Weekly Market Update

Transcription

1 1 Weekly Market Update Phoenix Capital Research, Phoenix Capital Management Inc. All Rights Reserved. Protected by copyright laws of the United States and international treaties. This newsletter may only be used pursuant to the subscription agreement and any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), in whole or in part, is strictly prohibited without the express written permission of Phoenix Capital Management Inc. All Rights Reserved.

2 Disclaimer: The information contained on this newsletter is for marketing purposes only. Nothing contained in this newsletter is intended to be, nor shall it be construed as, investment advice by Phoenix Capital Research or any of its affiliates, nor is it to be relied upon in making any investment or other decision. Neither the information nor any opinion expressed on this newsletter constitutes and offer to buy or sell any security or instrument or participate in any particular trading strategy. The information in the newsletter is not a complete description of the securities, markets or developments discussed. Information and opinions regarding individual securities do not mean that a security is recommended or suitable for a particular investor. Prior to making any investment decision, you are advised to consult with your broker, investment advisor or other appropriate tax or financial professional to determine the suitability of any investment. Opinions and estimates expressed on this newsletter constitute Phoenix Capital Research's judgment as of the date appearing on the opinion or estimate and are subject to change without notice. This information may not reflect events occurring after the date or time of publication. Phoenix Capital Research is not obligated to continue to offer information or opinions regarding any security, instrument or service. Information has been obtained from sources considered reliable, but its accuracy and completeness are not guaranteed. Phoenix Capital Research and its officers, directors, employees, agents and/or affiliates may have executed, or may in the future execute, transactions in any of the securities or derivatives of any securities discussed on this newsletter. Past performance is not necessarily a guide to future performance and is no guarantee of future results. Securities products are not FDIC insured, are not guaranteed by any bank and involve investment risk, including possible loss of entire value. Phoenix Capital Research, OmniSans Publishing LLC and Graham Summers shall not be responsible or have any liability for investment decisions based upon, or the results obtained from, the information provided. Phoenix Capital Research is not responsible for the content of other newsletters to which this one may be linked and reserves the right to remove such links. OmniSans Publishing LLC and the Phoenix Capital Research Logo are registered trademarks of Phoenix Capital Research. OmniSans Publishing LLC - PO BOX 2912, Alexandria, VA 22301

3 WEEKLY MARKET UPDATE Dear Subscribers Firstly I want to wish those of you in the US a very Happy Thanksgiving. For those of you outside of the US, I send you best holiday wishes as we enter the holiday season. Regarding the markets The single biggest item to note is that the $USD is more overbought than at any point running back to early The $USD is above its weekly Bollinger band (blue circle), with an RSI that has just poked into severely overbought territory (red circle). What s incredible is that this move is entirely based on expectations, NOT policy changes. 3

4 As I ve noted previously, the single largest driver of currencies post-2008 has been the employment of or ending of QE programs. Less than 1% of investors realize this. Nearly everyone believes that interest rates are what determine currency levels. This is a myth as the markets have shown us. The $USD staged its biggest drops when QE 1 and QE 2 were unveiled in 2009 and 2010 respectively. And it staged its biggest rally in 2014 leading into the end of QE 3. Indeed, the only time a QE program didn t impact the $USD dramatically was in 2012 with the announcement of QE 3. This was because both the Bank of Japan (BoJ) and the European Central Bank (ECB) were engaging or about to engage in massive QE programs of their own. So the announcement of QE 3 was canceled out. Similarly for the Yen, the largest drops were the result of the announcement of large-scale QE programs. 4

5 As was the case for the Euro. 5

6 With that in mind, consider now the recent move in the $USD. Neither the Fed, nor the BoJ, nor the ECB have made any announcements regarding a QE program. This move is entirely based on the markets believing a trade war is coming via the Trump Presidency. As a result, the $USD is severely overbought while the Yen and the Euro are severely oversold all based on expectations, not the announcement of new monetary policy. 6

7 This move is overdone and the $USD should begin to crash soon. It might hold up into the Fed meeting December th, but based purely on technicals the $USD could crash right now When this happens it will open the door for the next major leg up in inflationary assets, particularly, Gold, Silver, precious metals miners and Emerging Market stocks. Regarding Gold, sentiment is at negative extremes I ve rarely encountered. The media and social media space are rife with claims that Gold s rally is over and that Gold is going to plunge to new lows, possibly even $1,000 per ounce. These claims are being made when Gold is still 13% off its lows AND outperforming stocks year to date! Gold is now sharply oversold at a time when it is coming up on numerous bands of support. 7

8 The minute the $USD rally rolls over, Gold will be shooting up sharply. My intermediate-term target for Gold on this move will be $1600 or higher by this time next year. And if we get a confirmed long-term bullish crossover (when the 50-week moving average breaks above the 200-week moving average) it will signal that the next MAJOR leg up for Gold is beginning. The last such occurrence hit in 2002 at the very beginning of this current bull market in Gold (red circle below). A second long-term bullish crossover here would mean we re set for a similar move. 8

9 During the last Gold major bull market in the 1970s, Gold rose 550% during its first leg up from 1970 to It then corrected 50% before beginning its next leg up. However, it was the SECOND move higher than was the BIG one= a 900% increase in value. Using this as a proxy, combined with my belief that Central Banks are going to be unleashing truly NUCLEAR level QE programs within the next months, I expect Gold to move to at least $5,000 per ounce if not $10,000 per ounce during its next major leg up. So I am not worried about Gold at all. Long-term if that bullish crossover hits again, we re going to see astronomical gains in the next 2-3 years. The story is identical for Silver: sharply oversold with multiple bands of resistance here, and a long-term bullish crossover in the near future. 9

