Strange. Most investors I talk to think the world is doing just fine. They say the U.S. economy is growing and the gains in employment have been nothing short of spectacular.
They say Europe is not collapsing as so many experts have feared. And that Mario Draghi’s pedal-to-the-metal euro printing is working.
They even claim Britain is doing fine, France will escape its troubles and inflation is coming back.
About the only part of the world they’re negative on is China, claiming that if there’s one single threat to global growth, it’s the Middle Kingdom and nothing else.
Well, I’ve got news for them. This is precisely what the markets want you to believe. They have an uncanny way of first separating you from your money, then washing it all down the drain.
When the markets are acting like this, making almost everyone feel everything is just dandy, or will turn out dandy — risk levels are actually at their highest. Investors are lulled to sleep. They’re complacent. They’ve dropped their guard.
And the next thing that happens? Those investors lose their money, big time.
Look. Markets do not change their major trends all that often. At most, a market may change its major trend once every three years. More commonly, they change trends every five years. And even that is rare. Most major trends persist for at least seven years.
Instead, what happens is this. You get a major trend unfolding on cue, with its cycles. Then you get a pause, a sideways consolidation period, often wrought with pullbacks.
The money that is made during the trending part of the move is often given back during the non-trending, sideways portion. Especially by trigger-happy, impatient investors and traders.
It seems they just can’t stand the fact that all markets need to occasionally take a breather. That all markets need to shake out the earlier investors — so new investors can come in. Or so short-sellers can take profits and cover their positions (in bull markets).
Markets are, yes, living, breathing beasts whose main function is to outwit you. And one of the ways markets do that is to stage what seem like long, sideways periods of tight trading ranges and pullbacks — or rallies in bear markets — that frustrate the heck out of you and force you into making mistakes at the worst possible times — just before the major trends come back to the forefront.
As they are right now. For instance …
A. There is no evidence whatsoever that gold is going to blast off now to $1,400 and higher, as so many pundits would have you believe.
Simply look at my latest neural net forecast model for gold and you’ll see what I mean.
Yes, gold is rallying in the very short term. But the rally is merely short-term noise in the market, designed to throw you off course.
The major intermediate-term trend is lower, into late May. And then the major long-term trend will re-emerge, which is a bull market, and the next leg higher.
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So what should you be doing now in gold? You should be looking to buy the decline into May, or if you’re a speculator, you should be shorting gold, looking to make some money as gold slides into a late May cycle low.
Could this model be wrong? Sure it could. But everything I monitor, not just my neural net models, also tells me that gold must pullback — probably to below $1,200 — before the next bull leg higher unfolds.
Ditto for silver, platinum, palladium and for mining shares.
So if you want to be part of the majority that will get eaten up by gold trying to trap you on the wrong side of the market with its meager, very short-term rallies like we’re seeing right now, be my guest: I’ll sell you all the gold you want.
B. Then there’s the dollar right now, another perfect example of a fake-out move that’s going to hurt a lot of analysts, traders and investors. Its recent decline has many of them convinced the dollar is dying again and that other currencies, especially the Japanese yen, are rising to be king of the mountain.
All because the dollar has staged a minor pullback!
You can see it here on this chart I have for you. Actually, it’s a bit of a test, for you to see how much perspective has to do with things.
Most pundits are looking at the decline in the dollar on the extreme right side of this chart.
They see the decline and they shout from the rooftops “The dollar is dead. The dollar is going over an abyss. Death to the dollar!”
And then they come up with all kinds of conspiracy arguments and ridiculous fundamental explanations why the dollar must collapse (and along with it, the USA).
But now, you tell me. Look at the dollar since August 2011 and what do you see? A rather strong, steady uptrend that broke through the top of an uptrend channel in October 2015 …
Then consolidated near the highs with some swings back and forth … and is now merely pulling back to re-test the upper support line of a rising trend channel.
Sorry all you dollar bashers: My 5-year-old son can interpret this chart better than you can.
Now let’s take the analysis a few giant steps forward and run my AI neural net on the dollar, calculating billions of price data points to discern hidden cycles and make a high probability forecast into the future.
Here is the chart. And what does it tell you?
That the dollar is on the cusp of a new, and powerful leg higher, one that could start any day.
That’s just two markets that serve my point: Markets are never what they seem they are, not on the surface. And if you let those surface impressions fool you, not only will you most likely lose treasure troves of money …
You’ll miss out on the really big moves when they do come.
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