Financial weekly letter
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Important weekly letter for metal traders: 14 June 2009 Dear Friends, I am putting last week's weekly newsletter here because metal investors around the globe follow our outlook very closely. Here is the weekly letter for those who are not our members.
Dear Members, Last week the markets were quite volatile because of the June month options and futures expiry. I would once again like to remind long term investors to focus on the Dollar and the DOW and they are certain to be among the many new billionaires that will emerge in coming time. This is not to say that commodities will be dead; for they will have their own unique role to play as time goes by. Indeed, the commodity market is set to remain very active, but because it is a relatively small market, investors should expect to feel the heat either on short squeeze or a bear trend. The situation will only be different once the market grows substantially. We also foresee a bubble in grains as well as in metals and oil, but at this stage the focus is upon the DOW and the Dollar. There will be a big bubble in corn once Jupiter comes back to Capricorn, which we expect after a few months. When the time comes, corn prices will suddenly multiply but soybean will be left behind. The transit of Mars will also affect oil, while Jupiter will compel gold and silver to move towards historic highs after one year. Therefore, our main areas of focus should only be those in which major forces of nature have strong or full support. Meanwhile I shall do my utmost to guide you appropriately. One of the greatest bull markets in gold is still pending and our members should wait patiently for one of the best gold buying opportunities. Therefore, one should not buy metals at this stage but wait for the appropriate time and we shall buy aggressively like in 2002 to 2004. This week’s trend from 15 to 19 June GOLD/SILVER We are very excited at the prospect of soon loading gold once the planets give us the right signal. The longer term outlook is that gold will move into a bubble market before it crashes; and the trend may first take gold to $1200, then to $1800 and it may eventually hit $2800 after five years. On the other hand silver will move to $28, then 39.80; eventually hitting $50. Of course this is all in the future not today. Having said that, the current weakness could slide gold down to $750 or even $550 as the Astro trend is uncertain. The only planet supporting precious and base metals is Mars, and t has been in support for the last two months. Indeed it was an error on my side not to have recommended buying. Nevertheless, we foresee support for metals on the lower side, but a negative period is coming in gold, silver and other metals from 1st of July. It will not be surprising if gold rapidly drops to $550 and metal investors should therefore plan well or risk being thrown out of the market by short term price movements. Metal investors can opt to drastically reduce their holdings, in other words go for low leverage and start accumulating call options. Those who want to hold for long in the futures market should take put options. In the last week we have witnessed a significant drop in metal stocks. For instance, the HUI came down to almost $340 from $400, which is quite serious because gold is still trading around $939. One can either take this as an alarm signal or simply ignore it, but I leave it to you because we are currently not holding any single contract in metals. We are also not holding metal stocks. Meanwhile we are accumulating uranium and solar stocks, and we shall continue to do this in coming days and months when the stock market gets a bit hammered. Medium term investors should avoid metals at this stage as a better opportunity will present itself. This week gold and silver will trade sideways on Monday. Those who shorted should cover on Tuesday as we foresee both metals gaining ground and sharply moving up on Tuesday and Thursday. If gold fails to close positively on Tuesday and Thursday, then that will be an alarming indication for all investors trading in metals. On the other hand, a positive closure on both days will be confirmation that gold will fight against the US Dollar in the next two weeks and remain positive. The trading range will be $930.80 to $949.80; and the breaking of prices on either side will result in sharp movements in that direction. If gold breaks $930, then it will move to $903 (though chances of this are slim). If it however trades above $949.80, gold is likely to reach $968.80. The best advice is to stay alert and watch Tuesday AND Thursday’s trend as these days will determine the trend for the medium term. Trading for silver will be $15.21 to $14.10. We shall release an update during the week. If on Tuesday and Thursday gold closes positively, then we shall predict gold reaching $1032 by the end of the first week of July. A weak closure on both days will however mean a very negative outlook for the short and medium term. One can cover the short in gold stocks or buy the stocks if gold trades positively on Tuesday. Meanwhile wait for our