The Golden Musketeer
The debt-funded conflict between the American and Iranian governments now features a blockade of Hormuz.
This blockade moves physical war to the back burner (which will upset millions of chickenhawks around the world) and it moves stagflation to the front.
That’s bad news for most fiat-themed citizens in the West… and it is fabulous news for all gold bug “musketeers”.
The blockade will exacerbate already-terrible fuel shortages in Asia. That might make the US government happy, but it will also create a drop in demand for US products… and that will cause corporate earnings to slip.
That’s the “stag” in stagflation.
This is the short-term USO oil fund ETF. A blockade-oriented collapse in demand would cause oil prices to drop sharply… but not back to pre-war levels.
Also, money managers will soon begin to focus on the US mid-term elections. If neither fiat-oriented party wins a majority, the political quagmire will further enhance the stagflation theme.
For a bear market to begin, both the Dow Transports and Industrials would need to take out their March lows… and the ADL (advance/decline line) would need to close under 545.
The US stock market is clearly overvalued. It’s been able to stay that way for so long because of the relentless growth of the government.
Some pundits believe Kevin Warsh could be the catalyst to end the madness. That’s certainly possible, given his statements that QE needs to be permanently ended, stock market valuation needs to be normalized, and the government needs to bear responsibility for its own horrifying fiscal state.
The Pentagon enjoys lying about the actual costs of its wars and it’s clear the government has little intention of changing its ways. The bottom line:
Got gold?
In the West, most gold bugs are focused on predicting the next big and small moves for the fiat price of this awesome metal. In the East, citizens calmly focus on getting more gold when it goes on sale… regardless of whether they predicted the sale or not.
As the US government’s fiscal mismanagement gets closer to “going off the rails”, most Western gold bugs will likely become eager to adopt the winning mindset of their Eastern brethren.
The big and small buy zones on this chart aren’t just for gold. They are also for silver bullion and the miners.
A general rule of thumb is that big horizontal support zones created by former highs offer investors the most significant opportunity. In contrast, zones created by previous lows are single points in both time and price.
Most amateur gold bugs are going to be most comfortable buying a zone that’s more like standing on a big sponge than being perched on a ledge on the side of a building. In a nutshell, $4100 and $3900 are small buy zones, and the most recent big one was $4400. It’s not too late for momentum players to buy, but conservative and value-oriented investors should patiently wait for the next big price sale and arrival at big league support.
This is the “get more miners” GDXJ chart. GDXJ soared 30% higher from each buy zone low… and did it very quickly. Big buy zones like gold $4400 can be bought twice, but each dip into support weakens it. I urge investors to consider the mantra, “three strikes and you’re out”.
The CDNX “raw” junior stocks have soared from that same gold $4400 zone, and it was also a big support zone for the Dow (45,000).
Here is clearly one of the most enticing charts in the history of markets, the CDNX weekly chart. There’s fabulous left and right symmetry in play for a massive inverse H&S pattern. Also, note the position of the key 14,5,5 series Stochastics oscillator at the bottom of the chart. CDNX enthusiasts should be positioned in key miners now… so they can enjoy the imminent upside breakout and stagflation-oriented surge!
Junior mine stock investing isn’t for everyone, especially with size, but as this gargantuan gold bull era rollout continues, these miners look set to outperform everything! At $199/year, my junior resource stocks newsletter is an investor favourite, and I’m doing a special pricing this week of $169 for 14mths! Send me an email or click this link if you want the special offer and I’ll get you onboard. Thanks!
Here is clearly another of history’s most spectacular charts. This one is the GDX weekly chart.
A massive drifting rectangle is in play, and some technicians may call it a flag. The target of the pattern is $200.
Note the huge rally from the $85 support zone. That zone also corresponded with gold $4400. In a nutshell, as the US government gets ever-closer to going completely off its debt-funded rails, more gold bugs of the West, like their Eastern cousins, are ready to get more gold, miners, and silver!
Thanks!
Cheers
St
Special Offer For Gold-Eagle Readers: Please send me an Email to [email protected] and I’ll send you my free “Get Jacked With J!” report. I highlight key GDXJ stocks that could surge after Fed man Jay’s speech this week! Both core and trading position tactics are included in the report.
Stewart Thomson
Galactic Updates
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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.
