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Over the last couple of weeks there hasn’t been a lot of action in the markets. We continue to see very tight trading ranges that are likely due to the low volume. But more importantly the markets are now dealing with the background noise of the second half of the fiscal cliff negotiations — the debt ceiling.
Lets go to the charts …
Bonds Trending Lower
Bonds remain in a downtrend from their record high in price late last year and the record low in yields. And the cycles in the bond market are telling me that bond prices could plunge quite sharply in the weeks ahead.
Click the chart for a larger view.
Prices are rallying a tad, but overall the action is very weak. I expect this downtrend to continue because the bond bubble is imploding. The next stop for the 30-year Treasury bond will be at approximately the 135, 136 level. And I have almost no doubt whatsoever that we will see bonds fall and rates rise as we enter into the serious eleventh-hour negotiations on the debt ceiling.
There’s even a chance based on some of the cycles I’m looking at that Washington may not reach an agreement. And the government may have to temporarily shut down!
Gold Still Has
Room to Fall
There’s not much happening there — just a little bounce higher. You can see that we remain below an important channel resistance and below an important cyclical trend channel. We may move a little higher to just back above $1,700 to test that resistance. But look at all the air down below here!
I maintain my view that the next great buying opportunity coming in gold will be at much lower prices, most likely during the first quarter of this year.
Click the chart for a larger view.
Same Story for Silver
Silver is really just sort of climbing along this lower support level. It’s trying to rally, but the rally is very meager. Once we break the support level down around $31.25, which I fully expect, there is a steep plunge coming. So my view has not changed one bit at all.
Click the chart for a larger view.
U.S. Dollar Could Rally
The Dollar Index is acting just as I expected it to. The long-term weakness is still present in the dollar because of its inability to stage a significant rally. It’s climbing along this uptrend line. And it’s hugging it right here. We may see the dollar start to rally even as the fiscal cliff negotiations on the debt ceiling fall apart.
Click the chart for a larger view.
Now logically you might think that if we hit the debt ceiling, the government shuts down, the dollar should plunge. I don’t think that’s necessarily the case.
If you think it through, if the government shuts down, or if the budget negotiations get really nasty, a lot of investors will seek out the sidelines. They’ll get out of the markets and go to cash to wait and see what happens, which would give the dollar some strength. So it’s not a sure bet that the dollar would fall on bad news about the debt ceiling. That remains to be seen.
Short-term, the cycles still point higher for the dollar as well. Long-term, we all know the dollar is in trouble. There’s no question about it. But I don’t believe the next disastrous bear market move for the dollar will come until later this year.
Dow Industrials Holding
Up Amazingly Well
Like the dollar, the strength you’re seeing in the Dow is an indication of its long-term strength. We are, at some point in the not-too-distant future, going to enter a new bull market in equities that will see the Dow and the S&P 500 go to new record highs over the next few years.
In the short- and intermediate-term it’s a coin toss. We could see the Dow move up to just over 14,000 or we could see that long-awaited pullback that I’ve been looking for.
Click the chart for a larger view.
Fundamentally, anything could crop up that could drive the market higher or take it lower. Cyclically, on the short-term models, I’m still expecting a pullback. So I am not willing to go all in on the stock market yet by any means. Nor am I willing on the other side to go aggressively short at this time.
So keep your eyes on these markets. They are indeed the most frustrating I’ve seen in a long time. But I also know that when you go through periods like this as long as you keep your ammo intact and stay defensive with your savings, when the markets start to move they are loaded with opportunities were you can make a ton of money.
Best wishes,
Larry
Larry Edelson, one of the world’s foremost experts on gold and precious metals, is the editor of Real Wealth Report and Supercycle Trader.
Larry has called the ups and downs in the gold market time and again. As a result, he is often called upon by the media for his investing views. Larry has been featured on Bloomberg, Reuters and CNBC as well as The New York Times and New York Sun.
{ 15 comments }
Larry. Awesome info my friend. Thank you for your fantastic insight. My wife, who is not into the markets or trading in any way whatsoever was just sitting next to me while I was reading your Money and Markets article “Turning Points Coming Soon” and she just blurted out, “I wouldn’t do that” I said what? She said “When I looked at that chart, my gut feeling was I wouldn’t buy that”. Larry, she was looking at the Bonds chart. My response was, “I know, Larry reco’d I buy Proshares Short 20+year Treasury so you’re right. She did the same thing every chart. Just by looking at the chart and your lines, she said the same sentiment you did in your writings. Bottom line, You have my devotion, because I believe you know what you are talking about. Sincerely Rob Florence Weiss Elite Member
Hi Larry
“What you can do for your country and not what your country can do for you” The leader left to early and where his the party now when we need them.
When will Smartmetals be open for business. I am ready to buy some gold.
When will short term treasury rates go up?
How steep do you expect the silver to plunge? Love your articles Larry.
DOW chart looks like an upward rising wedge
Once it peaks, big drop
You said,”Fundamentally, anything could crop up that could drive the market higher or take it lower.”
Isn’t the Boind Bubble a sure thing, and isn’t it going to take the Dow down worse than the last two Bubble Bursts did?
Hi Larry,
I am a great admirer of your work and opinions. Over the past year I have closely followed your analytical interpretation of market trends especially gold. My question is being a resident outside America (Australia) how do I overcome the risk of not benefiting from your projected long term appreciation of gold prices when gold prices are quoted in $US (Exchange rsk)? I am specifically referring to owning physical bullion gold . The other options are holding shares in sound gold miners and gold ETFs. However, this is not quite the same as owning physical gold. Appreciate your comments. Kindest Regards, Peter.
Larry, Anticipating these next exciting moves and ready to see some firm ground to move on.
I do wish you would address the affect that the Treasury implosion will have on instruments such as Ginny Mae’e and other mortgage backed securities. No one seems to be addressing that. Otherwise your message is clear as a bell and most informative. Thank you.
Larry,
With bond prices trending lower I assume more investors would put their money in the stock market. Even the anticipated fiscal cliff couldn’t stop the stock market from going higher. I see the trend to continue regardless of the next fiscal cliff outcome.
It is hard to sit here in cash as I watch the metals fall, but I am. We normally get a once in a lifetime market crash that affords a real buying opportunity. I think the 2008 event was just a warm up for what is coming in the near future.
Thanks for phrasing your commentary in a positive way. The dire, frightening descriptions really get to be overwhelming and cause me to freeze rather than act.
Larry- i just want security and stability pure and simple.
I don’t want to be on this merry go round.
Can I park money in cash and short term treasuries as a safe haven?
Larry, what do you think of S.E. Asian Government debt? (and also more generally Emerging markets Gov Debt). I have seen some comments that if the US bond market should collapse it would not only take these Gov bonds down with it but that they would be the worst hit.
I cannot understand why this should be so because they have such better fundamentals. What do you think?
Regards, Paul
Quote: According to Keith Barron, geologist and consultant responsible for one of the largest gold discoveries in 25 years:
I believe that most of the Western world’s gold, which is supposed to be in central bank vaults, has been leased out. Much of it is now in private hands in India, and what remains continues going East to China and other Asian vaults. So most of the Western gold has vanished from the vaults and it’s now just a book entry. These various Western countries and bullion banks simply roll these leases over when they come due, and the gold never gets returned back to the countries.
So it’s very interesting to see what’s going on. Obviously the trust is breaking down in the system
I wonder what your thoughts on this are Larry?
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