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Weekly Market Update 12-6-17
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Thenextmoveinreflationaryassetsisjustaroundthecorner.Asyouknowwe’vebeentrackingtheBIGPICTUREperspectiveondeflationvs.inflationthroughout2017.Myviewisthat2017wastheyearinwhichtheworldshiftedfromfearingdeflationtoforecastinginflation.YoucanseethisinthebondmarketsviatheTIPvs.Long-Treasuryratio.Insimpleterms,whenthisratiorallies,inflationisontherise(TIPsareoutperforminglongTreasurybonds).Andwhenthisratiofalls,deflationisontherise(longTreasurybondsareoutperformingTIPs).Belowisthe10-yearchartforthisratio.Asyoucansee,thefinancialmarketshavebeeninadeflationarytrendsincelate2010withtheoccasionalburstininflationarypressures.
ThecriticaldevelopmentInotedisthatthisratiobottomedinabigwayinlate2016(redcircle).Thiswaswhentheworldbeganshiftingawayfromdeflationandforecastinginflation.Theratiohassincestruggledtobreakoutofthisdownwardchannel,whichisnotsurprising,giventhemagnitudeoflong-termdeflationarytrend(itisrarethatamajortrendlinelikethe
Weekly Market Update (12-6-17)
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topblueonewouldbreakonthefirsttry).We’venowhadtwoattemptstobreakthatuppertrendlinein2017.Ibelievewe’reabouttohaveathirdattemptinthenext4weeks.Andthisoneshouldbetheonethatbreaks.
Asyoucansee,wehaveMAJORsupportattheselevels(redline).IexpecttheTIP:TLTratiotobouncehardhereandbreakouttotheupsidebreakingits10yeardownwardtrendingchannel.Putsimply,Ibelieve2018willbetheyearinflationarrives.Thereason,asI’venotedthroughoutmid-2017,isthatmultipleCentralBanks,particularlytheEuropeanCentralBank(ECB),BankofJapan(BoJ)andSwissNationalBank(SNB)havemaintainedemergencylevelsofQEandmoneyprinting,despitethefactthatgloballytheeconomyisperformingrelativelywell.Alltold,in2017alone,theseCentralBankswillprintedovera$1.5trillioninnewmoneyandfunneleditintothefinancialsystem.Thisisanall-timerecord,representingevenmoremoneyprintingthanwhattookplacein2008whenthewholeworldwasinthegripsoftheworstcrisisin80years!Andithasfinallyunleashedthemuchsoughtafterinflation.Thereisnodoubtinthefollowing
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charts:thenextinflationarymoveisabouttohit.CopperproducerFreeport-McMoran(FCX)wantstobreakouttotheupsideinabigway.Whenitdoes,it’sgoingto$17+veryquickly.
Wealreadyownthisinourportfolio.Butifyou’relookingtoputnewcapitaltowork,thisisanexcellentchoice.AnotherpositionwealreadyownthatlooksreadytorockethigheristheOilServicesETF(OIH).It’snowatcriticalsupportandwillbeturningupwardssoon.
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Again,ifyou’relookingtoputnewcapitaltowork,thistooisanexcellentchoice.Ifyou’renotkeenonindividualstockplaysandsimplywantbroadexposuretothisinflationarytrend,IreallyliketheMetalsandMiningETC(XME).
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Oncewebreakoutofthattrianglepattern,XMEisgoingtothelow40sbymid-2018.That’sasolid33%higherfromcurrentlevels.ActiontoTake:BuytheMetalsandMiningETF(XME).Iwanttobeclearhere:thisinflationthemewon’tjustconcernindustrialmetals;ALLcommoditieswillbenefit.ThecommoditycomplexasawholetrackstheTIP:TLTratioImentionedearlier(seethetwoassetsoverlaidinthechartbelow).Sowhenthisratiofinallybreaksouttotheupside,it’sgoingtodragtheentirecommoditycomplexwithit.
Forthisreason,Ibelieveoneofthetopperformingsectorsin2018willbecommodities.ThisiswhywehaveboughttheRogersAgriculturalCommoditiesETN(RJA)aswellastheDBCommodityETF(DBC).Bothofthosewilloutperformin2018.Moreover,thisistrulyaDEEBvaluetrend.Thebelowcharthasbeenfloatingaroundforafewweeksnow.Butitshowsjusthowridiculouslycheapcommoditiesarerelativetostocksrightnow.
