Fundamentals

We are facing the worst pandemic in 100 years while also facing an economic challenge that makes the 2007 recession appear very small in comparison. The financial markets are in the stratosphere compared to what is happening on Main Street. It is difficult to feel comfortable with what is going on politically and economically. Great economic damage has been done.

The media is facing charges of being full of false information even while the media reports more than 210,000 dead in the US from the coronavirus. At the same time, President Trump is saying not to worry about the disease. This is just to highlight the confusion over the fundamentals. Depending on which news sources you follow and which leaders you pay attention to, you can have diametrically opposed views of the state of the country and of the economy. The key is to figure out how to make money in this situation.

We trade gold because it is a leading economic and monetary indicator. It is a currency and is the other side of the US dollar. Gold and silver until 1971 were the guarantee that the US dollar would maintain its purchasing power and its intrinsic value. Since 1971, when the dollar went off the gold standard, the US dollar has declined 98% and is on the way to zero against gold. In 1971, when Nixon took the dollar off the gold standard, the US dollar became a paper or fiat currency. The gold standard prevented the Fed from printing as much money as it wanted to print. That stability made the dollar much stronger and made the US dollar the global reserve currency. Since coming of the gold standard, that power has been in decline. Our debt has increased significantly to levels never seen before in the US. The market is beginning to feel the pressure that the economy is in desperate need of more stimulus. President Trump yesterday said he was stopping any further stimulus bills until he is re-elected president if he is. He then said he was open to certain stimuli. Over the next few weeks until the election, the markets are going to be volatile.

Whoever wins in November will inherit this economic disaster that we are living through. Businesses are closing, unemployment is high, and the economy has been devastated. Unless we get clear policies to address the damaged economy, the entire system is in grave danger. To survive, the system now needs endless amounts of stimulus. We do not know how much, but each time we get stimulus, such as in 2007 and then this year, it helps for a time, and then the system stumbles again. The $3 trillion this year did not fix the system, which is still struggling mightily. When the last batch of aid runs out, we are going to see a tsunami of unemployment, evictions, and bankruptcies on top of a probably pandemic spike as the weather turns cold and people remain indoors more with other people.

Gold

In such troubled times, remember that gold is a tier 1 asset. You can borrow up to 90% against it in many cases. Only currencies can be used as a tier 1 asset, which makes gold a currency. Gold has been a currency for thousands of years.

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Courtesy: TDAmeritrade

Gold is trading around $1,900, which was the resistance level we saw in 2011. Gold is consolidating around that price with the possibility that the market could come down to $1,864 to $1,862, based on the weekly VC PMI data. That would mark a harmonic alignment between the daily and the weekly.

This week we made a high of $1,927 and then it came down below the monthly average and activated a monthly bearish price momentum. It came down to $1,877. The Buy 1 level is $1,828 for the monthly. The market found buyers around $1,877 and then hovered there and rose slightly. We are trading between the average daily and weekly numbers of $1,893 to $1,896, and the harmonic relationship of the Buy 1 levels for the daily and weekly. $1,864/$1,862 seem to be harmonically aligned for today. This is the target, if reached, where it would be excellent to go long. The market appears to be finding buyers a lot sooner. The market will tell us what it wants to do. For day traders, there are no signals today, since they are in a neutral to bearish price momentum. You should wait for the market to reach an extreme above or below the mean to trade. We are waiting for the market to come down to the Buy 1 level and go long based on the daily and weekly or the market will run up to 1,896, above 1,893, which is the weekly average, and activate a daily and weekly bullish price momentum with the goal of daily Sell 1 level of $1,913 and weekly Sell 1 level of $1,935. It would then have the $1,944 level, which is the daily Sell 2 level as a target.

We are long NUGT. We are long JNUG. We are long assets that we can hold without risking margin calls. They offer an incredible opportunity to build equity without the risk of margin calls. They are aggressive ETFs and you don’t want to hold them a long time. You want to buy at 91 and sell at 100, for example. In the short term, we use futures to scalp the market based on the VC PMI recommendations.

Even though gold is down 22 or so, but gold derivatives are trading on the plus side today. NUGT is up 175. GDX is up 86. NUGT is up 189. SILJ is also up. Usually, futures lead the way in terms of price discovery, but today it seems that the shares or ETF derivatives are leading the way. We appear to have found a bottom, particularly in the share or ETF markets.