1% Correction In The Markets – Should We Panic?
Chris Temple joins me today to look at the selloffs today in the US equity markets. The Dow is down almost 300 points and the VIX touched above 15 for the first time since August. We also look at the relationship between rising yields and a natural correction that is due for the markets.
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Freak out! (Chic – Le Freak)
I missed the Chic first time around….must have slept through the 70s.
😮
No need to panic, just sell. There are plenty of good reasons to do so.
Trading Places: Sell! Mortimer Sell!
I like the fact that EEM looks just like DIA so it won’t be receiving much interest from those looking for greener pastures. That means more interest in the most obviously undervalued shares out there — the gold/silver stocks.
At first it will be a “sell everything” atmosphere, but Emerging Markets will start to get a bid with some of the green pasture searching money flows.
However, I agree that gold/silver stocks and the commodity sector will be the recipient of some of the re-balancing of funds. It won’t take much to move the needle in a substantial way in this tiny sector.
Bring on the sector rotatation!
Like the Dow, I wouldn’t touch EEM anytime soon. It had an even bigger year than the Dow and looks every bit as bad for the short to medium term. Long term, EEM looks much better.
Commodities ex gold/silver are dependent on the economy so falling conventional stocks will make them less desirable for a time as well.
I moved some of my exposure in my retirement account from the US general markets to the Emerging Markets towards the end of last year. It’s about 70% US / 30% overseas now. Not really a trade but more of a change in my weighting just to get a bit more outside of the US after such an epic run the last decade.
As for my trading account though, I agree that when investors start looking for where to move funds to capture value, that a percentage of this money flow that is looking for a new home will find the low valuations in commodities and mining stocks quite attractive. I’ve positioned accordingly and look forward to the balance of 2018 and 2019 as being an incredibly fruitful time in the resource sector.
Ah come on, boyz…buy the dip! After all, happy times are here again, don’t you know?
And the Feral Reserve’s got your back…after all, you’ve got a Goodfiend at the Feral Reserve! 🙂
you’ve got a Goodfiend
Hah! Freudian typo! http://www.dictionary.com/browse/fiend
Now, you boys know you’ve got a Goodfriend at the Feral Reserve!
Future Good Friends Fed members…
https://www.thesun.co.uk/news/5447151/human-chimp-hybrid-born-florida-lab-killed-humanzee/
Wow – humanzees….. seems redundant. 🙂
But seriously…you gotta know the Feral Reserve and all the CBs are gonna do all they can to prop up the markets…just think what happens to all those gooberment pensions if they don’t. What are you gonna tell the cops when they can’t retire in their 50s with pensions worth millions? I know where I live they would go ballistic.
The FED has your back….. Enjoy the show!
The really scary thing is that if 1929 is what is the pre-rhyme in history, we will not be initially saved by precious metals.
I have the majority of my assets now in precious metals, but I am seriously worried.
It is possible that Bix Weir and Clif High are correct and that the monetary system will not this time be saved by precious metals, but by government controlled cryptocurrencies. My worry, however, is that such new currencies will be little more than quasi-limited supply fiat.
Governments have always and will always have a desire to over spend and over tax, and in this nothing has changed or will change in that regard until a revolution.
Is this time different or is this the Big One of our lifetime? I don’t know, but fear that it is. Have central bankers learned anything in a century, or are they simply government spending enablers? Time will tell.
CFS – I don’t believe 1929 is a direct comparison here. The runaway juicing of the stock markets with artificially low interest rates has created something we’ve never seen before and a 9 year rally that barely paused for 3-5% corrections. With interest rates this low, all “savers” were punished if they put money in a bank or CD or money market, and thus everyone has been forced into the stock markets, and some found a home in real estate.
The bond bubble is 35 years in and waiting to find a pin, but how that plays out remains to be seen.
** Mining stocks and Commodities are way down relative to other asset classes, so even if they initially pull back in the “sell everything” mode, they don’t have nearly as far to fall as the general equities do that have been juiced up for the last 9 years.
During the 2008/2009 crisis the miners and metals fell but that is because they were at much loftier valuations. That isn’t the case this time around.
It is commodities and the precious metals turn to rise, especially if we keep seeing a weaker dollar & higher wages stoking the fires of inflation.
That is the reason I have the majority of my assets in precious metals.
But a run in commodities and precious metals requires money to buy them and it is not clear the monetary system, as we know it, survives. I don’t believe in a Mad Max scenario, but that does not mean I don’t worry about the possibility.
