amount of employees. These increases along with massive regulations (also to support government pen pusher jobs) has increased cost to business in a substantial way. All of these costs are passed along to consumers.
All of the price increases we have seen since 1998 are a direct result of the above and not COMMmanODITY PRICE increases.
On top of all that, the debt levels both public and private has reached a level where it can no longer be sustained and thus the average consumer (who is living on purchasing power the same as it was in the 70’s) becomes more and more squeezed that over the course of time the paycheck buys less and less and now we have arrived at a point where most can only afford food, clothing and shelter. That means that economies are not growing. Indeed, it takes non-discretionary spending to spur economic growth.
When we couple all of the above with 10,000 baby boomers retiring a day, it can only lead to a global economic slowdown.
That is what we are now seeing. And the result this time will not be a recession, but a global debt default which will lead to a massive life change for most of the planet.
While there are strong forces that don’t want the price of gold to go up, we should realize that commodity deflation is a very strong factor that is also helping to keep pressure on gold.
Commodities sometimes bottom (or peak) earlier than gold and vice versa for periods of up to six months, but they almost always follow the same overall direction.
Oil hit a six-year low this week, reaching $42 a barrel. Odds favor that it will bounce briefly from here, but eventually reach the $32 support level we saw in late 2008.
This trend in the price of oil, alongside the steady decline in almost all commodity prices doesn’t bode well for the future of stock markets across the globe either.
Overall, odds favor that the correction in gold is in its final stages, but that does not mean that the final price low is in yet. Gold has corrected 50% of the entire rally and while that is certainly an important number to watch (the 1040-1080 area in gold), there is still not any evidence that the final low in gold and silver have been made. Odds favor that Oct 2015-June 2016 is the most likely and favored timeframe for the final lows in metals.
Commodity Prices: Predicting a Substantial Stock Crash
By Harry Dent, August 13, 2015
I recently explained that it’s one thing for a central bank to artificially prop up its own stock market. It’s another thing entirely to even imagine doing something similar to falling oil prices. What’ll they do – buy oil futures? Give me a break.
Oil hit a six-year low this week. As I write this, it’s around $43, closer yet to the $42 target I forecast when oil bounced back to $63. After another tepid bounce, it will very likely fall to the $32 support level we saw in late 2008. John Kilduff, a leading oil analyst who will be speaking at our Irrational Economic Summit in Vancouver next month, sees this happening earlier than his original Christmas call.
But oil just got another kick in the shins this week when China decided to return to its old tricks again.
The People’s Bank of China’s move to intentionally lowered its currency ‑ to fight the slowdown made all too obvious by an 8.5% decline in exports – is fundamentally no different than injecting $0.5 trillion into its stock market’s bloodstream or buying empty condos to keep its real estate from tanking. It’s one economic manipulation after the other!
This raised concern over China’s demand for commodities. A weaker yuan probably means fewer imports, and so less demand. As a result, oil and other commodity prices slumped.
All of this might be just a segue way into a much greater point – the overarching collapse in commodity prices that is already beginning to ravage the emerging world. This will only get worse in the years to come, and will quickly take our own stock market down with it.
Commodity prices move in a 30-year cycle that has run like clockwork over the past century. Overall, it’s been pretty reliable since the early 1800s.
We’ve been in a “down cycle” since commodity prices peaked in mid-2008. And in line with the cycle, they won’t bottom out until around the early 2020s – likely by 2023 at the latest.
There are two major reasons for this:
No. 1: The demographic slowdown in developed nations, which affects demand.
And No. 2: The economic slowdown in China
The Chinese have dominated the consumption of industrial metals and energy for years to feed the country’s rapidly-growing economy and global manufacturing export machine.
For these reasons, as much as commodities have fallen – 57% overall, and up to 80% in oil and 70% in iron and coal – they still have further to fall in a series of continued crashes.
More importantly, this continues to be the best leading indicator of the global financial crisis ahead because it affects stock markets in both the emerging and developed worlds.
Now, I’ve shown before how commodity prices move more in tandem with emerging market stocks. Much more so than a stock index like the S&P 500.
Look at the chart below. It compares two leading measurements for commodities and emerging stocks: the CRB commodities index, and EEM, the ETF for emerging market stocks:
commodities
 
That correlation is plain as day.
See the evidence for yourself. World-renowned business strategist Harry Dent believes the final and most devastating phase of the financial crisis is just weeks away.
But as you can tell, there’s been a growing divergence building between the two since the middle of last year. There’s now a 33% gap.
That doesn’t mean the correlation has stopped working. It just means emerging market stocks have at least that much to fall.
They’re already down 36% from their top in late 2007. We’ll likely see that gap close with a breakdown in emerging market stocks in the months ahead.
I expect the EEM index to hit $18 by early 2017 (a 50% crash from here). Ultimately, I see it going as low as $10 by 2020 to 2023 as commodity prices continue to fall through the years to come.
