Gold: A Major Shift In Paradigm
This is a historic day, just as it was last week. It is 7 am PST and silver is down $1.93, last at $12.56. Gold is at $467.50, down $49. This is obviously unprecedented. We are witnessing the biggest transfer of wealth in history. No one expected that the coronavirus was going to be the straw that broke the camel’s back. Sometimes events come out of nowhere. They are called black swans, and we are seeing a flock of such swans. This is the beginning of what is going to be the changing of the guard of the new economic system that is about to unfold.
All 11 S&P sectors are down. Crude oil is down $29, 7 to 8 percent. The S&P is down to about 4,500. We have a massive liquidation across the board.
You need to be calm and collected. The market’s volatility offers a tremendous opportunity. Even though this looks like the end of the world, it offers opportunity. During any crash, even in 1929, there are great buying opportunities. The economic values are collapsing across the world and there is chaos and pain, but you can dollar-cost average your portfolio.
The markets are clearly stating that they have lost trust and faith in the Trump administration. The markets have no belief that the administration has any ability to deal with this crisis. All we have seen have been lies. The administration has been unable to accept that this is a major pandemic. We do not know the full economic implications of what the markets are going to do.
Metals ETFs
The Direxion Daily Junior Gold Miners Index Bull 3x Shares ETF (NYSEARCA:JNUG) is up about 5.37. It is contrary to the price of gold. So we are looking for the shares to separate from this chaos. JNUG is a triple X ETF, which was trading close to 100 recently and is down to 5.40. I would purchase JNUG at the market.
The Direxion Daily Gold Miners Index Bull 3x Shares ETF (NYSEARCA:NUGT) is also a promising ETF. We are recommending that our subscribers buy it at the market, too.
JNUG is up about $1.08 already. We should begin to look at derivatives. Even though they have a triple X velocity, they allow you to trade without any margin requirement.
Markets are tremendously undervalued, so buying JNUG and NUGT right now are great buying opportunities.
Gold
Courtesy: TDAmeritrade
Gold has been coming down into a strong area of accumulation on a weekly basis. The average price for the week is $1,575. The extreme Buy 2 level is $1,446. The Buy 1 level is $1,481. The market collapsed right into the area in blue, which identifies where the accumulation is occurring. The artificial intelligence of the Variable Changing Price Momentum Indicator (VC PMI) identifies the area where we potentially will see buyers come into the market.
You do not want to go short from this area. It is the lowest probability of success if you go short. The odds are that the market will revert back up to the mean with a 90% to 95% probability. I am getting ready to buy aggressively down here. Counterintuitively, given the political, economic and global situation right now, it is a great time to buy. The prices often come down during crises, but offer tremendous buying opportunities. In 2008, silver and gold fell in September. Silver went down to $8 or $9, which is similar to where silver is today. But silver then roared back up to $50 and gold went up to $1,900 by 2011. We are in a similar situation in regards to precious metals.
We are in the panic or liquidation phase of the crisis. Those are the people who need to be out of the market. Any time we have seen this time of liquidation across the board, it usually provides a historic buying opportunity. In 2003, when SARS was first reported, gold was at about $300. That was the beginning of the bull market in gold. It ran all the way up through 2011 to a high of $1,900. You are looking at a new bull market in precious metals. Prices have collapsed to a bottom in the market. I added to my positions. I am down in equity, but it is a huge buying opportunity. I bought NUGT at $5 earlier and it is already at $7. With such volatility, fortunes can be made very quickly.
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Gold mining shares are also on a fire sale basis. You are going to see a reversion in gold mining shares even before the gold market turns around. NUGT and JNUG are triple X velocity and are aggressive. I do not recommend holding onto them long term. If you want something long term, look at indices, the VanEck Vectors Gold Miners ETF (NYSEARCA:GDX) and the VanEck Vectors Junior Gold Miners ETF (NYSEARCA:GDXJ). You can buy them and park your money for the duration of the next bull market in gold mining shares.
I choose not to use margin at this time with futures, since you can get locked limit down fairly easily. I’ve seen too many sad stories in relation to margin calls or who have used triple X velocity shares on to then buy on margin. That is silly and is just pure greed. If you do that, you are doomed in these markets.
If you view this as a business, you can be around for a long time. Put your emotions away or use them as an indicator. We often talk about risk or money management, but emotional management is rarely mentioned. Emotion management is key to making money in the markets, especially in markets like this when they collapse.
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The average gold price for the week is $1,575. The Buy 1 level is $1,481. The Buy 2 level is $1,446. Closing above $1,481 is going to activate a buy trigger. If gold closes above $1,481, it will activate the buy signal. I really like what we are seeing. Gold mining shares appear to be breaking away from the general market. Good buying is coming into the gold market. The signal was triggered and we recommended our readers to buy gold. There is a 90% probability of the market reverting back up to the mean with the mean target of $1,539 and the weekly mean target of $1,575.
The VC PMI give you three different possible levels of protection. We do not recommend using straight stops. For conservative traders, if a signal is activated, you can use the close of the next bar as your stop. Aggressive traders can use a catastrophe stop based on their personal situation and on a dollar value.
Based on our cyclical analysis, we believe that we are witnessing cyclical bottoms in gold and silver. Do not be surprised if gold goes up throughout the day.
If you are trading these markets, make sure you do not overtrade. The greater the volatility, the fewer positions you should carry. You want to be able to stay in the game, so avoid margin calls. NUGT and JNUG allow you to stay in the game, since the worst case scenario is what you put up with marked to market. It limits your exposure to that asset without the risk of a margin call. This business is all about managing risk. If you can manage risk, these markets offer a chance to change your life. We use the VC PMI to help make those decisions while managing risk.
We are starting to see a reversion in gold and the gold mining sector. JNUG and NUGT are beginning to move into an uptrend. 6.58 was the breakout for JNUG, which is in a major breakout. JNUG’s mean is 6.58, and it is breaking out.
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The metals markets are the first area to recognize that government officials need to do something more than they have been doing. The financial markets are down about 30% in a month, which is historic. Since 2008, the central banks have learned to ensure that banks have plenty of liquidity, which is why I don’t think we will be dealing with a global depression. Governments have clearly agreed that they need to print as much money as the market needs, which is what governments are doing. They are planning to pull out all the stops to backstop this market. I believe that some measures are going to be of a historic nature, too. Central banks are liquid enough to provide liquidity to the world, if needed. The question is how fast? We will come through this, and when we do, it will be a better place because the excesses and manipulation of interest rates and of precious metals will be over. You are watching the demise of that system. Focus on precious metals. Once we get this virus under control, the mass of demand that is going to hit the market is going to be incredible. There are few choices available for a massive amount of demand, which could mark a paradigm shift in the price of commodities, especially gold. We are moving into a global shortage of food. The Middle East situation is getting worse. The world economic system is adjusting to these crises. To create a cushion to avoid another depression, governments all over the world are going to have to print money or turn to gold and silver as hard currencies. During times of crisis, precious metals have pulled people through and that will be the case once again during today’s crisis. Buy physical gold. Buy NUGT, JNUG and gold mining shares. They offer an incredible opportunity today.
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