With the Dow surging and gold and silver continuing to trade firm, one of the greats in the business sent King World News a fantastic piece saying he believes that the gold market has already bottomed and is headed higher, but the stock market will roll over, hit new lows, and then accelerate to the downside, plus a bonus Q&A that includes questions on whether or not the Fed has lost control and also covering the turn in the gold market.
By Bill Fleckenstein President Of Fleckenstein Capital
October 7 (King World News) – There was obviously a fair amount of motion while I was on the road — as is so often the case. (Although I have absolutely no explanation why, this phenomenon has accompanied my travel schedule off and on for about 20 years.)…
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Going back to last Friday, the nonfarm payroll report was about as poor as one could have expected, and probably comes closer to reflecting the underlying economic conditions than the prior (stronger) ones. It would appear that the majority of folks continue to believe that the recent break in the market was just a correction, the recent low has been tested, and now we are off to the races.
I think that is wrong and what in fact is going to happen is we will have a failing rally, at some point in the not-too-distant future we will take out the prior lows, then the race to the downside will be on. What will trigger that I can’t say. It is certainly possible that earnings season could do it, though oftentimes it takes the cumulative effect of a handful of disappointments to break the back of the market, but seeing both Yum! Brands and Adobe miss at beat-the-number is an indication of what I expect we will see a lot of in the next few weeks.
As for today’s action, the indices were about 1% higher from the get-go as they followed the SPOOs from overnight. However, by midday or so the market was back closer to flat, led by a decline in the Nasdaq. Beneath the surface, from a short-selling perspective, Intel has been quite strong, I assume because there is some fantasy being told by the IR department that all is well, PCs are making a comeback, and datacenters will stay strong. I have no idea if Intel has figured out a way to stuff the channel one last time, but I continue to feel strongly that it is on borrowed time.
Apple Slider Anyone?
In addition, the suppliers to Apple have been unable to rally, even in the rampage of the last several days. Thus, perhaps folks are starting to figure out that expectations are too high from a volume standpoint for Apple, which means suppliers are going to be roughed up, not the least of which because (away from Apple) their other businesses are most likely suffering as well.
Turning back to the action, after the midday selloff we had another rally that got almost back to the highs before stalling out, with the indices gaining 0.5% to 0.75% on the day. Away from stocks, green paper was mixed, fixed income was a bit heavier, oil was flat, as was gold, while silver gained 1%.
Can You Dig It?
The action in gold and the miners in the wake of the NFP has been quite strong, and I believe that the worm has finally turned and I would expect that the metals complex will behave a bit better on pullbacks. Not to say there won’t be violent reactions to the downside, because there will be, but hopefully they will dig in at higher prices and not be under pressure for quite as long.
If the technical action begins to improve, others will take notice and that will bring in buyers, which is how new bull markets get rolling. There is certainly no shortage of facts to support a much higher gold price. Part of what has held it back is that it just couldn’t build any momentum, for whatever reason.
Included below are four questions and answers from today’s Q&A with Bill Fleckenstein. The questions are from his subscribers and they get to read Fleckenstein’s answers every day.
Bonus Q&A
Question: Hi Bill. No question but an observation. ‘GDX’ has traded 103 mil and 92.6 mil shares the last few days in a up arrow. I have been doing this a very long time and in my opinion this could finally be a good sign for the miners and the metals. I believe a bottom may have finally been reached. Let’s see how this plays out.
Answer from Fleck: “I agree, thanks. Hope we are right.“
Question: Hi Bill, has the recent rally in the miners given you confidence we’ve seen a bottom, or are you looking for them to hold their own if we see a retreat in the gold price? Are you looking for something else? Thanks
Answer from Fleck: “Yes, I think that we have seen the lows, but only time will tell.“
Question: Hi Bill: Just for your information one BIG GUY today bought 50,000 June 125 calls of GLD at $2.23 per call investing $11.3 million! With GLD closing at 109.86 isn’t that price a little expensive? Thank you
Answer from Fleck: “Only 8% or so away, and it could happen in several days if the right confluence of events occurred. People just don’t realize what a coiled spring the gold market is.“
Question: Bill – what odds do you give that the Fed has turned this market higher? i.e. that they have not lost control, yet.
Answer from Fleck: About zero. But they are trapped, they haven’t “lost control.”
***To subscribe to Bill Fleckenstein’s fascinating Daily Thoughts CLICK HERE.
***ALSO JUST RELEASED: Gerald Celente – The Elites Are Setting The Public Up For A Financial Wipeout CLICK HERE.
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