Gold is going up. You know that, because we have been following it closely together. The price of gold made a double bottom in March and began to rally. At the same time Bitcoin has been falling apart as it fell into a technical slaughter box when it fell through $50,000.
Yesterday, it fell again through $43,000 as the recent short-term bounce in the Nasdaq lost momentum, and this morning is tapping on the $40,000 level.
A lot of people are now trapped. The problem with a Robinhood trader is that their app gives them zero information expect price action and lists of stocks and crypto collectible currencies that others on Robinhood own. So, with no useful information to make decisions, they are encouraged to simply become a herd trader.
Still believing while his crypto collectible currencies fall in value. https://t.co/n6TlW6Qq7P
— Mike Swanson (@tradermike_1999) May 18, 2021
It’s useful, though, to look at this chart. At the top is gold and below it is the Nasdaq, Bitcoin, the TLT Treasury bond ETF, and the US dollar index at the bottom.
Gold is the only thing on this chart that has been going up in the past eight weeks.
Why?
Two things have happened.
First, we have seen a manic peak in speculative energy in the markets in early April. This is represented by the recent tops in Bitcoin and the Nasdaq 100, which has caused fad popular big cap stocks, such as those on the Robinhood top 100 owned list and inside the ARKK ETF to dump hard. As money goes out of things it looks for new places to go.
Gold, silver, and commodities have been one place. This doesn’t mean the stock market is going to fall endlessly. It is simply the areas of most speculation that are getting hit. The DOW has barely fallen from its recent high in comparison to Bitcoin and the ARKK ETF and stocks like TSLA. My guess is that we are going to get one more leg down on this Nasdaq correction. I’m personally looking for a spike in the VIX indicator to signal a bottom and it could happen next week.
It is the manic rise in margin debt and millions of people piling into the same fad stocks like a herd that is the cause of the current market correction.
This just in:
— Mac10 (@SuburbanDrone) May 18, 2021
Margin debt reached a new record high in April: pic.twitter.com/EKYKrfobfb
Secondly, the inflation date came out to show that inflation is growing and is here. That is helping gold as it has caused money to come out of the US dollar index and out of bonds. This is not helping the crypto collectible currency market either, as crypto currencies are not bought as safe havens against inflation or the US dollar, but simply as instruments of manic speculation, like lottery tickets. There are now over 10,000 individual crypto collectible currencies that are trading.
There is no reason to think either of these two new trends are ending anytime soon, and the second one is here to stay. My top stock pick of the month is a small cap mining stock that already is generating revenue from gold sales to benefit from the gold rally. Find out about it here.
I talked about this with Jim Goddard of www.howestreet.com in this interview.
-Mike