10 And the story is even more extreme for Gold miners, where a long-tem bullish cross over has already hit. 10

11 The same goes for Junior Gold Miners. Bottomline: Do not worry about the precious metals space. This is an EXTREMELY volatile sector. But the macro and technical pictures here are the best I ve seen in years. The ONLY thing holding back the next massive leg up is $USD strength which will be ending shortly. Outside of Precious Metals and Precious Metals Miners, Emerging Markets are looking very promising. The $USD rally has absolutely annihilated Emerging markets. But the Emerging Market ETF (EEM) appears to be putting in a bottom now. 11

12 This is the buy signal I ve been looking for. Action to Take: Buy the Emerging Market ETF (EEM). In terms of individual plays, Brazilian brewing company Ambev (ABEV) has been absolutely crushed by the $USD s strength. I think we re putting in a bottom here, with a potential snapback rally to $5.50 if not new highs. 12

13 Action to Take: Buy Ambev (ABEV). Mexican cement Giant Cemex (CX) is another company that is putting in a base and preparing for its next leg up. 13

14 Action to Take: Buy Cemex (CX). In terms of what s to come in a few weeks, one area that really interests me right now is Coal. Few asset classes are as bombed out as Coal. Most US-based coal companies have been bankrupted by regulations in the last eight years. However, things began to turn a corner in early 2016 with the Coal ETF (KOL) bottoming and rallying hard. As I write this, the Coal ETF is massively overbought and has slammed into overhead resistance. However, once we shake out some of the hot money here, we could easily go to $25. I m watching this sector closely. Once it cools down a bit I ll have some coal plays to you. Finally, regarding US stocks, the entire market is severely overbought. With the $USD above 100, 4Q16 corporate profits are toast. I expect we re going to see a sharp correction to 2170 or even 2150 on the S&P 500 within the next two weeks. 14

15 This would be roughly around breakout support on the monthly chart (upper red line). 15

16 Once that correction is completed, provided the $USD falls and continues falling, the S&P 500 will be going to 2,300 or so. That s my base case for now though it s subject to change depending on what the $USD does. Personally I believe there will be bigger opportunities in precious metals and emerging market stocks than in US stocks going forward. This concludes this week s market update for Private Wealth Advisory. The $USD rally looks sharply overdone and should reverse shortly. When it does, it will kick off the next leg up in risk assets of which precious metals and emerging market stocks will be the top performers. I m watching the markets closely and will issue updates as needed. Barring any new developments you ll next hear from me next Wednesday in our longer monthly issue of Private Wealth Advisory. Until then Best Regards, Chief Market Strategist Phoenix Capital Research 16

17 OPEN POSITIONS STOCKS PORTFOLIO POSITION SYMBOL DATE CURRENT GAIN/ LOSS Exxon XOM 9/24/14 $95.82 $ % RPX Corp RPXC 8/5/15 $15.48 $ % China ETF ASHR 11/7/16 $24.80 $ % Emerging Markets! 11/25/16 $35.25 ETF EEM NEW! Ambev ABEV 11/25/16 $4.96 NEW!! Cemex CX 11/25/16 $8.07 NEW!! BONDS PORTFOLIO POSITION SYMBOL DATE CURRENT GAIN/ LOSS Nuveen Muni. Fund NVG 1/2/14 Emerging Market Bonds EMB 11/21/16 Long US Treasuries TLT 11/21/16 $13.12 $ $ $ % $ % $ % Prices as of market s close on 11/25/16 at market s close Price include dividends *Average price of $17.50 and $

18 PRECIOUS METALS/ MINERS PORTFOLIO POSITION SYMBOL DATE CURRENT GAIN/ LOSS Gold Silver* 3/17/10 3/17/10 $1,120 $16.23 $1, $16.52 Uranium ETF URA 6/8/16 $15.49 $12.36 Gold Miners ETF GDX 10/5/16 $22.83 $20.61 Gold Mining Juniors GDXJ ETF 10/5/16 $37.52 $33.80 Silver Wheaton SLW 10/5/16 $22.59 $18.07 Silver Standard SSRI Resources 10/5/16 $10.30 $9.59 Barrick Gold ABX 10/5/16 $15.54 $14.76 New Gold NGD 10/5/16 $3.88 $3.59 Natural Gas Trust UNG 10/5/16 $8.71 $8.08 6% 2% -20% -10% -10% -20% -7% -5% -7% -7% Prices as of market s close on 11/25/16 at market s close Returns include dividends 18

19 SPECIAL SITUATIONS/HEDGES/SHORTS PORTFOLIO POSITION SYMBOL DATE CURRENT GAIN/ LOSS Santander (SHORT) SAN 2/3/16 $4.13 $4.50-9% Barclays (SHORT) BCS 7/5/16 $7.92 $ % France ETF (SHORT) EWQ 9/16/16 $23.38 $ % Italy ETF (SHORT) EWI 9/16/16 $21.56 $ % American Eagle Outfitters AEO 5/26/16 $15.36 (SHORT) $ % CASH/ CURRENCIES PORTFOLIO POSITION SYMBOL DATE CURRENT GAIN/ LOSS Euro Trust FXE 10/5/16 $ $ % Prices as of market s close on 11/25/16 at market s close Price include dividends 19

20 RECENTLY CLOSED POSITIONS POSITION SYMBOL DATE SELL DATE SELL GAIN/ LOSS Gerdau GGB 11/7/16 $ /22/16 $ % Copper 18% COPX 11/7/16 $17.90 Miners ETF 11/22/16 $21.10 Conoco- 4% COP 11/2/16 $43.46 Phillips 11/25/16 $45.38 Schlumberger SLB 11/2/16 $ /25/16 $ % Chevron CVX 11/2/16 $ /25/16 $ % 20