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Putsimply,thefinancialsystemisabouttoenteraperiodofdramaticcommodityoutperformanceinducedbyaninflationaryshockcourtesyofCentralBanksrunningemergencylevelsofQEatatimewhentheeconomyisalreadyheatingup.AfinalcomponenttothenextmoveinreflationwillbeaMAJORbottominpreciousmetals.Preciousmetalsmovewithinflation.Buttheyalsomovebasedonfear.Withthatinmind,thebiggestnewsof2017faraspreciousmetalswereconcerned,wasthethreatofanuclearconflictbetweenNorthKoreaandtheUS.Thiswaswhatinducedthepricespiketothe2017highof$1351inlateAugust/earlySeptember2017.
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ThiswasVERYbullishinthelongterm,asitmeantthatGoldfinallybrokeaboveitssix-yeardescendingtrendlineestablishedfromits2011top(seechartbelow).However,becausetheNorthKoreansituationdefusedconsiderably(Icouldwriteanentirereportonthis,butlet’sjustsay,fornow,thattheUSsenta“message”onOctober10andthatreportsofan“earthquake”strikingNorthKoreathatdaywerelikelymisleading),Goldhassincecooledconsiderably.Fromatechnicalanalysisperspective,thismoveisinnowaybearish.Giventhesignificanceofthatlong-termdescendingtrendline,itisnotunusualforGoldtoretestthislineoncebroken.Andthatispreciselywhatitisdoing.However,thisperiodofweaknessisnowending.GoldisintheprocessofputtinginaMAJORbottomthatwillkickoffitsnextmajorbullmarket.Thebelowlong-termchartforGoldrevealsaMASSIVE10yeartrianglepattern.Thispatterntellsusthatin2018,Goldshouldbeginitsnextmajorbullmarketthatwilltakeittonewall-timehighs.
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Wearenotquitedonetothedownsidehere.Butonceweare,it’sgoingtobeaonceinMANYyearsbuyingopportunityLetmeexplain,duringthelastGoldbullmarketinthe1970s,Goldrose550%duringitsfirstlegupfrom1970to1974.Itthencorrected50%beforebeginningitsnextlegup.However,itwastheSECONDmovehigherthanwastheBIGone=a900%increaseinvalue.A900%increasefromcurrentlevelswouldputusat$10,800perounce…whichincidentally,isrightaroundwhereGoldwouldneedtobetomatchthegrowthinmoneysupply,shouldtheUSdecidetoreturntotheGoldStandard.Beforeyoulabelmeinsaneforevensuggestingthat,takenotethatTreasurySecretarySteveMnuchinvisitedtheUS’sGoldReservesinFortKnox,markingthefirstapoliticianvisitedthesitesince1974.Mnuchindidn’tgotoFortKnoxjustonawhim.TheTrumpadministrationisworkingonsomething.Anditwilllikelyshocktheworld.Regardless,mymainpointisthis,inflationiscoming.ThisalonebenefitsGold.AndgiventhatCentralBankswillallbeginemployingNIRPandNuclearlevelsofQEthemomentthatanothercrisishitsthefinancialsystem(asitwillwhenthebondbubblebeginstoburstnextyear),the
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long-termbackdropforGoldisspectacular.Withthatinmind,ourcurrentpaperlossesinourminingplaysdon’tworrymeintheslightest.Thistimenextyearitishighlylikelyallofthemwillbeup50%,ifnottripledigits.Thefactwewereearlyoncatchingthisnextinflationarywaveonlymeanswe’llhavetheopportunityto“averagein”betterbuypricesonallofthemonceGoldbottomsinthenext3-4weeks.Putsimply,BIGinflationiscoming.Thefirstindicationwillbewhenindustrialmetalsplayersspike(next3weeks)followedbycommoditiesingeneralandfinallypreciousmetals.Thisistheroadmapinthenear-term.
Asabriefaside,IwanttonotethathigherinflationwilldamagetheTechindustry.TechstocksperformTERRIBLYduringperiodsofhighinflation.IfyouthinkI’mmakingthisup,takealookattheNASDAQ’sperformanceversusGoldduringthelastinflationaryspikein2011.
