With the dollar plunging more than 2 percent and crude oil surging 9 percent, today Bill Fleckenstein warned that the gold market may spike at any time as gold is poised to rip higher. Also included is a bonus Q&A.
By Bill Fleckenstein President Of Fleckenstein Capital
February 3 (King World News) – Overnight markets were mildly weaker, with the exception of Japan, which was 3% lower, and for no particular reason preopening the SPOOs were indicating a rally of about 0.75%. The market didn’t open quite that high, but in about half an hour those gains vanished and the Dow and Nasdaq lost about 0.5%, with the Dow hanging in a bit better…
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What Goes Up and Down, Must Go Up and Down
Just as there was no catalyst for the rally, there was none for the decline either, other than to say — as we saw yesterday — that surprises are now happening to the downside. And for everyone who thinks the world revolves around oil, while all of this was happening that market was doing not much of anything, though it was up a couple of percent.
I have been saying for some time that I thought the market structure was quite brittle and that once we got through the August lows we would quickly see dislocation. Then last week it looked like that wasn’t about to happen. Now here we are a few days later and once again it seems like dislocation could occur at any moment. I think folks should be on red alert to expect a good deal of damage.
After reducing a few of my short positions recently I started putting a few of them back out yesterday and added to some today. In an interesting development, Intel’s attempt to try to hold prices up to make its earnings (which is what it has been doing with its server chips) now appears to have backfired, as a story today suggested that Google may start using Qualcomm’s products.
Maybe They Ran Out of Memory
Intel made the same mistake in the late 1990s when it kept the price of PC chips too high. It is a classic example of a company worrying about its stock price and hurting its business. I have used that example a lot in the past, and now here is another perfectly good one from same company.
Turning back to the action, the market dropped about 2% in the first hour (led by the banks) and then buyers mysteriously started coming out of the woodwork. Why, I have no idea, but by day’s end they had the Dow up 1% and the S&P 0.5% higher while the Nasdaq was 0.3% lower. It was a really bizarre day to say the least.
Away from stocks, green paper was quite a bit weaker, losing 1.5%, as even the yen rallied against the dollar. It would appear to me that the FX market has been quicker than the equity market in figuring out that the Fed recovery story is in fact the fantasy that we skeptics claimed it was. Oil, as noted, gained a couple of percent early on and then kept climbing, closing the session 7% higher. Fixed income was lower, and the metals were stronger, with silver up 2% to golds 1%, as gold managed to break out over the vaunted 200-day moving average and a long-term down trend line.
Bull Market Two Point Au?
Exactly what the prices are that will spur additional buying is pure guesswork, but now we could see some sort of a spike at any time. It seems to me the gold market is poised to rip higher, as more and more people are finally starting to understand that central bank polices don’t work. All we need is a few converts every few days to have quite a party on the upside. Similarly, many miners are set to break out as well.
My game plan has been to get positioned for the gold market to take out the 200-day MA, which is occurring, while saving some room so that I could add to my exposure if we get a retest of the 200-day MA from higher prices. This may sound like I am trying to be too clever, but I already have a decent-sized position and I will probably use options to increase my exposure.
Put Me In, Coach!
My point in going into this is that for a long time I have advocated not averaging down and waiting until things seemed to be stabilizing and turning. I have guessed we had reached that moment several times in the past and been wrong. Once again I am guessing we are there, and I may be wrong again, but I doubt it. So for what it’s worth, I think it is finally game time.
Included below are five questions and answers from today’s Q&A with Bill Fleckenstein.
Bonus Q&A
Question: Good Morning Bill, is your gut telling you that this is just a tradable PM rally or the real McCoy?
Answer from Fleck: “Both for sure, but likely the latter.”
Question: Hi Bill. Are you noticing the bullish action in AEM? Connecting the highs going back to 12/2010 you get a trendline. In December 2015 it broke through that line. Check the box on the first step in the trend changing. Now we need to see the moving average to keep providing price support. This looks like the first metal stock to have a shift like this. If the market kicks off a bull phase in PM stocks AEM could be the leader.
Answer from Fleck: “AEM is the price leader for sure. Metal/miners are coiled and getting ready to explode. Bulls need to be on red alert and have a game plan as to how to get beefed up if they aren’t already. A big move could start any day now or take another couple of weeks, but we are close.”
Question: Bill, I work as an ER physician around the Texas border and lately we have seen border patrol bring individuals from Brazil, Russia, and even China to our ER’s. While this is not a new thing, what is new is the volume and the fact that some of these individuals both men and women look from upper class strata .Most of us are in complete disbelief because this is not the usual type of people that we get crossing the border very often. You have to see some of these women!!! But honestly, joke aside, my point is that the world sure looks like is falling apart, and it’s probably a lot worse than we think. I am very worried Bill, very much so something big and bad is going to happen. Nothing makes sense. I can’t recall so many things being so chaotic around the world all at once…
Answer from Fleck: “I think we are headed for tough times, for sure.”
Question: Bill, what are you looking for to get aggressive on the short side?
Answer from Fleck: “Nothing specifically, but I have added back some shorts. I think the stock market is in trouble, but I’m aggressively in metals, so I can only be in so many places.”
Question: Bill, gold has moved through through 200day ma but it has done this several times before on the way down. Are you looking for a bounce off of it instead of passing back down through as a confirmation that we are finally moving in the right direction and as a signal for those looking to beef up positions?
Answer from Fleck: “To know as best we can that the bear market is over it needs to clear the 200-day. Then test it from above, then rally again. That isn’t a guarantee, but it would then be highly likely that we are in a new bull market, which is what I expect.”
***To subscribe to Bill Fleckenstein’s fascinating Daily Thoughts CLICK HERE.
***KWN has now released the powerful audio interview with Peter Boockvar, where he warns we haven’t seen real chaos yet, but it’s coming and gold is going to skyrocket, and you can listen to it by CLICKING HERE OR ON THE IMAGE BELOW.
***ALSO JUST RELEASED: Two Legends Just Issued Major Alerts CLICK HERE.
***KWN has also now released the extraordinary audio interview with legend Rob Arnott, who oversees $155 billion. He discusses the carnage in global markets, what to expect next as well as some remarkable investing strategies for investors to weather the global storm, and you can listen to it BY CLICKING HERE OR ON THE IMAGE BELOW.
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