The best news I could ever impart upon the world of gold and silver owners
would be that the Great Intervention Bull Market of 2009-2018 in
common stocks has ended and that the world is going to gravitate back to the
traditional safe havens used by savers for over 5,000 years, precious metals.
However, it is probably premature to pop the cork because one glance at the
monthly chart of March 2009-October 2018 reveals a much more sanguine picture
than the one shown beside it. Compare the 10-year monthly chart to the 2-year
daily chart; two distinctly different messages are conveyed.
In the first chart, the events of the past four weeks look ugly, and if
you were a buyer at the September highs, it IS ugly. If, however, you were a
long-term investor that accumulated in the period after the March 2009 lows,
it is not exactly Armageddon. I therefore believe that the jury is definitely
out on the direction of the stock market looking out to 2019 BUT-and this is
important-we MUST rally in November. We are right at that 10-year uptrend
line that sits right around S&P 2,625-2,650, so it absolutely MUST grab
in the next two weeks. Failing to honor the 10-year uptrend line would be the
market's final verdict and one which I will respect by reducing risk across
the board to an even greater degree than I have been doing all summer.
Conversely, it would also be a clear signal for the managed money monkeys to
look to alternatives (like gold and silver) as a way of capturing alpha.
Ergo, the next two weeks are critical. In the meantime, I am carrying
larger-than-normal cash reserves as I await the return of Judge Market from
chambers with the verdict.
Which of these two charts is Chairman Powell seeing?
Fed Chairman Jerome Powell has been raising rates for the better part of
two years and has recently indicated that he intends to increase rates once
more in 2018 and as many as three more times in 2019. President Trump has
been openly critical of these policy moves because the stock market
performance has been a big part of his presidential legacy scorecard as
proven by his numerous tweets celebrating the new highs seen countless times
since his election in 2016. I contend that the Fed has its eyes on the
10-year chart and that is exactly what YOUR eyes should be on. The Fed's
mandate under Powell will not change due to a stock market 10% off the highs;
it might change with negative GDP growth, a faltering CPI, or rising
unemployment-MIGHT. The problem with the politicization of Fed policy and
stocks lies in the incredible rise to power of the financial elite led by the
banks, whose campaign contributions cover both parties in the U.S. and the
leading parties abroad. These banks have been instrumental in taking the
markets down right before the mid-term elections giving rise to Trump's
criticism of the Fed thus deflecting the onus of blame from tariffs and sex
scandals to the policy-makers. As the voters head into the booths on November
6, the vast majority of Trump supporters won't give a hoot about the Dow
Jones Industrial Averages and small minority that do will have the Fed to
blame rather than Trump.
Turning to Canadian markets, would it surprise you to learn that as of
tonight's close, a handful of uranium and vanadium companies have popped on
to the "Top 100" list for performance over the past 52 weeks. Pot
deals still dominate but have slipped noticeably since the legalization event
on the 17. If you notice the 52-week highs for the last year, most of the pot
deals are WELL off the highs. Notice, too, that the only gold and silver deal
of any import is none other than our pick from August, Great Bear Resources
Corp. (GBR.V), which I added in the $2.30 range and which went out for the
month at $3.15.
The month of October went out like a lion with stocks rallying hard but
Thursday's solid performance and Friday morning's blow-out NFP (jobs) number.
AAPL's weakness dominated the day as the final "FANG" bit the dust.
I expected the market to bounce during the first three days of the month as
pension fund flows are invested but AAPL's crushing 7.3% drop has now
eliminated the leadership that piloted the markets for the better part of the
summer and fall. Looking back at the performance rankings for the October, it
is interesting that holders of gold bullion and gold mining shares enjoyed a
positive performance while virtually everything else suffered declines of
6.5-9.2%, numbers that can quickly eliminate bonuses and terminate careers.
Once again, and in honour of an ancient financial tradition, gold and
silver fulfilled their respective roles as "precious" metals,
accordingly defined as "objects of great value; not to be wasted or
treated carelessly." As we head into the final eight weeks of 2018,
there are a great many managers of other people's money who are paying
attention-and it couldn't happen at a more opportune time. Tonight's COT
report shows that the Commercials were covering shorts into weakness while
the Large Spec algobots continued to pile and add shorts/dump longs also into
weakness. As long as the Large Speculators continue to carry such a paltry
number of longs (13,194 futures only; 5,976 futures and options), the gold
price should continue to trend higher through year-end. It is imperative to
remember that major declines in gold have occurred when the aggregate long
positions held by Large Speculators exceed 300,000; we are nowhere near that
figure today and won't until $1,400 is tested by year-end.
Originally trained during the inflationary 1970s, Michael Ballanger is a graduate of Saint Louis University
where he earned a Bachelor of Science in finance and a Bachelor of Art in
marketing before completing post-graduate work at the Wharton School of
Finance. With more than 30 years of experience as a junior mining and
exploration specialist, as well as a solid background in corporate finance,
Ballanger's adherence to the concept of "Hard Assets" allows him to
focus the practice on selecting opportunities in the global resource sector
with emphasis on the precious metals exploration and development sector.
Ballanger takes great pleasure in visiting mineral properties around the
globe in the never-ending hunt for early-stage opportunities.
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