Yeah, it is worrisome for sure, but I don’t expect that big of a correction, when/if it finally comes. 10-20% correction would clear out the sentiment and reset the charts.
Over time it could turn into the BIG reset some are expecting, but look at how many people have been waiting for that for decades now. In the meantime life goes on…
I’m used to a 10-20% corrections in volatile stocks on a daily basis, so if something like that develops in the general markets, then it’s a big meh…. for me personally; however, I’m sure the talking heads and overconfident hedge fund traders will be crying in their soup over it.
The Central Bankers will want to prop up the markets, of course. (Actually, I believe it is the treasury not the Federal Reserve that functions in this way in the U.S..
But the Fed/Treasury has painted itself into a corner, by virtue of the size of the debt.
A normal response soon would be to raise interest rates to control excessive money supply, but given the size of the debt, such action is not possible without undesired consequences. If massive spending is made by all central banks in collusion to maintain stock markets, the catch 22 for this procedure will be a collapse of the monetary system by virtue of the debt – a Weimar style collapse, but almost world-wide instead of country specific.
Miners may not have as far to fall….but zero is still zero.
Miners are guaranteed to tank if the markets do, it will be the same as it always is, baby out with the bathwater.
Assuming banks allow withdraws and brokers stay broking cash on the side lines could be very prudent.
CFS makes a great point, old withered up farts carry some cash with them when they go out, young nubile pretty giggling girls dont go out without their phones.
Are times changing? maybe they already have, but some things dont change, its never dif this time, should a market crash happen, people will raise cash with anything they have as usual.
PM stocks get sold.
Thats my guess anyway.
B:
Miners have already tanked. They are pricing gold at $400 and in relative terms are cheaper than they have ever been. I would like to see gold and the metals wring out the permabulls but the miners don’t have far to fall regardless of what the other segments of the market do.
Exactly right, Robert. This is not 2008 at all.
Bingo.
So its different this time. ok
Personally, I see gold stock demand increasing as the economy gets stronger.
Mining stocks and commodities are way down relative to other asset classes, so even if they initially pull back in the “sell everything” mode, they don’t have nearly as far to fall as the general equities do that have been juiced up for the last 9 years.
During the 2008/2009 crisis the miners and metals fell but that is because they were at much loftier valuations. That isn’t the case this time around, so it is definitely a much different set up in the miners & commodities than the general equities at this point.
You’ve misapplied that saying, b. The differences are vast.
Gold stock demand is greatest when gold miners are the only game in town (most profitable; most profit growth; and most undervalued). The gold miners quadrupled 15 years ago while the S&P fell by almost 50%. The nice thing is that the miners are going to do very well even if conventional stocks manage to hold up better than expected.
I’ve posted the following chart several times in recent years:
http://stockcharts.com/h-sc/ui?s=%24HUI&p=D&st=2000-11-15&en=2002-07-22&id=p06358701623&a=376513785
This chart has been posted in about a dozen presentations lately, but it visually shows just how depressed the commodity sector is relative to the nosebleed levels we see general equities at.
A little reversion to the mean is in order…..
http://cdn.ceo.ca/1d72dsh-Gundlach_equities_vs._commodities_.png
Commodities have been at record lows for a long time now so many probably doubt the significance – big mistake.
EX:
Brilliant chart showing commodities vs stocks. Using my theory of buy cheap, sell dear, commodities are cheap compared to anything else and should as you say, revert to the mean. This time it’s usual, not different.
Pots have real room to drop b…..trading at lofty levels and if people lose their shirts won’t have any money to buy pot. 😵
you havnt heard?
Times of pot will get you thru times of no money better than money will get you thru times of no pot.
50 cent to $14 has not been a bad place to be while waiting for PMs to do something.
I agree, these could be considered “lofty” levels.
A valid point. In a liquidity squeeze some of these higher flying speculative stocks will come down more than the commodity stocks which barely have even gotten off the mat.
There is a lot of RED ON THE BOARDS…..TODAY………
Pot got hammered too, seems pot is following gold again.
I asked yesterday about Bobs article, he said a reverse was going to happen, but which way?
Just wondering, the article was posted when gold was on its way up, maybe he predicted a drop?
Doc is saying the same thing the cpm group is saying, Doc=patience, cpm=not this year.
Both saying when PMs move up, owning them will be fun, shares or phyzz.
