Place your bets – Will we see a breakout or breakdown in the US Dollar
Doc is with us this morning to discuss his outlook on the US markets and the US Dollar. Doc is in agreement with Rick on the comment that the US market are rolling over. We do not address Rick absolute bottom of 3,000 Dow but Doc does share some lower targets. A for the US Dollar the lack of volatility, continuation in the pennant formation and tightening Bollinger Bands we need to get ready for a break in one direction.
Please let us know which direction you think the US Dollar will break.
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bank box, as SD would say YIKES!
Better hope the bank branch manager does not need any extra income nor likes baseball.
The bank manager does not know what’s in my box.
Wow, that’s quite a return on that penny. You’d have $2,000,000 had you spent a whole dollar. 😉
I think the more people believe Trump might win, or if he does win, the better chance the dollar will break down. Other than that, the dollar is still the prettiest baby in the nursery and I see no reason that will change soon.
Always, good to hear your commentary, Doc. Thanks.
Took an $8 loss on NUGT today. But netted 2% on ECA and 5% on MRO. 66% green trades this month. Net is only $157 but profit is profit!
DB…..The run Begins:Hedge Fund clients withdraw EXCESS CASH….zero hedge
Morning Doc,
Ive been following your comments on the gold/miners market and know your forcast is sideways to down over the next weeks/months with, most likely, a new leg up to follow.
If I may, what mining stocks do you feel have the best opportunities for strong runs in the next run? And do you have any thoughts on GPL and NAK?
Yup, the dollar is going to move soon says the charts. The fundamentals say it’s going south. Many countries that have used the USD for commerce are starting to use their own currency. Over the years exporting USD has kept the dollar strong. That game is being unwound. The dollar is heading south.
Interesting technical analysis from Jordan on Gold and the US Dollar:
Precious Metals Video Update: Gold Stocks Next Low in October?…
Jordan Roy-Byrne, CMT – 09.28.2016
I think Jordan may be little too pessimistic, but it is hard to tell, as he almost always sounds a bit sad.
Yes, I am a bit more optimistic, but in reviewing his charts, I see the reasoning he is using. Yes it is very hard to tell if Jordan is excited, sad, or pessimistic due to his delivery style. He misses turns from time to time (like all pundits that analyze the markets) but Jordan’s a sharp enough guy and I’ll take time to hear him out whenever he posts an update. Regardless, October should be a pivotal month and break out of this range.
Several commentators I read are saying a possible last decline early-October the another up-leg for months.
That seems reasonable to me, and that’s how I’m playing it. That’s why I’ve been starting to add to positions I like, anticipating a turn back up in mid October.
Platinum prices little changed as strikes begin at Impala
London (Platts)–29 Sep 2016
The lower interest rates go, the more limited are the returns, so for gold to reap the benefits, this would require a dollar devaluation. Americans seeing the currency devalue woukd see it as a harrowing example of crackup boom, while Canadians used to watching their currency devalue by 30% will be scratching their heads.
I’m also thing that commodities not sensitive to interest rates will not experience much in the way of gains.
Wow – I mentioned a few times in 2015 and early 2016 that out of the smaller Mid-tier gold companies that I thought Claude, Lake Shore Gold, Kirkiland Lake, Klondex, and Richmont mines would be taken out once the cycle turned bullish.
Now this makes 3 out of the 5 that have been taken out with this news from Kirkland Lake. That only leaves Klondex and Richmont to get nabbed and then some of the best acquisition targets will be gone for the Mid-tiers trying to expand.
Let’s take odds on which one goes first – Klondex or Richmont?
Bonus question: Will it be in 2016 or 2017?
__________________________________________________________________________
KIRKLAND LAKE GOLD AND NEWMARKET GOLD TO COMBINE TO CREATE A NEW MID-TIER GOLD COMPANY
September 29, 2016
As a follow up point, Crocodile Gold was looking good for a re-rating, and New Market Gold merged/acquired them and have done a great job of maximizing and reinventing that project. Now they’ll have Kirkland Lake under their umbrella.
