A few weeks ago, I published one of my more noteworthy missives entitled
"The Time to Be Short (Again) Has Arrived," in which
I advanced the notion that the level of the 200-day moving average for the
S&P 500 (2,742) was about as good a level to exit the market, if long, or
an opportunity to reestablish shorts, if flat. After a particularly
profitable December, I went into the New Year 2019 cashed up and ready for
another shorting opportunity in the S&P and Goldman Sachs. I decided to
take a stab at a few SPY puts on Feb. 6, with the market at 2,738, and warned
that a "2-day close above 2,750" was my stop-loss point.
It was a moderately good call, in that the S&P immediately tanked to
2,685 but has since reversed and in the absence of any tweets or e-mails or
missives suggesting anything resembling "cover all shorts," I was
officially stopped out of the S&P short on Friday morning on the opening
at 2,761.
Prior to Monday's action, the S&P only had one closing above
2,750 (Feb. 13 at 2,753), spent most of Valentine's Day between 2,732 and
2,753, but then exploded due to positive trade news (meaning rumors to the
positive). We sold the S&P at 2,738; we covered at 2,761; and now at
2,775, I am looking to reestablish the short on the S&P once the Relative
Strength Index (RSI), now 69.01, moves into the 70s, which it should next
week.
While the histograms appear somewhat subdued, the MACD indicator is now as
wildly overbought as I have seen it in quite some time. While I was stopped
out for a modest hit on Friday, like a pitbull on a bone I am looking to take
another stab at the short side. I still consider this to be a textbook bear
market rally, with a retest of the December lows in store before new highs
are achieved in the second half of 2019. However, as I have been writing
since the lows on Christmas Eve, the most powerful of all financial narcotics
is "fear" (of missing out) which, along with its older brother
"greed," is incubated in the most powerful meth lab in existence,
the bear market rally.
Only time will tell whether the algobots' programming will agree with my
assessment, but once thing is certain: this rally is one mother of an opium
den of illusory hope and it is sucking a great many investors into that
familiar "Fed's got our backs!" complacency.
The big story for me this week was not the manipulations and machinations
of the price managers on Wall Street in rescuing the "Great Bull
Market," but rather the abrupt about-face in the precious metals markets
in the face of the capitulation of Jerome Powell and the global central bankers.
Everyone is now rapidly abandoning the entire concept of
"normalization," from the U.S. Federal Reserve to the European
Central Bank to the People's Bank of China, as renewed stimuli are being
discussed and introduced everywhere.
The chart below illustrates how gold responded to those gargantuan
watershed shifts in monetary policy from 2009 to 2011, as the stock markets
became the third mandate, joining maximum full employment and price stability
on the docket. Gold was most certainly headed for a test of the $1,300 level
last week when, in the face of a strong dollar, it did a one-eighty and
headed back up, closing at $1,325 basis April.
For most of this frigid weekend, I have been pondering over the longer
term implications of the Powell Policy shift in late December. The more I
think about it, the more convinced I am of the likelihood of a sustained
advance in gold and silver, mirroring their behaviors in the 2009-2011
period, which was the last time the bankers bailed out stocks. They bailed
out the stock market again this past December because, I believe, Jerome
Powell gazed into the crystal ball and saw the incredible degree of
"financialization" of the global economies wreaking terminal havoc
on the Western economies and panicked. What appeared in that ominous orb was
not only massive layoffs in the financial industries, but wave after wave of
rising populism with the gutted middle class pointing accusatory fingers at
the "Davos Gang."
While declining stock markets and depleted portfolio values frighten the elite
politico-banker classes in every country around the world, nothing (and I
mean nothing) terrifies them more than the specter of the
"madding crowd's ignoble strife," complete with torches, pitchforks
and confiscatory tax policies designed to liberate the wealthy from their
wealth and the governors from government. To the elitists, the working and
shrinking middle classes are magnificent mirrors by which they can view and
compare their enviable lots in life to that of the "deplorables"
referred to by Hillary Clinton during the last American election. However, it
is these very "deplorables" that are manning the guillotines of
revolutionary change in the streets of France in a Millennial March toward a
new world order and not the kind envisioned by the globalists and
politico-banker class.
This anarchist sentiment bubbling to the surface of generational thinking
comes as the cost of maintaining the current world order, and its suppressive
employment policies rise to levels unbearable within the current economic
system. To have 30% youth unemployment in countries such as Italy is
unthinkable, but were it not for the wealth concentrated in the stock
portfolios of the American politico-banker class, the same would be the case
in America.
Which brings us right back to the late-December Powell
"revelation" of just how significant stock markets are to the
public mood and to the maintenance of the status quo so worshipped by the 1%
that own 99% of everything around the world. "Balance sheet normalization"
pales in importance to a marauding middle class seeking out revenge for the
plight in which they find themselves. Adding a crashing stock market to
crashing job opportunities and you arrive at bone-dry political tinder in
advance of a flash fire of social disorder. That, in my view, was the horror
that prompted the policy shift.
In summary, since the Fed Mandate now has three (instead of two) critical
components, the recently added third one being "rising stock
markets," I look to history and the 2009 fiscal policy initiative that
created approximately $14 trillion in stimulus (credit) as the benchmark for
the next two to five years. and the one singular event, rhyming with the
2009-2011 period, that will drive the gold price to all-time highs.
