1. Market Update
It's been a nasty start into the new year. Deflation (driven by a weak China)
keeps on eating into the system and now is visible for everybody. I have been
writing about this many times during the last couple of years. Yet the global
puzzle has become so complex that it is basically impossible to correctly interpret
and evaluate what's really going on. I therefore prefer the sober lock at the
charts, even if this means to neglect the three dimensional strategic thinking.
My current conclusion is the following:
Stocks are in a bear-market and should be avoided. The mantra now is "sell
the strength to either reduce your open risk or to short the general stock-market".
Commodities in general should remain depressed yet an agressive bear-market
rally should be expected soon.
Oil has seen an impressive reversal, has probably found it's bottom for now
and is on the way back to $40.
Gold continues to run into a falling bullish wedge which still means very
likely $1.000 before a new bull will start.
South-African Miners are the "mining play" of the year as gold in South African
Rand has not yet hit its technical target. Wait for a larger setback in these
mining stocks before you buy.
Bitcoin is consolidating within an ascending triangle and should be accumulated
on any weakness below $380.
2. Bitcoin within a multi-month bullish triangle consolidation
Bitcoin continues to run into an ascending bullish triangle. Expect this type
of bullish consolidation to last for a couple of months. Currently Bitcoin
is oversold and a clear buy. Within this triangle the bullish pressure is slowly
but surely building.
Action to take: Buy Bitcoin right now and right here
Entry Price: below $380, currently $370
Stop Loss: $290 (22.6%)
Profit Target: $800
Timeframe 6 -18 months
Risk($80) / Reward($430) = 1 : 5.4 (very good ratio!!) - Position Sizing: Don't
risk more than 1% of your equity.
3. The Midas Touch Gold Model on a Buy Signal since January 26th
The model turned bullish again on January 26th.
The recent changes include buy signals from:
Gold USD - Weekly Chart
Gold Volatility CBOE Index
SPDR Gold Trust Holdings
Gold in 4 major currencies
GDX Gold miners - Daily Chart
New Sell Signals are coming from:
Gold Seasonality
GDX Goldmine Sentiment
US-Dollar - Daily Chart
Overall it is not a strong bull signal so far but since the miners (GDX) are
joining the party we have a bull signal again. Any dip below $1.098 will very
likely shift the models result immediately.
4. Gold running into a falling wedge on the monthly chart
Long-term this is bullish, short-term Gold is hitting massive resistance.
5. Gold with a good start into the new year but already overbought
Gold had a good start into the new year. After initially failing at the resistance
around $1,110 it finally broke through this number last Tuesday and quickly
pushed towards the 200MA. Since mid of last week we saw a small consolidation
including a test of the breakout level at $1.110. Today bulls are already coming
back into the market and it looks like gold could run until the upper resistance
of the wedge around $1,135 - $1,140 before this move is over.
Overall I remain skeptical towards the recovery since December. This move
is not looking very impulsive and sentiment is already extremely optimistic
to a certain extent. E.g. the weekly Kitco Gold Survey has posted two weeks
in a row results with gold bulls > 80%. This is a clear warning signal and
goes a long with the unhealthy sentiment numbers for the GDX (see my model).
Besides that seasonality is now fading towards the negative cycle until mid
of June. At least the CoT numbers for gold are still constructive.
Therefore my preferred scenario sees gold failing at $1,135 - $1,140 and starting
a multi-month down leg with a high probability to hit the final low around
$980 - $1,025 until June. But a daily or better a weekly close above $1.140
immediately will change the picture and activate $1,190 as the next target.
Action to take:
Swing traders should patiently wait at the sidelines. There are no good setups
currently in the gold-market. You don't want to buy into an overbought market.
Investors should continue to buy with both hands if Gold moves below $1,050
again until you have at least 10% of your net-worth in physical Gold and Silver.
6. Portfolio & Watch list
Portfolio: Buy Bitcoin below $380 with a stop at $290. Plan to hold
for a couple of months.
Watch list: Market Vectors Gold Miners (GDX)
Market Vector Junior Gold Miners (GDXJ)
DRD Gold (DRD)
Endeavour Silver Corp. (EDR.TO)
McEwen Mining (MUX.TO)
Mag Silver Corp. (MAG.TO)
United States Oil Fund (USO)
Agriculture ETF (DBA)
Track-Record: We got stopped out of our gold short position on January
4th at $1,083 for an outstanding gain of $97/contract or 8.2% (=8.08R).
7. Long-term personal beliefs (my bias)
Gold is in a bear market and headed towards $1,035 - $980. Once this bear
is over a new bull-market should start and push Gold towards $1,500 within
2-3 years.
My long-term price target for the DowJones/Gold-Ratio remains around 1:1.
and 10:1 for the Gold/Silver-Ratio. A possible long-term price target for Gold
remains around US$5,000 to US$8,900 per ounce within the next 5-8 years (depending
on how much money will be printed..).
Fundamentally, as soon as the current bear market is over, Gold should start
the final 3rd phase of this long-term secular bull market. 1st stage saw the
miners closing their hedge books, the 2nd stage continuously presented us news
about institutions and central banks buying or repatriating gold. The coming
3rd and finally parabolic stage will end in the distribution to small inexperienced
new traders & investors who will be subject to blind greed and frenzied
panic.
Bitcoin could become the "new money" for the digital 21st century. It is free
market money but surely politicians and central bankers will thrive to regulate
it soon.