When this is all complete, I’m moving them up on par with Oceanagold as a super-solid Mid tier company with a darn good management team, great assets, and a great growth profile.
Impressive.
After reading it more carefully, it looks like Kirkland Lake will keep the name and is acquiring New Market Gold, so NMI is getting the premium, and Kirkland Lake is selling off on the news. That’s pretty normal market behavior IMO.
“Existing Kirkland Lake Gold and Newmarket shareholders will own approximately 57% and 43% of the combined company, respectively, on a fully-diluted in-the-money basis.”
Regardless the combined company will a solid player in the Gold space. A bit too large for my tastes, but I respect both teams and wish them all the best.
Brian, if you happen to read this post what is your plan?
Will you stay with the combined company, or will you take your winnings and try a smaller company?
I’m keeping my Newmarket shares after the merger. They should call the new company Crocodile Gold.
Good idea. That Crocodile just keeps snapping up the good assets and will live a long long time….
The press release reads that the company will stay Kirkland Lake after the merger.
EX
When the other two takeovers occurred (Claude, LakeShore) I sold almost immediately because I could not own the buyer due to my (eccentric) constraints regarding ethics and jurisdiction. I then bought new juniors with the profits and original investment in both Claude and LakeShore. (Impact Silver, thank you , Matthew)
This Kirkland Lake / NewMarket deal has me a bit off-balance. I’ll need to research NMI more, but if I remember correctly, they have been discovering amazing grades (CHECK!) and are in the top 3 jurisdictions: CA, USA, AUS.
Basically, I like to have several producers in my Portfolio to offset the crazy volatility of the junior explorers.
So … I hold my Kirkland shares as of today.
Klondex is my favorite right now (as it is for Jordan, I believe). Such potential. But I’m sure it will go this year, also.
RIC, not so attached to. I could sell it tomorrow and never look back
Hope things are well with you, EX
Brian
One more thought, if I may …
If I do sell Kirkland, I will be buying more of Brixton: It is my favorite silver junior right now. All have gone up a LOT, but I like the Super-Grades and Jurisdiction. Not many like it in Canada or US, right now. A new one could appear on my radar (Hint, Hint)
Oh … I sold a part of my investment in Avino. Still holding my core, though.
Brian
Good thoughts on the Mid-Tier producers Brian. Yes, I had owned both Claude and Lake Shore gold, but did not have positions in them when their takeovers happened, but would have sold as well. I have also owned Kirkland Lake and Klondex, but not at present. If I did own Kirkland Lake, I’d be tempted to give the new combined company a go.
When Crocodile was floundering around, I kept considering buying it, and felt it was way undervalued and needed a re-rating. Then Newmarket Gold acquired/merged with Crocodile and I was disappointed that I missed that window and for hesitating on it. Their management team and progress have been impressive though, and they’ve stated a few times in interviews and press releases that they were looking to do more acquisitions. That is why originally I thought they bought Kirkland. Regardless, both companies have quality assets and quality management teams that will now be fused into one company; so it really is more like a merger of near equals, but it is 57 % Kirkland and 43% Newmarket. Kirkland Lake is technically taking over NMI but they are blending the teams on the management and board level.
I like Bonzo Barzini’s idea to rename the new company Crocodile Gold now so it can keep gobbling up more assets 🙂
As for Brixton Metals – yes, I like the opportunity there a great deal, and also am a shareholder (and I just added more recently). We discussed that one quite a bit, but I’m in agreement. As for Avino, I have traded it back and forth and outperformed those that just bought and held it, but I do have a nice core position that I’m leaving in place for the longer term.
Cheers!
Brian – I wrote you back regarding Avino on the Monday Doc editorial [but not until Tues morning], so not sure if you saw it. Here’s the repost:
—–> On September 27, 2016 at 7:06 am,
Excelsior says:
“Good thoughts Brian.”
“Yes it is very hard to go wrong with Alexco, Brixton, Excellon, Impact, and Americas Silver corp. I have positions in them as well (except Excellon, but it is on my short list).”