update on Thursday. BASE METALS As predicted, base metals traded positively, but base metal stocks were quite negative. Base metals could remain positive for another one week before they crash hard from the first week of July. Those who are short in copper, platinum, zinc and aluminum can hold, and one can add more in the first week of July. COFFEE/COTTON Both soft commodities traded weakly as predicted and the trend will persist in coming days. Mercury will give a buying signal in coffee within 10 days, therefore wait for our alert on coffee. Cotton is set to remain weak and one should therefore avoid any new trading. Those holding cotton short can hold for the next one or two months. SUGAR/COCOA Cocoa prices will remain sideways but sugar looks poised to fall sharply. Sell sugar around $15.50. STOCK MARKET All major stock markets look tired: the European and Asian markets traded a little weakly or sideway as predicted. This week we foresee volatility in all major markets and we shall witness a major correction in European and Asian markets. While one can short these markets, you should hedge your position 30% by buying the USA market. In the next three months all major world markets will move in sideways or be in a weak trend. The current top has been posted and we therefore better trade in other areas. Currently, the energy and metals area looks weak as metals prices are coming down and oil will soon have a major break down. However, trading in these areas will give better returns compared to trading indexes, and we are convinced that members should look seriously consider them. In the Asian markets, one should sell banking and metals sectors. Those who want to hedge their position can buy power or indexes and those who want to sell indexes should hedge their position by buying capital goods companies or power related companies. We don’t recommend anyone to stay long without a hedging position because the outlook of the markets after 15 June is unpleasant. GRAINS Corn and wheat are trading weakly. Even though soy bean is trading higher, we still believe that corn will be one of the best investments in coming time, not soybean. The current trend in grains will remain weak and we therefore don’t recommend any buying at this stage whether in corn, wheat or beans. All these grains should remain down. OIL Oil prices have moved up more than 100% in the last three months, but still a lot lower from last year July ($145). From my small trader knowledge, I figure that the big traders are playing a very dirty psychological game with traders or investors. Traders will not be worried or have sleepless nights if oil moves three dollars from $32 to $35, but they will when they want to take a short position in a bull market or if they are in the short position at $70 and it moves up from $70 to $73. After a few weeks they will find that oil has dropped from $70 to $57. This is what is currently happening in oil, and traders are in fear because there is rapid movement and no one has the guts to hold a short position in oil. A few may hold but they will get out after making one or two dollars and miss the whole downwards move, which is what happened when oil came down to $32 from $145, and very few people were able to stay in the short position. It took five years for oil to move from $32 to $145, but it came down from $145 to $32 in the seven months. A bear market always provides special returns but one has to be patients for prices to reach their peak. History of the last 140 years shows that a bull market always takes longer to move up compared to the move of a bear trend. In other words, for a bear market to achieve lower prices, it could take a tenth of the entire time a bull market took to achieve the highest price from bottom to top. Two planets, Mercury and Mars usually wreck havoc on bull markets if they come in the wrong position. The current bull market in oil and stocks could be afflicted if Mercury supports Mars. At this stage this has not happened but it is slowly making a 1-4 position, which could be quite dangerous for stocks and energy. We still see $72.80 as a good price to sell oil; and it came down from that level on Friday. This week oil looks weak and a bear trend will develop. We see oil coming down to $68.20. Heating oil and RB gas will trade with oil. Last week we predicted Natural gas to remain positive and this week we see a little positivity. One should therefore buy gas and sell oil, and this will be great hedging. CURRENCIES The US Dollar performed extremely well last week even as technical and fundamental news were against the USD. We foresee a strong performance of the Dollar this week as well; therefore add position in the Dollar without fear because the US Dollar index will soon hit $100. The Australian Dollar and the Pound will remain sideways or try to move higher. The Swiss Franc, the Euro, and Canadian Dollar will remain weak and one can take a sell position in these currencies. Hedging trade could be to buy the Dollar Index and buying the Yen with the Pound. Meanwhile, keep adding Uranium and nuclear stocks to your portfolio. Thanks & God BLESS Mahendra Sharma, 14 June 2009 |