Gold Shoulder Build And Stock Market Collapse

President of Graceland Investment Management
April 21, 2020

The US stock market is once again in imminent danger of a major collapse. The disturbing daily chart of the Dow Index.

A rally towards resistance has taken the shape of a bear wedge. The rally failed to even reach that resistance zone, and now there’s an ominous breakout to the downside.

The US government has embraced socialism for almost every sector of the economy, except medical care for the nation’s elderly and most vulnerable citizens… during a major virus crisis!

The most socialized sector in America is the stock market. Horrifically, even with relentless government propaganda, endless central bank money printing, and rate cut welfare, the stock market can’t do anything except gasp higher in a failed bear wedge pattern.

America would not have an economic crisis today if the government had a savings mentality instead of a debt mentality. The government never saved for a rainy day, let alone for a crisis, and it never encouraged citizens to save. Given that America has been the world’s lead empire for about a hundred years, that’s totally outrageous.

Now, the government is in danger of collapse if it doesn’t get income tax extortion payments from the citizens, and the citizens are in danger of running out of food if the government doesn’t order the central bank to print money and hand it to the citizens.

Incredibly, the government has yet to take any responsibility for the horrifying failure to save. It seems more interested in sending “bully boats” to Iran with even more borrowed money than it does in preparing itself and US citizens to handle a real crisis.

The oil market is the most recent recipient of “corporate socialism” support from the government. I predicted that support would fail miserably, and it did.

While most amateur investors have been envisioning a “V bottom” for oil, I’ve predicted a horrifying gulag… a gulag that could end with hyperinflation rather than economic growth.

The US “petrodollar” is the pillar of America’s debt-based society. It makes sense that Saudi Arabia’s dictators are revered by the US government, because they are the lynchpin for the petrodollar.

The collapse in the oil price puts the Saudi dictatorship at risk, and if it collapses, so could the petrodollar.

Gamblers can buy a bit of oil for a “price pop”, but serious long-term investors need to focus on the gold market.

That’s because as any empire collapses, gold becomes the asset class that comforts investors and provides financial safety for their families.

The important big picture gold chart.

In a nutshell, the long-term technical charts look fabulous, but in the short-term, investors should expect substantial volatility as the build-out of the right shoulder on that chart gets underway.

The daily gold chart.

In the short-term, gold has broken down from a bear wedge pattern, and that fits with the start of right shoulder “assembly” on the weekly chart.

The short-term gold chart.

The technical action is clearly negative, but a decline to about $1600 would offer investors close to a $200/ounce price sale. The Corona crisis (perhaps better termed a “failure to save” crisis) has increased gold market volatility.

In the past, I suggested passive gold investors buy gold and related items on $100/ounce price sales. Now the number that fits with current volatility is probably closer to $200/ounce.

The GDX chart.

Until the US government begins promoting gold rather than itself as the main key to managing a crisis, gold stocks will continue to suffer during major stock market meltdowns.

The good news is that a pullback would make the charts of GDX and many individual miners look even more bullish than they already look right now.

There’s a small descending triangle in play on the GDX chart. A small dip below the base of that pattern would create a high right shoulder of a nice inverted H&S bottom pattern. The frustrating wait for a break over the key $32 resistance zone continues, but now the countdown to “rocket launch over $32” can probably be measured in just months or weeks of time!

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Stewart Thomson

Graceland Updates

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Stewart Thomson is a retired Merrill Lynch broker. Stewart writes the Graceland Updates daily between 4am-7am. They are sent out around 8am-9am. The newsletter is attractively priced and the format is a unique numbered point form. Giving clarity of each point and saving valuable reading time.

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Stewart Thomson is no longer an investment advisor. The information provided by Stewart and Graceland Updates is for general information purposes only. Before taking any action on any investment, it is imperative that you consult with multiple properly licensed, experienced and qualified investment advisors and get numerous opinions before taking any action. Your minimum risk on any investment in the world is: 100% loss of all your money. You may be taking or preparing to take leveraged positions in investments and not know it, exposing yourself to unlimited risks. This is highly concerning if you are an investor in any derivatives products. There is an approx $700 trillion OTC Derivatives Iceberg with a tiny portion written off officially. The bottom line:

Are You Prepared?

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Stewart Thomson is president of Graceland Investment Management (Cayman) Ltd. Stewart was a very good English literature student, which helped him develop a unique way of communicating his investment ideas.  He developed the “PGEN”, which is a unique capital allocation program. It is designed to allow investors of any size to mimic the action of the banks.  Stewart owns GU Trader, which is a unique gold futures/ETF trading service, which closes out all trades by 5pm each day. High net worth individuals around the world follow Stewart on a daily basis.  Website: www.gracelandupdates.com.

The California Gold Rush began on January 24, 1848 when gold was found by James W. Marshall at Sutter's Mill in Coloma.

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