Margin Clerks Come Calling

Because this week Mrs. Taylor and I were traveling from New York City to San Francisco to visit our 7-month-old granddaughter, it was logistically necessary to do this commentary after the markets closed on Thursday, April 21, rather than after the usual Friday market close. After a short covering rally on April 20 sent both stocks and U.S. Treasuries higher, some rather hawkish talk from the Fed led to a tailspin in the market in the afternoon.

What is counterintuitive is that foreign demand for U.S. Treasuries has been plunging even in light of such hawkish Fed talk and as the Fed begins to play QT.

On Thursday, almost everything that traded lost value, which is what happens when the financial bubble is deflated. That often happens to gold too in the short term because when the “Margin clerk” calls, you have to come up with the cash. To do so, you sell what you are able to sell, and since gold always has a bid, it gets sold too. It’s like throwing the baby out with the bathwater.

Around 1:00 PM on Thursday, Michael Oliver reiterated in no uncertain terms that equities are now in a significant bear market. But he also pointed out that since equities have topped, there is no reason to worry that gold won’t continue to operate as a safe haven and recently much better than U.S. Treasuries. Here is what Michael wrote to his subscribers on April 21.

The same days circled!

So, all ye gold bugs, watch the S&P 500! That index has signaled via its annual momentum (at the February monthly close) the onset of a major bear trend. The NDX did so at January’s close. A counter-trend rally by the stock market has occurred since the March 8th low. And for gold, a counter trend pullback has occurred since its March 8th peak. If the current minor rally flips back down for the S&P500 (reference dailies on the prior pages), bet on gold doing the exact opposite. And of course silver and the miners will do what gold does.

About Jay Taylor

Jay Taylor is editor of J Taylor's Gold, Energy & Tech Stocks newsletter. His interest in the role gold has played in U.S. monetary history led him to research gold and into analyzing and investing in junior gold shares. Currently he also hosts his own one-hour weekly radio show Turning Hard Times Into Good Times,” which features high profile guests who discuss leading economic issues of our day. The show also discusses investment opportunities primarily in the precious metals mining sector. He has been a guest on CNBC, Fox, Bloomberg and BNN and many mining conferences.