Yves made a bold call on gold last February, well before the Fed's Taper Talk of May that spooked debt and currency markets. Yesterday I posted his updated gold chart. Let me show them side by side - you can see he called gold spot on.
The Iranian nuclear deal may catch Oil and Gold investors in a Bear Trap. Initially it will be very negative for both - Oil and Gold should drop - as war fears had built a risk premium into these assets. When Oil gets and stays below $90 it should spook a lot of other markets by raising Liquidity issues. It is after that we may see a bear trap as bears pile on the dropping assets. This will, however, unfold slowly.
Yves Lamoureux sent a message to that effect, and will follow up with more specific recommendations. His chart on Gold shows the coming drop as a fifth wave down, indicating end of trend. He also expects it to show capitulation, necessary prior to a trend change.
Yves comment: "its become almost hilarious to see the market behave in extra slow motion; the fact that high frequency trades have taken over paradoxically leads to results in an extra time length as things actually unfold. The market with its speed has become stupid."
For fun I post the pattern comparisons to past crashes. Recently bears tried to compare this relentless up market to 1987 (fail) and 2007 (fail). The latest is to 1937, which at least has an historic logic to it: we are in a new Great Depression, which is following a different path but may end up even worse for cumulative loss of GDP.
More to 1937, the sequester led to the Budget Control Act, which has remarkably lowered actual Federal spending for two straight years (that hasn't happened in a long time) and reduced the deficit both in nominal Dollars and as a percent of GDP. This reduction of Federal stimulus has made Keynesians nervous, since they worry that it is similar to what happened in 1937 to throw us back into a Depression after the New Deal seemingly had brought us out.
At a broader level, comparisons are often made to 1929=2000 but it seems 1929=2008 is more apt. Looking to the period before 1929, we find a curiously comparable story:
- a tech boom in 1914-1919, the auto bubble (vs. the dot-com bubble 1994-99)
- a sharp recession (1921, 2001) followed by a classic credit bubble (Roaring '20s, Housing Bubble)
- a banking crisis followed by GDP drop and persistent high unemployment (1930s, 2009-now)
Now today the Fed is back to talking of Taper, which could spook equities.