With that as a backdrop, what are the optimum actions to take over the
short, intermediate, and long-term time horizons to adequately protect wealth
from the erosion of purchasing power and depletion of living standards? In
the short term, we must look to the intentions of the bullion bank traders,
who have a distinct advantage over the rest of us by way of unlimited capital
and regulatory sanctuary. The best window into their playbook remains the
Commitment of Traders (COT) Report.
As for the COT, we are still weeks behind in the data. The COT week ended
Jan. 22 marked the terminus of the pullback to $1,281.50, and included a
16,036-contract reduction in the Commercial Trader short position. The next
move was straight north to the January peak at $1,331.10, at which point RSI
got into the mid-70s and reversed. I sent everyone a chart of silver showing
how many tops had occurred with RSI stretched into the 70s, and proceeded to
exit all of my leveraged positions on Thursday, Jan. 31, which was followed
the very next day by a two-week decline that ended exactly on Valentine's
Day. What has caught my eye is that even with the lag in the COT data, it is
obvious the narrowing of the position extremes between the Commercials and
the Large Specs continues, just as it did last spring, but the price action
is decisively different. Last year's rinse-and-repeat cycle saw a $140 drop
in gold, as the Commercials went from 160,000 net shorts in May to over
40,000 net longs in August. In the six weeks we have seen a sharp reversal in
the Large Spec holdings, as prices remain rangebound as opposed to
collapsing, which spells "higher prices ahead."
The reversal day we got on Thursday set up the sharp (and unusual for a
Friday) advance in gold late last week, so leveraged long positions such as
the GLD, SLV, and JNUG calls should be bought—but only on weakness early this
week. If I get a pop into the $1,335-1,345 range for gold, with RSI in the
70-80 range, I will use very tight stop losses on these positions. The long
physical gold and silver positions and the junior exploration and development
issues recommended in the 2019 Forecast Issue portfolio remain intact as
intermediate and long-term holdings in anticipation of new highs in 2019.
Twitter is a useful tool in communicating actions to be taken and going
"on record" with a call.
Accordingly, I sent out a tweet last Thursday at 11:17 a.m. with gold at
$1,313.60 having roared back from a $1,305 low: "Looks like we are
getting a positive outside reversal for gold (at least in the pit session) so
I am buying back all of my leveraged positions (GLD April $125 calls/SLV
April $13 calls) plus JNUG!"
The GGMA 2019 Model Portfolio has been updated as of Friday, and has
advanced 14.56% year to date (YTD), largely on the strength of the
10,000-share holding in Great Bear Resources Ltd. (GBR:TSX.V; GTBDF:OTC)
purchased on Jan. 2 at $2.30. I purchased my first position in GBR in August
at around $1.70, immediately after learning of its exciting gold discovery in
Red Lake, Ontario. The Dixie Project is especially close to my heart because
the first championship in my hockey career was while playing center ice for
the Mississauga-based Dixie Beehives in 1969-1970. We won the Ontario Junior
B Championship, defeating the likes of the Markham Waxers, Stratford Indians
and Hamilton Mountain Bs. The Dixie organization holds a special place for me
and now GBR's Dixie Project is doing the same.
With the S&P 500 enjoying the biggest percentage advance in years,
having gained 10.72% YTD, the GGMA portfolio is outperforming it by a hefty
35.8% in the same time period, and it is the 65% gain in GBR that is carrying
the load.
(This portion of my service is for paid subscribers only. Should you wish
to subscribe to the GGM Advisory (GGMA), email me and I'll send you the
details. mballanger@rogers.com)
Finally, and in closing, I wanted to thank all participants in the Getchell Gold
Corp. (GTCH:CSE) financings during the 2017-2018 stretch for their
patience and perseverance, now that the final verdict has been handed down by
the Canadian Securities Exchange and Canada Depository Services. I must wait
for Getchell to announce the results of the "tribunal" before
making any detailed comments, but suffice it to say that I basically wasted
eight weeks of my life trying to secure justice for my friends and
colleagues.
Now that it is a fait accompli, I intimately know how the Gold
Anti-Trust Action Committee's (GATA's) Bill Murphy and Chris Powell must be
feeling after twenty-odd years of Herculean efforts in trying to secure
justice for believers in the roles played by gold and silver in the quest for
true price discovery and transparency in world markets. Getting shuttled back
and forth between regulators and exchange officials and brokerage firm
compliance departments, as Bill and Chris have been doing since the late
'90s, enduring untold personal expense with not so much as a token retainer,
has been a Nosferatu Nightmare for them both.
I am in the middle stages of writing my memoirs over the Getchell Affair,
and when I am finally able to compare notes with Bill and Chris (and the late
Jim Blanchard), I will reveal what I have learned about the people we think
we trust in their execution of their duties. It is explosive material; it is
enraging material; it is maddening material to the point of violence; and it
evokes the finality of the knowledge and recognition of right versus wrong.
Some of the people in our world have been allowed to function within a
platform bereft of the knowledge or appreciation if what exactly constitutes
actions that transgress the moral compass. They choose to withdraw to the
sanctuary of legal technicality and absolution, a tactic that my late father
would never tolerate let alone condone. The GATA saga and the Getchell saga
carry one thing in common: There is today no avenue of access available to
anyone that seeks to recolonize the very core of the free market. Once
you have all grasped the significance of this last statement, you will have
earned the right to debate it.
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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