Dollar up, gold, silver, platinum, palladium down, DOW & S&P down, VIX up, Euro down, pseudo currencies major crash of 85-95%. Sentiment does work. I’m hanging on to my resource shares and will ride out any drop.
So far I am batting 100%
Aren’t we lucky a thousand point drop on the Dow is still less than 4%.
I don’t know about cryptocurrencies. But does anyone; except satoshi and his compadres, who might be part of those with power.
Muchy wants to keep his job………..Strong Dollar long term….he says…..
https://www.zerohedge.com/news/2018-01-30/mnuchin-i-absolutely-support-strong-dollar-over-longer-term
What a bunch of flip-floppers….
That is too Muchy…….I doubt the guy can count to a 100…
Ultimately all their talking back and forth just amounts to mixed messages and nonsensical posturing. Despite all the lip service this administration is trying to give for a higher dollar now (when they’ve wanted a weaker dollar since last year), it is meaningless to the longer term trend.
The dollar may bounce in the short-term, but it is clearly displaying weakness on the charts, and there isn’t much support below the recent 88 level, so it may pull all the way down to those series of prior peaks and congestion near 84 before rebounding, setting up a new and much lower trading range.
In that partially inflationary environment, the commodities and metals will get more attention from the main stream investing community, and it may be the impetus to bring new investing money flows into the sector.
There is a big planet out there with an emerging middle class and rising wages that want stuff and the companies that can economically extract the raw elements (commodities) will prosper. Unfortunately for citizens in the US, it means our “stuff” is going to cost more now.
Mnuchin urges Congress to raise debt ceiling as another shutdown looms
Reuters
Reuters•January 31, 2018
https://finance.yahoo.com/news/mnuchin-urges-congress-raise-debt-143551475.html
Peter Schiff: It Could be Over for the Dollar
InvestingNews – Jan 29, 2018
“Peter Schiff of Euro Pacific Capital explains why he thinks we’re headed toward the biggest bear market in the dollar’s history.”
The resistance line that stopped the Dow on the following chart was drawn over a month ago, not “fitted” today:
http://stockcharts.com/h-sc/ui?s=DIA&p=W&yr=5&mn=6&dy=22&id=p53482042137&a=448653503
IPT is bullishly up 3% since Friday’s close while SILJ is down 6.3%. As I’ve said before, when IPT diverges from the sector, go with IPT’s message, not the sector’s. Nothing is 100%, but it has worked for me more often than not.
SCZ has also been charging higher lately and EXN was up big yesterday against the herd, but pulled back a bit today. Still both are up over the last few days.
There are actually about a dozen or so Silver Development stage companies that have been heading higher despite the pullback in many of the producers or explorers. That sometimes is the case, as currently the metals prices are really changing that much about their longer term setup.
correction: currently the metals prices are (NOT) really changing much….
I wish this site had some way of editing posts after one hit’s submit.
Most sites give people 15 minutes – 1 hour to edit before it is cast in stone. Often it isn’t just spelling or grammatical issues, but there are times l’d like to change or ad something, and just say fuggedaboutit….
Sometimes just passing over submit, without actually clicking, causes one of my systems to believe it’s a click.
The metal prices aren’t currently changing anything but the outperformance by the little silver miners is a very good sign, no doubt about it — especially when they’re up while the metal is down.
+1
Apple will come out later this week and say that it sold ONE iphone X resulting in an extra 500 points up immediately on the DOW.
You know it makes no sense at all.
Apple and The Govt………
https://www.zerohedge.com/news/2018-01-30/us-launches-probe-apple-slowing-older-iphones
They are innovative. Each year they will keeping a half inch to the screen and one day it might be the size of a book.
Well I have one stock in the green…..and it’s up 12%….finally getting action on Brent Cooks Evrim. v.evm
Despite all the negative sentiment and gnashing of teeth, there are actually plenty of stocks in the green today in the Gold & Silver space and in many of the other commodity stocks and miners. It’s just another mixed day in the markets…
This could be the breakaway gap down that signals a trend change. If VIXY closes the week above the 18 week MA, it’s probably a trend change…
With all the political stuff going on and anti trust violations with certain companies, it makes good sense to see a downturn.
Meanwhile, it’s all about commodities and emerging markets. At least until PMs start looking shiny (some day..)
If, nothing else, …..it will get them thinking……….
I had already dumped everything before the correction but stuck with a GE position purchased in the 16 area. Starting to add XOP today at 37.05 and 36.84.
YES!