October's Rout Was Meaningless

Au Report

Source: Michael J. Ballanger for Streetwise Reports 11/02/2018

Precious metals expert Michael Ballanger discusses recent moves in the stock market, as well as with precious metals equities.

The best news I could ever impart upon the world of gold and silver owners would be that the Great Intervention Bull Market of 2009–2018 in common stocks has ended and that the world is going to gravitate back to the traditional safe havens used by savers for over 5,000 years, precious metals. However, it is probably premature to pop the cork because one glance at the monthly chart of March 2009–October 2018 reveals a much more sanguine picture than the one shown beside it. Compare the 10-year monthly chart to the 2-year daily chart; two distinctly different messages are conveyed.

In the first chart, the events of the past four weeks look ugly, and if you were a buyer at the September highs, it IS ugly. If, however, you were a long-term investor that accumulated in the period after the March 2009 lows, it is not exactly Armageddon. I therefore believe that the jury is definitely out on the direction of the stock market looking out to 2019 BUT—and this is important—we MUST rally in November. We are right at that 10-year uptrend line that sits right around S&P 2,625–2,650, so it absolutely MUST grab in the next two weeks. Failing to honor the 10-year uptrend line would be the market’s final verdict and one which I will respect by reducing risk across the board to an even greater degree than I have been doing all summer. Conversely, it would also be a clear signal for the managed money monkeys to look to alternatives (like gold and silver) as a way of capturing alpha. Ergo, the next two weeks are critical. In the meantime, I am carrying larger-than-normal cash reserves as I await the return of Judge Market from chambers with the verdict.

Which of these two charts is Chairman Powell seeing?

Fed Chairman Jerome Powell has been raising rates for the better part of two years and has recently indicated that he intends to increase rates once more in 2018 and as many as three more times in 2019. President Trump has been openly critical of these policy moves because the stock market performance has been a big part of his presidential legacy scorecard as proven by his numerous tweets celebrating the new highs seen countless times since his election in 2016. I contend that the Fed has its eyes on the 10-year chart and that is exactly what YOUR eyes should be on. The Fed’s mandate under Powell will not change due to a stock market 10% off the highs; it might change with negative GDP growth, a faltering CPI, or rising unemployment—MIGHT. The problem with the politicization of Fed policy and stocks lies in the incredible rise to power of the financial elite led …read more

Source:: The Gold Report