“I hold Avino for more of a stable and steady growth story, that I believe will grow into a respectable mid tier mining company over the next 2 years.”
“One of the things I like about Avino is their off-take agreement with Samsung, which underpins their projects. You are correct that their resource has never been the highest grade, but economics of the resource are more important that the actual grade. Brent Cook has made that point many times – there are very low grade resources that are simply more economic than some high-grade resources, due to their depth, site access, infrastructure, power requirements, how far does the ore need to be transported, etc… For example, Alexco has really high grade, but it is far more remote, and they have the Silver Wheaton and Sandstorm streams eating into any revenues they may generate, so that knocks the profitability back down some.”
“With Avino, I consider them a very well run “family business” that isn’t going to collapse or go out of business any time soon. Also, they keep extending the mine life on it even as they are mining it because most of their mountain of resources is not included in their official reserve estimates yet. As a result, I see where they have a fair amount of exploration upside around Avinio and San Gonzalo.
There is also the upside in costs and access to the ease of mining their old Oxide tailings to consider as well. Mining the old tailings will make it easier to drop their AISC when that is mixed in with the other ore in 2017-2022.”
“Lastly, the marketplace isn’t giving them any value for Bralorne yet, and that may be their high grade Gold/Silver surprise to the marketplace.”
The Samsung deal is the main reason I hold Avino shares – very innovative.
Innovative indeed.
The dollar should move upward to test the beginning of the year prices.
There is nothing wrong with the weekly chart. A continuation of higher lows.
The flunking payroll report did not affect it nor did GDP. An advance should put pressure on the mining shares to complete their correction. A stronger dollar will be problems for international SP earnings. After this has been experienced, a vote for more QE should become the next topic to continue to fuel the bubble in stocks.
Cory’s poll: If European banks go down the drain…..the Euro would surly follow. With 57% of the dollar index against the Euro, it would seem logical that it would rise. JMO
Cory – When I look at the weekly chart in the dollar it couldn’t be more neutral.
– Look at the RSI at 48.89 (neutral)
– Look at the 50 week EMA and how the action has been straddling both sides of it in a wedge formation (if you were to draw in trend-lines on the candles off the highs and lows) – signals a strong breakout in either direction with no preference
– price is at Mid-way point of the EMA envelops (neutral)
– price is at Mid-way point of the Kelter Channels (neutral)
– Slow Stochastics at 52.43 and weaving in the middle range (neutral)
– MACD flatlining after rising up, but still in slightly bearish territory – but still (neutral)
Overall it is about as middle of the road as it gets. The other shoe is about to drop, but there is no clear indication of which way this consolidation is going to break.
http://stockcharts.com/h-sc/ui?s=%24USD&p=W&yr=2&mn=0&dy=0&id=p87043703421
The US Dollar direction is a coin flip. I’d recommend an American Eagle.
Excelsior, I’ll take the Eagle any day.
Technically speaking, you are absolutely right on the USD, neutral.
The problem is we are going on a decade recovery from the financial crisis and rates remain negative in Europe, 10YR USTs are below 2% and we have a stagnant economy. Lately, the FED has been talking / making comments on stock buying, ammunition for the next downturn, the rate increase that never happens, etc.
The next phase of this central bank orgy is that the markets are going to start “forcing” the central banks and it will appear that they are out of control. With that being said, it doesn’t mean equities will crash. It just means that right now the FED is doing nothing, in the upcoming months, the FED will be forced to take action.
The real konundrum is that if commodities surge, what will happen to prices, especially food? If the dollar remains high or goes higher, what will happen to earnings? Notice that basically all material costs continue to rise even though commodities are at their lows. What happens if commodities rise dramatically?
Richard – Great points on how the rates on the 10 year have sunk into very low levels (and could get down to Rick Ackerman’s 1.65% area before this is all over). As for the mess the central bank policy has created, you nailed it. They’ve painted themselves into a corner there is no visible escape from. It is like they have 1 pawn left and their king on a chessboard facing and onslaught of incoming knights, rooks, and a very angry queen.