Techtanked,Goldsoared.
SoourTechshortswillsoonhehighlyprofitable.
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Onafinalnote,IwantedtoalertyouthatourBiotechETFstageda3for1split(meaningeverythreeshareswereconvertedinto1share).
ThisiswhyIBB’spriceissuddenly$102.I’veadjustedourbuypricetoreflectthissplit.Pleasecheckwithyourbrokerifthenumbersarenotmakingsense.
YoushouldnothavelostANYcapitalwhenthissplitoccurred.I’veheardthatseveralbrokershaveyettoproperlyadjustpricinganditlookslikea66%loss.
Thisiswrong.Ifitlookslikeyou’redownalotofmoneyonIBBimmediatelycallyourbrokerandgetthemtofixtheissue.
Thisconcludesthisweek’smarketupdateforPrivateWealthAdvisory.I’mwatchingthemarketscloselyandwillissueupdatesasneeded.Barringanynewdevelopmentsyou’llnexthearfrommenextWednesdayinourusualweeklymarketupdate.
Untilthen…
GrahamSummersChiefMarketStrategistPhoenixCapitalResearch
BestRegards,
PS.Ifyouhaven’tyetpickedupacopyofmybest-sellingbookTheEverythingBubble:TheEndgameForCentralBankPolicy,Amazoniscurrentlyrunninga10%discountonitsprice.Youcanpickoneuphere:https://www.amazon.com/dp/197463406X/Andifyou’vealreadyboughtacopy,pleaseleaveareviewtohelpgetthewordout.Thankyouforyoursupportandyourbusiness.
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OPEN POSITIONS
STOCKS PORTFOLIO
Pricesasofmarket’scloseon12/6/17.Gainsincludedividends
POSITION SYMBOL BUY DATE
BUY PRICE
CURRENT PRICE
GAIN/ LOSS
RPXCorp RPXC 8/5/15 $15.48 $12.80 -17% AgriculturalCommoditiesETF RJA 1/12/17 $6.46 $6.00
-7%
PublicStorage PSA 3/23/17 $225.92 $211.80 -4% PioneerNaturalResources PXD 6/15/17 $158.02 $150.66 -5%
EnergyTransferPartners ETP 8/2/17 $21.00 $16.34 -20%
EnterpriseProductsPartners EPD 8/10/17 $26.08 $24.33 -7%
DBCommodityETF DBC 9/13/17 $15.26 $15.83 4%
FreeportMcMoRan FCX 10/4/17 $14.53 $14.35 -1% HelixEnergySolutions HLX 10/11/17 $7.75 $6.37 -18%
Halliburton HAL 10/11/17 $45.37 $43.38 -4%
BiotechETF IBB 11/15/17 $306.25 $102.58 0%
OilServices OIH 11/30/17 $24.12 $24.39 1% MetalsandMiningETF
XME 12/6/17 $31.83 NEW BUY!
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POSITION SYMBOL BUY DATE
BUY PRICE
CURRENT
PRICE
GAIN/ LOSS
Gold 3/17/10 $1,120 $1,266.00 13% Silver* 3/17/10 $16.23 $15.98 -2% WheatonPreciousMetalsCorp** WPM 10/5/16 $20.83 $20.88
0%
FirstMajesticSilver*** AG 5/12/17 $7.91 $6.43 -19%
GoldMinerETF GDX 9/20/17 $23.50 $21.67 -8%
GoldMiningJuniorsETF GDXJ 9/20/17 $34.11 $30.41 -11%
KlondexMines KLDX 9/20/17 $3.61 $2.22 -39%
WesdomeGoldMines WDO.TO 9/20/17 $2.21 $1.72 -22%
Iamgold IAG 9/28/17 $6.40 $5.07 -21%
SilverMiningETF SIL 10/4/17 $33.96 $29.76 -12% SilverMiningJuniorsETF SILJ 10/4/17 $12.22 $10.05 -18%
