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Markets as of writing now are weak this morning on news of Russia possibly having defaulted on their debt payment and the possible ban on buying of Russian gold by the G-7. If this does happen it should be another bullish signal for gold.
Markets did close up on Friday, but investor commitment and volumes were relatively low on the market upside and stock markets still face a lot of upside resistance.
This week however is a big rebalancing week for the pension, mutual and institutional funds as we are coming to mid year, end of June which marks the end of a quarter. July 1st - July 17th is seasonally the best two week period in the US stock markets since 1928 so expect that to possibly contribute to market volatility along with higher volumes than normal.
We suspect however given the overall “bearish” patterns in stocks (and Advance/Decline Lines – meaning trend is still for more stocks dropping than those rising) and a lack of any sign of market capitulation, as well as continued weakness in Dr. Copper (copper pro\ices are down significantly and are a sign of strength or weakness in the economy), that we are continuing to see simply a “relief rally” and the longer-term downtrend will continue.
With our discipline we are open to change if our indicators tell us, but ALL of our main signals are in the red and anything we do outside that discipline would be speculation.
Speaking of speculation, if you have been advised to “buy the dips” what discipline is that? I guess one could argue that if you are a Buy and Hold forever no matter what the economic conditions are that buying anytime is your discipline but with all the evidence of a slowing economy, high inflation, grotesque global debt and over printing of currency along with the ongoing geopolitical storm in the Ukraine and tensions in other countries around the world one wonders why anyone would take the risk.
Check out a couple of charts we have attached for this week that will make you think twice about buying the dips and also reconsider again what is the best discipline for you to be in going forward. As you know I have not been shy about expressing my concerns that we are heading for a 1929 stock market crash and a deep Recession if not Depression.
The first chart shows how costly “buying the dip” and Buy and Hold can be.
As the insert in the box states, “offered investors many opportunities to lose their money over and over again.” Our advice, ride it out or find a commodity that historically has been a store of value, a safe haven and acted inversely to a large market crash. That would be Gold, the only asset that never reached nosebleed bubble levels in January of this year.
The next chart shows the relationship between stocks and oil during the 2008 Financial Crisis. It acted inversely until oil dropped fast and stocks followed along, that’s when the bulk of the losses occurred. So, keep an eye of oil prices and see which way this goes. If the economic outlook continues to deteriorate one could surmise that the demand for oil would drop as well.
Here is a recent article that funds sold oil at the fastest rate in 15 weeks. Funds Sell Oil At Fastest Rate In 15 Weeks As Economic Outlook Worsens | ZeroHedge
Have a great week and we look forward to bringing you information as something important
Yours in Faith, Family and Finance,
Daryl