Reduction in Money Printing

Last week was a mild “risk off” week but Treasuries didn’t rise as they usually do. Only gold rose last week as the “safe haven” asset. This week was a much more significant risk off week with both stocks and commodities getting whacked really hard. My good friend John Rubino wrote an article titled “Here we Go Again,” implying that the Fed would soon kick in with a huge trove of money stimulus, triggering stocks and gold into another major upward thrust.

I haven’t had a chance to talk to John yet about an article I read at the end of this week showing that the “Secondary Market Corporate Credit Facility” is not being used now to ensure liquidity in the corporate bond markets. Could it be this is a sign that the Fed is going to let the stock market be on its own through the election perhaps? Might it be this is a sign the Fed is acting to help grease the skids of President Trump? I don’t know, but clearly there is quite a reduction in money printing through this vehicle that would serve to keep stock prices and other asset classes elevated. Our Model Portfolio fell, from a year-to-date gain of 41.82% to a year-to-date gain of just 31.51%. In my personal portfolio shown on your right, my portfolio plunged, from a gain of 40.50% last week to just 25.41% this week.

Yes, it was painful for us gold bugs as well. But it is exactly at times like these when gold gets so hard and when snowflake technical analysts are calling their shrinks for some “safe space” that I find Michael Oliver’s work most helpful.

In showing the long-term chart on your left, from his many years of experience, Michael pointed out that if there are three or more points along a given uptrend or downtrend (or two precisely horizontal points on a flat structure) then you can talk about a structuring being established. Note the red upward trend lines and the flat lying green lines on the bottom (structure) chart. A second point he made was that before a major trend takes place, momentum action almost always signals the move first with a clear structural violation. And usually that breakage isn’t so evident on price charts at that time.

From Michael’s work, major trends for gold are up and there are no nearby momentum or price trend structures defined by prior action to break down through. In other words, this secular gold bull market is alive and well. This downturn provides an opportunity to buy some shares at very reduced values.

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