PRECIOUS METALS/ MINERS PORTFOLIO
Pricesasofmarket’scloseon12/6/17.Gainsincludedividends*Averagepriceof$17.50and$14.97**Averagepriceof$19.07and$22.59***Averagepriceof$7.11and$8.70
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SPECIAL SITUATIONS/HEDGES/SHORTS PORTFOLIO
CASH/ CURRENCIES PORTFOLIO
POSITION SYMBOL BUYDATE
BUYPRICE
CURRENTPRICE
GAIN/ LOSS
EuroTrust FXE 10/5/16 $114.05 $113.74 0%
Pricesasofmarket’scloseon12/6/17.Gainsincludedividends
POSITION SYMBOL BUY DATE
BUY PRICE
CURRENT PRICE
GAIN/ LOSS
FranceETF(SHORT) EWQ 9/16/16 $23.38 $30.60 -31% ItalyETF(SHORT) EWI 9/16/16 $21.56 $30.44 -41% Russell2000ETF(SHORT) IWM 12/14/16 $135.37 $145.63 -8% Apple(SHORT) AAPL 3/23/17 $140.92 $169.08 -20% Facebook FB 5/31/17 $151.63 $177.95 -17% Alphabet GOOGL 5/31/17 $987.72 $1,036.41 -5% HomebuildersETF XHB 8/9/17 $37.94 $41.03 -8%
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POSITION SYMBOL BUYDATE
BUYPRICE
SELLDATE
SELLPRICE
GAIN/ LOSS
AmericanEagleOutfitters(SHORT) AEO 5/26/16 $15.36 1/31/17 $14.59 5%CliffsNatResources(FIRSTHALF) CLF 2/8/17 $10.15 2/13/17 $12.10 19%
Ambev ABEV 11/25/16 $4.96 2/23/17 $5.93 21%Cemex CX 11/25/16 $8.07 2/23/17 $8.69 8%CliffsNatResources(SECONDHALF) CLF 2/8/17 $10.15 2/23/17 $11.13 10%
Exxon XOM 9/24/14 $95.82 3/8/17 $81.28 -8% EnterpriseProductsPartners EPD 11/31/16 $25.93 3/8/17 $27.83
9%
NaturalGasETF UNG 2/22/17 $6.57 3/8/17 $7.11 8%
EmergingmarketsETF EEM 1/12/17 $36.60 4/10/17 $39.20 7%
BarrickGold ABX 10/5/16 $15.54 4/10/17 $19.04 23%
UraniumETF URA 6/8/16 $15.49 4/12/17 $15.90 9% Cameco CCJ 1/4/17 $10.69 4/12/17 $11.48 7% CoalETF KOL 1/4/17 $12.59 4/12/17 $14.51 15% SilverStandardResources SSRI 10/5/16 $10.30 4/12/17 $11.32
10%
RoyalGold RGLD 2/8/17 $71.50 4/12/17 $74.14 4%
SilverMiners SIL 3/15/17 $35.81 4/12/17 $37.60 5%
USSteel(SHORT) X 2/1/17 $31.97 4/13/17 $29.42 8% CopperMinersETF(SHORT) COPX 3/23/17 $22.64 4/18/17 $21.02 7%
FinancialsETF(SHORT) XLF 12/21/16 $23.61 4/26/17 $24.06 -2%
RECENTLY CLOSED POSITIONS
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RECENTLY CLOSED POSITIONS CONTINUED
POSITION SYMBOL BUYDATE
BUYPRICE
SELLDATE
SELLPRICE
GAIN/ LOSS
PeruETF EPU 12/7/16 $33.23 5/17/17 $34.775%
BrazilETF EWZ 2/8/17 $37.53 5/17/17 $39.90 6%UtilitiesETF XLU 2/8/17 $49.35 5/17/17 $51.58 5%SolarEnergyETF TAN 4/19/17 $17.20 5/17/17 $18.00 5%RoyalGold RGLD 4/26/17 $69.92 5/17/17 $79.90 14% SouthwesternEnergy SWN 3/30/17 $8.15 5/24/17 $6.76 -17% GulfportEnergy GPOR 3/30/17 $17.17 5/24/17 $15.47 -10% USOilFund USO 4/26/17 $10.37 5/24/17 $10.60 2% ExxonMobil XOM 5/3/17 $82.70 5/24/17 $82.29 0% EnergyETF(SHORT) XLE 5/24/17 $67.56 6/5/17 $65.05 4% EmergingMktsBondETF EMB 11/21/16 $109.82 6/7/17 $115.95 8% LongUSTreasuries TLT 11/21/16 $121.05 6/15/17 $126.10 5% NuveenEnhancedFreeMuniCreditFund NVG 1/2/14
