Weed Stocks are Going Bonkers!

Since the end of December, it seems like another dot com bubble in the making. The crash is going to be hard.

Scoremore’s Dream Chart

Palladium : What is it ?

https://en.wikipedia.org/wiki/Palladium

Does This Chart Keep You Awake At Night ?

 

Well, maybe that would be a bit extreme, but I just thought I’d explain why I don’t think it’s anything to worry about.

For those of you who don’t think the Dollar Cycle is likely to repeat, this won’t help. However, this is my explanation. Look at 1988 on the chart above. Here it is zoomed in…

Now lets compare that with where we are today…

Remarkable similarities, I think you’ll agree, but here’s the thing. Just as gold looked ready to make a bullish launch in 1988, it flopped, and fell 50% in 10 years. That’s 10 long years of losses for anyone who held on. Why ? Cycles. They all run alongside each other, intricately connected. Supply/demand plays a part, but large fluctuations in the currency index will play a huge part, especially if it were to rise by 50% for example. Which brings us to the Dollar Index. Cutting to the chase – where were we in the Dollar Cycle in 1988 and where are we now ?

Two chart patterns – 1980’s and today. Both look very similar. Both look bullish. One couldn’t achieve it’s potential, then other can.

All Systems Go ?

or both patterns fail and we probably will fall below $1000

Nasdaq 100 vs Gold: Pre-Bubble Backtest Complete?

Shared this chart on Goldtent back in December, before the 2019 backtest of the 16 year Inverse Head and Shoulders neckline. Fast forward a few months to today and it looks like the backtest may have completed.

This is the chart that keeps me bullish on the Nasdaq 100 / QQQ in favor of Gold. Not necessarily bearish on Gold, I actually want Gold to go as high as it can. If the NDX:GOLD ratio re-tests the tech bubble peak ratio near 17.0 with Gold at 2000, then Nasdaq 100 would grow to 34000. On the other extreme, if Gold falls to 500, then NDX can grow to 8500, keeping that 17.0 ratio.

I’m going to use that 20 year neckline as my line in the sand. I’ll switch from NDX-bug to Gold-bug when that line is breached and backtested.

This is also one of the charts that keeps me using the Nasdaq 100 as my “momentum filter” for my trades. Below is an example of a real trade I made where I bought Turning Point Brands (tobacco and vapor producer) near the breakout of an ascending triangle on its NDX ratio chart. Still holding this stock. “Sit Tight and Be Right” as long as the ratio is “right”. Please check out my blog post here to see 10 examples of buying high growth stocks on Nasdaq 100 ratio breakouts. Sadly, none of my top ten ratio breakout trades are gold or silver miners (we’ll see if that changes in a year) -Harry

Where’s Washer and His Weeds?

Weed stocks seem to be on the move again. Sold all my gold stocks and am up an average of 15% since last month with weed stocks. Up 20% with ACB alone in a matter of 2 weeks. Washer’s insight is valuable. Another bubble seems to be forming. I want to know when to bail.

More economic insights…From my friend Carl

This is what happened leading up to the market break down in 2008.  Large investors who were told they could protect their downside risk with asset allocation programs ended up owning the same investment profile.  They may have 20 different asset allocations with small exposure in each one.  The theory is pretty simple actually, if one asset declines the others may not or will not.  In a panic asset allocation is the straw that breaks the investment back as sellers start selling all of the assets seeking cash.    The problem that emerges is that as fear takes over there are less and less funds committed to the buy side.  When trouble emerges that is systemic there are few buyers.
 This is not 2008 with an attack on the banking system that could have destroyed the U.S. financial system.  Without the actions of the Federal Reserve and the success of TARP we could still be trying to manage a depression.  Now the problem that maybe faced is that is low interest rates helped banks regain their liquidity but at what cost?  Now all three main types of borrowers including individuals, corporations and governments are loaded down with records amount of debt.  That is a natural outcome of low interest rates.  People and orgs borrow money because the low cost makes it psychologically acceptable.  This can cause two drip, drip, drip water torture events.  One is that defaults similar to what is happening with auto loans now slowly start increasing.  At first the markets will ignore this problem, but if it spreads to credit card debt and if home sales continue to decline it could mean consumers will be the first to experience financial stress.  They will soon be asking “why did I buy that car, house or boat?”  Why did I borrow money for a college education at an expensive school when I could have went to one at half the cost?  Eventually corporations that are borrowing large amounts of money at high yields because their prospects really are not good will come under fire and bankruptcies will start emerging.  Eventually investors will wonder about the role of inflation as the value of currencies are questioned as governments are forced to borrow more and more money to pay their rapidly increasing interest costs.  The canary in the economic in this scenario I believe remains the price of oil.  If it climbs faster and higher than most believe possible inflation could be come a huge problem speeding up the decline of the world economies.   The second drip, drip event  is the markets drop slowly and investments still have the illusion of hope.  Hope is poison in the decision making process when it has to do with stock ownership.
Carl

Gold Stocks Outperforming Gold but not Stocks

Gold Stocks Outperform Gold but Not Stocks

Dr. Copper – Monthly

Its called Dr. Copper because its said to have a PHD in economics. Here is a monthly view of the $price of copper from 1980 to present. It seems evident that the price moves in a 7 or 8 year cycle, trough to trough – or at least it has for the last 4 cycles. Three of the cycles were left translated (LT) – that is, the price rose for a shorter length of time in the cycle than the decline. In the 3 LT examples the price climbed for about two years, then gradually declined to the 7 or 8 year low. The outlier is the right translated period from ’02 until ’09 when the price climbed for 6 years and then collapsed into the 7 year low.
That brings us to the present cycle that started in January 2016. The question is – has the price of copper peaked? For clues we might look to on balance volume (OBV) as compared to the previous cycle, and to MACD as compared to all previous cycles. Both suggest copper has already peaked at year 2 and is declining into a cycle low due in January 2023.

$Copper Monthly

$Copper Monthly with $Gold overlay
What is interesting, and perhaps a little unsettling, is the correlation with the $price of gold. Its not perfect, but there is a correlation.

Dollar & Gold Since The 1970’s

Since the gold standard was removed, and things re-adjusted in the 1970’s, it’s very clear to see what has happened. There is probably no need to make it any more complicated. Just 2 charts is all you need.