Analyst: Time to Get Bearish on Stocks, Precious Metals

bear-1397235-640x480From Larry Edelson: It’s been a long, hot, dreary and boring summer for most markets — with some of the tightest trading ranges and lowest volatility seen in decades.

Blame it on whatever, the heat, the elections, diminished investor confidence — it doesn’t matter. All that matters is …

A. We now have some of the tightest-coiled markets, ever, springs ready to explode. And …

B. Short-term cycles now pointing to those springs ready to produce explosive trends in many markets.

Put another way, all that sideways trading of the past several months is finally coming to an end!

And per my recent columns, you should know my forecasts:

For gold and silver, sharply lower into early October.

For the U.S. dollar, sharply higher into the end of the year.

For U.S. and European stock markets, sharply lower into October/November.

For those of you who like my AI charts, here’s an updated montage of gold (silver’s chart is similar), the dollar index and the Dow Industrials.



Click image for larger view

If it were me, as I noted in last week’s column …

I would hedge any gold and silver holdings you may have with inverse ETFs. For gold I would consider ProShares UltraShort Gold, symbol GLL, which is already popping higher.

For silver I would consider ProShares UltraShort Silver ETF, symbol ZSL, a double leveraged ETF, seeking to deliver twice (2x or 200%) the inverse (or opposite) return of the daily performance of silver bullion in U.S. dollars. Already smoking hot!

For the Dow Industrials and the S&P 500, I would consider ProShares Short Dow30 ETF (DOG) and the Direxion Daily S&P 500 Bear 1X Shares (SPDN), both unleveraged.

Lastly, I repeat my warning of last week: Everything I study, all major markets and all my major indicators, tell me we’re rapidly approaching a major inflection point in the markets.

Keep in mind, the global economic and geopolitical scene is nasty, and getting worse by the day. In addition to ISIS and domestic uprisings in Europe and the U.S. …

First, the European sovereign debt crisis is getting worse. In fact, on August 11 a bank in a small Bavarian town 50km south of Munich, said starting September 1, it would levy a “custodian charge” of 0.4 percent on deposits above €100,000.

n 2014, Deutsche Skatbank, a small German co-operative bank in the east of the country, introduced negative interest rates for private clients on balances above €500,000.

Germany’s biggest banks, such as Deutsche Bank and Commerzbank, charge negative rates for big corporate and institutional clients and will soon have no choice but to charge retail banking customers as well.

All the result of negative interest rates and hair-brained policies of the ECB.

Second, disinflationary forces are still dominant. Throughout most of Europe, investors are mainly concerned with getting to cash and liquidity, and taking on little to no risk.

That’s disinflationary and it’s having a major impact on all markets, far more than most realize. Europeans who are not investing in our property or stock markets are hoarding cash, not gold.

Long term, though, it is a major force that supports the view for a major new bull market in gold, other precious metals and U.S. stocks.

But not just yet. Pullbacks are needed first. Think of the pullbacks as the forces needed to pull back the string on a bow, creating a compressive force that when released, will send the projectiles launching forward.

DIA-2016-08-24

The SPDR Dow Jones Industrial Average ETF (NYSE:DIA) closed on Tuesday at $185.31, up $0.19 (0.10%), and was unchanged in premarket trading Wednesday. The DIA, which is the largest ETF that tracks the DJIA, has gained 6.5% year-to-date.

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