I like to get in early on moves.
That’s why I banged the drum on the US stock market, as starting a new bull market, in January and February of last year.
It’s why I have been banging the drum on gold, silver, and commodities since New Years, as you have seen gold breakout to new all time highs multiple times and now are seeing the other commodities follow.
Last week, silver closed above $26 an ounce, a level that has held it down for what was almost two years.
Silver is now held down no more and the mining stocks are moving.
Last weekend, in my post I highlighted the BCIM Industrial Metals ETF, as another ETF to watch for the next breakout shift from a stage one basing phase into a stage two bull market.
And now that is happening too, as it closed above $22 last week.
BCIM owns copper, aluminum, lead, and zinc.
This ETF is likely to go to all-time highs in the next few years, so buying here, with a stop loss under $20, could lead to a 2X or 3X payoff in the next few years. This ETF has more upside from this price point than Bitcoin does.
A stage one phase is a basing phase, in which the 50-day, 150-day, and 200-day moving averages move sideways.
It comes after a stage four bear market in which the moving averages move down and act as a resistance.
In a stage two bull market those moving averages move up and act as support.
At the start of a stage two bull market, typically the masses have zero interest in buying, as they either lost so much money in stage four that they can’t get themselves to buy, or have zero interest as stage one was too boring for them and too boring for the media and gurus to talk to them about.
These are concepts I wrote about in more detail in my book Strategic Stock Trading.
People in the United States still have ZERO interest in precious metals. As gold has gone up they have been in fact, incredibly, been net sellers of the GLD gold ETF. Two weeks ago it saw $363 million in net redemption sales, to make it the ETF with the single most number of outflows that week!
Most of the gold buying is coming from central banks around the world and foreign investors.
The actions of US investors are now having very little influence on the price of gold itself. As an article at Kitco put it, “The marginal buyer of gold is no longer the U.S. It’s no longer Europe. It’s China. Between the country’s central bank and the Chinese public, China takes up over two-thirds of all the annual production. They are the new marginal buyer. That’s where the gold price is set,” Lassonde told Michelle Makori, Lead Anchor and Editor-in-Chief at Kitco News, during Kitco Insights Interactive Mining Titans’ Power Panel.
Americans are literally selling their gold to Chinese people.
It will take gold prices going up more and more for Americans to get interested at all. because the more something goes up the more the masses chase, get bullish, and believe anything said to them to justify the notion that prices can keep going up for them. You see that now, of course, in the crypto world, where the gurus talk technobabble and prices are linked to nothing of real world value at all. In fact, all a crypto guru has to do is say Bitcoin is going to a million to get a crypto small fry to believe anything he says afterwards about it. But that’s why they stay small fries, they buy into hype, lose money – and then instead of learning from their mistake and deciding that they need to develop a real strategy – they just jump into the next hyped up thing and lose again. They keep repeating that pattern their whole life, acting like the markets are a lottery ticket – and that is why the crypto gurus are using lottery language right now at them – they know those are the people buying into Bitcoin now.
Personally, once things go up I lose interest in telling people to buy and if I’m not a believer that it’s going to be a long-term bull market don’t mind selling.
So, I took a break completely last year from July to New Years from saying anything about the markets and no longer tell people to buy the US stock market.
I got my gold, silver, and commodities position already fully established several weeks ago.
I am not going to buy more, and I’m not a Bitcoin guru type that really cares about telling people to keep buying something to make them chase.
I was putting out a lot of Youtube videos talking about gold and silver this year and now have lost interest in putting out any at all.
I’m going to tell you today, though, about a new position I put on, outside the commodity space in a moment.
But first, I want to tell you that after this I’m not likely to do anymore new trading at all for weeks and maybe not months.
I got my positions and am going to hold them and wait before doing something else.
If add to them more than I’ll put myself at risk of getting shaken out of them at some point, so I have a position that is right for me, and do not need to buy anymore.
I did what I could to tell people to buy at a good time too, so don’t really feel like talking about buying anymore either.
The great entry point came and went.
Since, the US stock market has been in a bull market for about a year and half now, and the commodities complex is just starting one, it is going to be a long time until we see a lot of new bull markets begin in things. If anything, the next big long-term pivot will be the time when the US stock market goes into a new bear market, but I can’t tell you I see signs of that starting yet.
What I do see, though, is a likely new bull market starting in emerging markets and in China this year.
I took a position in a China ETF last week, and this could be the last new bull market trade setup I see for a very long time.
This ETF owns shares in 300 of the largest companies that trade in China.
It’s been in a bear market for over two years and rallied up to its major moving averages, all three of which are now converging together.
It looks like it is in a stage one likely to go into a new bull market this year.
If it can rally through its high of last month I may add a bit more to my position.
If it falls down below $22 I’d sell, thinking that is not trading the way I expected.
It’s not a big position for me, less than 4% of my largest account.
Commodities and China usually go into bull and bear markets together, as a growing Chinese economy brings more demand to commodities.
The same goes for emerging markets in general and here is the EEM ETF.
You can see how EEM – emerging markets – have at times traded with a very close correlation to the commodity CRB index. That’s what the indicator on the bottom of this chart is measuring, on a 200-day average price basis.
I’m not going to talk much more at all about this Chine idea after this post.
Chinese and US relations have deteriorated in the past few years and the mere mention of this idea has probably already made a few people reading this angry.
There is a risk of war with China over Taiwan.
If that happens it won’t happen for at least three years and if this position works for me I’m likely to sell it in one or two years.
China also needs to take a step before any possible war – and that is it must delink its currency from the US dollar.
It’s yuan is pegged to the value of the dollar, which helps to keep the yuan at an artificially low level.
One article, in Foreign Affairs, estimates that it is 10% undervalued.
War or not, this is a step China is likely to make one day, and once it does it will cause the value of its stock market to quickly jump for foreigners investing in it as the Yuan goes up in value. If a war is going to happen it’s likely to be in 2028. I may do a post on that, why, and what US government war games say would happen, at some point. The odds are probably less than 20%, likely less than 10%.
The China market is extremely undervalued to the rest of the world, with most Chinese market ETF’s trading with P/E’s less than 10 and the nation itself with a CAPE ratio below 9. Russell Napier talked about this China investment/trade idea among other topics in this Youtube interview:
One of the best investment books I have ever read is Napier’s book Anatomy of the Bear: Lessons from Wall Street’s four great bottoms.
In the past I have bought Greece and Turkey ETF’s after they have had terrible bear markets and financial crisis and reached super low valuations and made money holding for a year. I wish I still held a position in the TUR Turkey ETF, but I bought too big of one and got shaken out of it at some point, after reading more negative news about what is going on in the county and still is. Inflation in Turkey is over 50% a year.
At major market bottoms and turning points into a new bull market, typically the news about the market is awful and valuations are low and they can continue to be even as that market goes up.
The best investment buying opportunities, though, are markets and sectors where people either have zero interest in, as they seemingly have gone nowhere for a long time, or actually hate the idea of investing in, as that is how it is at the start of a new bull market.
It is why the masses missed out on gold and silver.
-Mike