If commodities surge, it would likely be do a weakened dollar, but so many expect the dollar to strengthen when the Fed raises rates Dec/ or early 2017. I have my doubts, but really am mystified by what comes next. That’s the thing, nobody including the central banks have a clear plan out of this mess. Does anyone believe that what Europe or Japan or China is doing is a great plan? It’s mess and worldwide economic cluster….
I feel best owning stuff (commodities and the companies that extract them, some real estate, whiskey & wine, and exposure to the energy space in the different sectors).
It’s gonna be a really big show……
Excelsior, Well said.
The central banks keep digging deeper and deeper. I know many individual investors that are very scared of not getting yield and unfortunately are falling into the trap of purchasing overvalued staples, utilities, etc. thinking they cannot lose. This is what FED policy is creating. Today is a perfect example. The algos lift the market based on the DB rally. Are people buying? I don’t know. Is is a short squeeze, more than likely.
I think RA’s target of 1.65% is the 30YR. I don’t know if we will see this, but maybe 2%. Change is definitely underway and unfortunately I believe we will see fireworks based on FED inaction and incorrect policy.
Negative rates in US would be a death case. Think of insurance companies, health, property, etc. These have been seeing increases of over 10% per annum and there is no end in sight. They cannot get yield either and are passing the costs off to the consumers. And with this crazy weather, crime, etc. payouts are increasing.
What if the FEDs decide to halt their treasury reinvestment program and begin purchasing other assets? Similar to the Operation Twist, except rotate out of safety and into risk? I don’t know what there exact limitations are.
Last comment, I am still concerned about interest that the FED pays on excess reserves. If they increase rates in December, then they could be paying banks 0.5% on these reserves while the 10YR is at 1.5%. They need to address this. Paying the reserve interest keeps inflation in check. A rate increase in the market could very well lead to an increase in the velocity of money and lead banks to begin reducing these excess reserves. And we already know, from Wells, that banks are up to the same dishonest shenanigans as always and nothing has changed.
That is an incredibly valid point about insurance companies. They need to invest their premiums into vehicles that will get them 2-4% or more to be able to pay out on Life insurance and other lines of insurance, and more than that if they also are backing annuity products. It’s a real mess to have interest rates down this low for insurance companies, so you are correct that the only other means they have of righting the ship is to charge higher premiums.
The other point you made I agree with as well:
“If they increase rates in December, then they could be paying banks 0.5% on these reserves while the 10YR is at 1.5%. They need to address this.”
Well, we can wonder about it all day, but all I know to do is take action to diversify into safe haven assets, and try to make yield on the higher risks stocks. I decided to kick it in to overdrive and speculate in mining companies….. If I’m going to play, I swing for the fences. 🙂
All the best to you in whatever approach you take to protect your family’s assets.
If these sinking markets hold today……..I think there is a good chance we’ll see some follow through tomorrow. Anyone dealing with his own money should step aside and allow things to settle down some. JMO
Apparently Warren Buffet likes cash at this time…….https://www.youtube.com/watch?v=vLesAJ2CbFM
GSV starting to catch a bid. Just added a heavy hitter to its board of directors.
Hey Karl !
If you have lots of stocks in your PF, you need to have at least one in Nevada – does not get much safer jurisdiction than mining in that state, for sure
Brian
I would bet up on the dollar due to a flight to safety that will happen on Euro bank crisis…it might be short lived though
Deutsche Bank , . …just read Ten (10) hedge funds have withdrawn funds….jsmineset
No funds for DOJ.rip
Wells Fargo next
Important Update with Keith Neumeyer on Silver for October 2016
BY KENNETH AMEDURI ON SEPTEMBER 27, 2016
Hey Excelsior here’s the latest news from your namesake
http://www.excelsiormining.com/index.php/news/news-2016/504-excelsior-mining-announces-us-14-million-financing
Yes I saw that press release earlier today, but do appreciate the update. Looks like they have slated Q3 of 2017 for construction and production in 2018. Moving right along.