$13.126/22/17 $15.22 40%
RioTinto RIO 6/19/17 $39.48 7/10/17 $43.48 10% ClearEnergyETF PBW 4/19/17 $4.06 7/10/17 $4.25 10% EnterpriseProductsPartners
EPD 6/22/17 $26.00 7/17/17$27.70 7%
USoilFund USO 6/28/17 $9.20 7/17/17 $9.57 4% ChinaETF ASHR 2/1/17 $24.98 7/24/17 $28.08 12% Uranium URA 6/15/17 $12.76 7/24/17 $14.28 12% Cameco CCJ 6/15/17 $9.14 7/24/17 $9.95 10% USSteel X 6/19/17 $20.83 7/24/17 $23.69 14% FreeportMcMoran FCX 6/19/17 $11.53 7/25/17 $14.08 22% BiotechETF IBB 4/26/17 $296.15 7/25/17 $324.86 10% Baidu BIDU 6/7/17 $187.53 7/27/17 $200.10 7% PeruETF EPU 6/22/17 $33.64 7/27/17 $35.61 6% Chevron CVX 6/22/17 $104.45 8/2/17 $110.86 6% EuroTrust FXE 10/5/16 $108.80 8/2/17 $114.61 5% USDollarETF UUP 8/2/17 $24.08 8/23/17 $24.18 0%
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RECENTLY CLOSED POSITIONS CONTINUED
POSITION SYMBOL BUYDATE
BUYPRICE
SELLDATE
SELLPRICE
GAIN/ LOSS
GoldMinersETF GDX 10/5/16 $22.45 9/5/17 $25.09 12% GoldMiningJuniorsETF GDXJ 10/5/16 $34.72 9/5/17 $36.92 11% RandgoldResources GOLD 5/12/17 $93.25 9/5/17 $104.90 12% KlondexMines KLDX 8/10/17 $2.94 9/5/17 $3.55 21% WesdomeGoldMines WDO.TO 8/10/17 $2.18 9/5/17 $2.37 9% NewGold NGD 10/5/16 $3.88 9/6/17 $4.18 11% BarrickGold ABX 4/26/17 $16.92 9/6/17 $18.23 8% SilverMiningETF SIL 4/26/17 $34.44 9/6/17 $35.75 4% SilverStandard SSRI 4/26/17 $9.94 9/6/17 $10.70 8% Transocean RIG 6/15/17 $8.56 9/26/17 $10.10 18% HelixEnergySolutions HLX 7/19/17 $6.16 9/26/17 $7.54 22% OilServicesETF OIH 8/23/17 $22.07 9/26/17 $25.75 17% Apache APA 8/23/17 $40.33 9/26/17 $44.72 11% Halliburton HAL 8/23/17 $39.06 9/26/17 $45.69 17% Verizon VZ 4/26/17 $47.17 10/20/17 $49.14 5% VietnamETF VNM 6/7/17 $14.64 10/20/17 $15.47 6% EOGResources EOG 7/19/17 $95.00 10/31/17 $100.26 6% ArcelorMittal MT 10/4/17 $26.50 10/31/17 $28.63 8% USOilFund USO 10/11/17 $10.32 10/31/17 $10.89 6% CrescentPointEnergy CPG 10/18/17 $7.49 10/31/17 $8.03 7% BaytexEnergyCorp BTE 10/18/17 $2.66 11/1/17 $2.90 9% Verizon VZ 4/26/17 $47.17 10/20/17 $49.14 5% VietnamETF VNM 6/7/17 $14.64 10/20/17 $15.47 6% LongTreasuryETF TLT 7/27/17 $123.27 11/8/17 $126.36 3% EmergingMarketsBonds EMB 7/27/17 $115.13 11/8/17 $114.60 1% SouthwesternEnergy SWN 7/19/17 $6.17 11/9/17 $6.52 6% NaturalGasETF UNG 8/2/17 $6.34 11/9/17 $6.59 4% UraniumETF URA 8/29/17 $13.53 11/24/17 $15.37 14% Cameco CCJ 8/29/17 $9.88 11/24/17 $10.00 2% BHPBilliton BHP 10/4/17 $41.13 11/24/17 $42.88 4%