Planet Yelnick

Yves Calls a Top! Led by the British Pound

Sharp drop today has the bears on the prowl. Technical analyst Glen Neely cautions that in the formation we are in - an expanding triangle (actually nested at three levels), a sharp drop often happens before the top - and is a bear trap. He still expects a final runup into late March or April.

I have been expecting a triple top with the S&P highs of 2000 and 2007 - and we are close but not quite there yet (ie 1565-1600 would be a better finish).  

Yet with all this hemming and hawing and cautionary notes, there is one analyst who has stepped up to a clear and brave call.  Yves Lamoureux has called the end of the Bond Bull Market, and also a top in Gold, and now calls a top in US equities, before a Great Bull Market in equities.  Enjoy!

Is The British Pound Giving A Market Top Warning?

We have been absolute bulls on stocks. Interest rates are too low and have been for too long. The crowd has caught on. We believe in an important market top now. Some observers are calling for the end of the equity bull market. We have a separate view of this. 

A solid pullback should be part of a larger degree wave two. We maintain that stocks will double from the 2013 bottom. The market appears, so far, on the path we have been describing to our subscribers since last year.

A correction now would increase our confidence in the next stock melt-up. It is a large phenomenon and best ascribed to risk preference and behaviour. How would you explain the recent stock jump? Most participants are at loss and are mostly invested in bonds. They are playing catch up.

We, on the other hand, are exiting our long stock plays. We have increased considerably risk off positions as described recently in "How to Catch This One Impressive Rally". We are very excited about introducing investors to the coming wave 3 of 3 in agriculture. We suggest direct long exposure. Our timing relies on a proprietary weather model.

 

We show you today this one clear warning. It is associated with the British Pound. We have seen a similar behaviour back in 2009. The Pound as a precursor is a great tool. You have to combine this with patience as well. In 2009 the Pound started to move down. It did so for many months. The stock market finally caught on. It resulted in the May flash crash. We think similar conditions are in place. The "all in" crowds have a stop loss strategy. Momentum will turn down and we think it could begin a negative feedback loop of selling. Remember that in absolute terms cash is low.

The market has risen with low volume. Illiquidity events are going to be more common in our opinion. They should be seen more frequently as the Fed starts to pull back on quantitative easing.

The Pound in effect acts as an early warning system. The recent drop has to do with a huge UK money expansion. Measured on a year over year changed rate, it is up 100%. We think something more is going on.

You will see above a long term chart of the Pound. We have labelled the drop in five waves. We think the bounce is a clear correction. It is indicated as an A-B-C pattern. This suggest new lows ahead. Is the market now set up to catch on? We think so.

Now is the time for a defensive stance!

Yves Lamoureux http://lamoureuxandco.com/

 

Yves Makes A Bold Gold Call

Yves Lamoureux, our new Bond King, has made a series of bold calls around the end of the epic bond bull supercycle.  Besides being bullish on stocks, he now has a view on gold.  

Why Our Model Values Gold At $1450

We have watched the big wave one and two unfold in the bond market of Europe. We think we have seen the turn. It is therefore likely that a huge wave three in rates has begun in earnest.

It has been our contention that the interest rate cycle would turn in 2010. It did in Europe. We stuck to our 2.5% US long bond call has the recipient of scared money. Massive spikes are always deemed turning point. We explain this phenomenon in “The End Game is Here”.

We attach a lot more importance to what takes place in Europe. Our gold model is geared that way.

The recent behaviour of gold is the best proof. How can you account for a weak gold price when the US dollar is weak? We do cover the grounds on this topic in a recent gold article. Some of the intricacies of movements are popular trades being undone. 

The start of a wave three in rates sets up a deflation trap once again. Primary waves all sport typical 5 waves form. The corrective nature is mostly of a zigzag type. This is why we are short 10 years Italian Treasuries from 4.20%.A quick look at wave two is beautiful textbook Elliot. We are now at 4.62%.

The market thinks it has everything to do with politics. As you are a good student of waves, you know better. Keep the cycle in mind as we cover the gold valuation model. 

We thought that gold would top in September 2010. We think of this time spent as a large degree consolidation. We have not been at all worried to miss the bull market. We have fully participated in it the last 10 years. The recent bounce is more likely viewed as a B wave. I suspect, we are at the start of a C wave. I factor the coming rates increase. Our model values gold at $1450.

We look to make a big entry once again. We are extremely disciplined and wait for things to be aligned perfectly.

Yves Lamoureux, http://lamoureuxandco.com/