My Fellow Traders and Investors:,
Turn on the popular business shows and spend a few hours listening to the plethora of confusing and often diametrically opposed opinions. You come away with confusion, self-doubt, frustration, and less clarity than you had before you tuned in. Nonetheless, the popular underlying theme of today’s forecasts is concern about deflation, disinflation, and recession.
Comparisons to the segment on the Japanese economy are now the order of the day. We’re constantly being bombarded by the claim that the Federal Reserve acted too slow or that the Federal Reserve acted too fast. Markets throughout the world are reflecting this extreme diversity of opinion as volatility reigns supreme.
Where most others see disinflation, I see inflation!
My vast experience in the markets as a trader, investor, and student have told me clearly that when most people are looking one way, life will come to bite them from behind. Where most “experts” are looking for dire disinflationary and recessionary consequences of low interest rates, I look at solid, reliable metrics and I see the exact opposite. For many years now metals, both precious and otherwise, have been languishing in a sea of bearish fundamentals and negative expectations. And yet, under the surface, the winds of change are brewing and major opportunities are approaching
Get ready now, or miss the boat
One of the popular themes motivating investor behavior is the much vaunted demise of the Chinese economy. After all, as consumers of practically every industrial commodity, China is a major force and a slowdown in their buying supposedly would impact virtually all markets. Yet, objective reality, as usual, tells us a markedly different story.
Take a look at commercial activity in copper
While investors are being fed a steady diet of negativity, the chart below shows what commercials are doing in the copper market. Above the zero line in green, commercial activity is on the buy side. Take a look at my comments on the chart and ask yourself the following question: “Why would commercials be buying now if they did not expect a significant increase in prices over the next few years?” Take a look at the history of commercial buying activity in copper futures over the last few decades. Have they had a good track record of acting ahead of the moves? How can we analyze and determine the behavior of commercial activity in the precious metals?
What Do the Cycles Tell Us?
Notwithstanding the stellar track record of commercial activity as a leading indicator in many commodity markets, when combined with the very reliable cyclical behavior markets such as copper and the other metals, combination is compelling at the very least. Here’s a look at the platinum chart on a long-term basis. It’s talking to me. Do you hear what it’s saying?
What about Palladium?
And here is a chart of one of my favorite long-term investment type markets, Palladium. Take a look at the cycle. Here’s another one that’s talking to me. Do you hear what it’s saying? And commercial hedging activity is now at its lowest level in many months. What does that mean? Simply stated, commercials don’t want to sell Palladium heavily at these levels. Why?
No, it’s not perfect, but it’s one heck of a lot better than most of the worthless stuff that traders are using these days to pinpoint significant market turns.
A preliminary sign
One of the stocks that I have been trading in preparation for the big bull market is SIL. Just in the last few weeks this stock has surged over 26% from its low! Why? I believe that savvy investors are preparing now for what is likely to be a much bigger move later this year I will discuss the outlook for this stock as well as others.