$ME Moneta Porcupine starts drill program on Golden Highway Project
Mining.com | about 3 hours ago
http://www.mining.com/moneta-porcupine-starts-drill-program-on-golden-highway-project/
The Uranium Supply Story – Part 2 of 4
by @Leni on September 29, 2016
That piece above on Uranium is dense reading, but great. Here is a good spreadsheet of the Top 15 Largest Uranium Mines in the world:
https://s3-us-west-2.amazonaws.com/cdn.ceo.ca/1buoh76-04-Top_15_Uranium_Mines.png
Here was another interesting spreadsheet of Uranium Mine Production by Country:
https://s3-us-west-2.amazonaws.com/cdn.ceo.ca/1buogqo-01-Production_from_Mines.png
I believe the direction of the USD is down, based on the monthly chart.
The weekly chart doesn’t look good either:
http://stockcharts.com/h-sc/ui?s=%24USD&p=W&yr=3&mn=9&dy=0&id=p59882233454
Good point. It made a clear top a few months ago, lost the 50 week sma, which continues to cap it, and hasn’t put in a clear bottom yet. So I’d expect the next move to be a continuation down.
The week is not quite over but it looks like commodities are going to break a 4.5 month downtrend versus gold:
http://stockcharts.com/h-sc/ui?s=%24GNX%3AGLD&p=W&yr=3&mn=3&dy=0&id=p49452541247&a=378282313
Loving the ratio charts, Matthew. Thanks !
I truly believe that knowing the RIGHT ratios provides a nice advantage to understanding trends (I did not know that a year ago – learning is good)
Brian
Here’s a good one. Would you believe that the XAU is still well below its 2008 crash when priced in gold? The next leg higher is going to be even better than the one we just had.
http://stockcharts.com/h-sc/ui?s=%24XAU%3A%24GOLD&p=W&yr=11&mn=9&dy=13&id=p14768988545&a=471646105
“The next leg higher is going to be even better than the one we just had.” I hope you’re right, Matthew. Gary Savage has just assured us that we won’t see another move like the one this year until the gold shares enter their bubble phase a few years from now.
Heres an XAU vs the SPX that folks might like:
https://www.dropbox.com/s/7m1ijnrlus238qm/20160930_XAUvsSPX.jpg?dl=0
Gary could be right and/or his definition of a “move” could be different than mine but I think those of us who like the nano caps have a very good chance at even greater gains before the mania stage arrives.
Here’s what happened in the last true bull move that began 15 years ago:
http://stockcharts.com/h-sc/ui?s=%24HUI&p=W&st=2000-06-30&en=2005-01-30&id=p03483311262&a=479653237
Notice that the first correction lasted 37 weeks and the second one lasted 59 weeks.
37 x 1.618 = 59
COPX:$COPPER tells me that copper most likely bottomed in January.
http://stockcharts.com/h-sc/ui?s=COPX%3A%24COPPER&p=W&yr=3&mn=3&dy=22&id=p63251991747&a=474433857
Thanks for the Copper charts Matthew.
+889,i don´t want to start the 888 discussion again 🙂
Very wise move Pete. 889 – no controversial significance that comes to mind.
Long term, the dollar is destined for 60 on the DXY. Short term, a bit higher. There is an alternate wave that it could hit 100.
Commodities will soon be doing some catching up to gold and silver:
http://stockcharts.com/h-sc/ui?s=%24CRB&p=D&yr=1&mn=8&dy=0&id=p05932497396&a=422938654
I like that you noted with the blue arrows where the fork support held for the CRB index.
Good stuff…… stuff is on the rise……
Matthew, sadly my 1959 Topps Mantle card is not in great condition. But my 1960 Topps Mantle, Carl Yaz(his rookie card), AL Kaline, Stan Musial, Sandy Koufax, Whitey Ford, Warren Spahn,Ernie Banks, Mays, Aaron, and many 1961 cards are in mint condition. The ’60 Mantle is worth 19K, and Yaz’s rookie card sold at auction this year for 20K. I paid a penny a card back in ’60 and ’61 and would love to sell my ’60 Yaz for 20K if anyone is interested. They have been sitting in a Roi Tan cigar box for decades, and are now in my bank box.