At $36, this index is already testing its three-year lows. The final support level is the 2011 low of $33.50. A break below $36 shows clear weakness. A break below $33.50? That would mean curtains for emerging market stocks.
But like I said, falling commodity prices hurts stocks in developed countries too.
Here’s a chart to explain:
This one suggests that the S&P 500 is ready to fall as well. And overall, it strongly suggests that U.S. and developed country stocks are about to crash something like 25% to 30% or more.
This chart shows that changes in commodity prices and forward S&P 500 earnings per share roughly follow one another. When one goes down, typically, the other goes with it.
If commodity prices fall, it brings global trade down with it. That leaves S&P 500 companies in a world of hurt since so much of their sales are overseas. And since analysts are always looking forward, earnings are going to be revised lower as trade overseas continues to weaken. When that happens, stocks will follow!
Like I said, I expect a 25% to 30% crash, minimum, in the first wave down in the next stock crash. That’s similar to the recent China crash.
Such a crash is most likely to begin in the classic crash season between late August and mid-October of this year.
So be sure to get as defensive as you possibly can in your investments by late August. That goes especially for any bounces in stocks or even oil we might see. They’ll likely occur just ahead before a larger crash sets in.
Gold Short term
Gold made its move to the 1125 area highlighted on the last update as a potential and has since pulled back to support near 1110. The big question now is whether it has more strength and can keep going. Short term cycles suggest no, but they can invert 25% of the time. Still it’s a time to be cautious for a short term peak that could last until month end.
The 50% total retracement of the entire correction at 1072-1080 is key support. As long as we maintain a close above 1103-1110, the short term uptrend can continue so that’s the first area to watch.
Interest rates
Medium Term – Bullish for higher rates
Moving averages 21.13 – 21.06
The pullback in rates held right at the moving averages on the weekly charts and a move back up to test the long term green channel line is underway again. The moving averages are turning up and that is a good that that if we take out the green trend line and the white one just above it, higher rates will become the medium term trend. This time it won’t be because of good economic numbers, but of panic.
Yes higher rates will potentially sell gold off, but it will be a fake out and part of the final wave down for gold. The trend in rates is not far from turning up on a medium term basis. As long as we hold the moving averages, and then take out the green trend line, odds will favor higher rates. And higher rates will be bullish for gold. Perhaps not quite at first, but certainly as the trend accelerates.
Cycles
The next cycle turn is due now, August 14th, plus or minus 72 hours. The bounce we expected on the last update did occur last week, but it was a quick one. It’s quite possible that the bounce is complete and prices are ready to turn down to month end. That is what the odds favor. But August can be a tricky month for gold so its not out of the question that we can get a cycle inversion (25% chance.) Other than that we still should favor a pullback to begin to month end. A close below 1103-1110 would be the first sign that the pullback is underway.
Should prices go higher than last week, then look for resistance at 1140, at the 50 day average. In summary, we should favor a pullback to month end.
HUI
Medium Term – Bearish
Medium Term Moving averages – 164 – 171
Intermediate Term Moving averages – 112.21 – 112.63 – NEUTRAL
We last discussed the medium term trend still being down but a short term bounce to the 120 area could develop first. That is how last week played out and now the question is whether it has more? As long as we hold above the moving averages on a closing basis at 112, the potential for higher will remain in play. A close below 111 will favor lower to month end.
Gold Medium Term
Long Term Trend ~ Bearish since Oct 2013 @ 1361
Long term Moving averages 1350 – 1429
Medium Term Trend ~bearish – Moving Averages 1190-1200
Gold supporting at the 1080 price area and the 50% retracement of the entire bull market. Odds continue to favor gold will attempt a bounce here, but on a medium term basis, there is still no evidence that this will be the final low. Not that it is out of the question, but it’s not the odds favored point.
Just the same, odds are high here that gold should hold the 1040-1080 area and at least try a rally attempt during August. As long as we are below the dual yellow downtrend line, the medium term remains bearish.
GOLD ETF GLD
Moving Average Trend ~ 105.23 – 105.17 –neutral
GLD did find support at 103 and how the test is to overcome the moving averages on a short term basis. That will be 1st resistance but also that gap in price on the way down at the 107-108 area and the white line at 109 is also resistance. We got the push to that area last week and now it’s a question of whether we reach the white line at 109 before a pullback goes back in motion.
GDX
Intermediate term Trend moving averages 13.93-13.87 - Neutral
GDX has broken the 2008 lows and until we reverse back above it the trends remain down. On a shorter term basis, price did bounce back and fill the gap as favored last week. With that said, the trend is now neutral and its not out of the question for price to test the green trend line next.
What next ?
The bounce to mid-August has been mild and while the bounce can continue to months end, we need to remain cautious as short term cycles could again begin another downturn this week. Most commodities are in downtrends and thus we should remain favoring the downside overall.
Bottom Line
We got the bounce expected last week, but short term cycles favor we are peaking with another pullback to month end. A close above 1126 would put that forecast into question.
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