Sunday, March 11, 2018

Is It The Best Time For Commodity Investing?

In the long-term investing one has to keep in mind a typical sequence:

During economic expansion the first asset class to top are treasuries. Then the stocks are topping and, finally, commodities.

Look at the chart below:


The chart shows this rule in practise. If I am correct, treasuries had topped in 2016 (blue circle). The stocks are probably topping now (the green circle), even  despite the latest all-time high made by Nasdaq 100.

Finally, commodities, represented by the CRB index (unfortunately this index is overweighted by oil), are breaking above the long-term resistance level at 195 (the red circle).

Summarizing - if I am correct, now there is time for commodity investing...

Friday, March 9, 2018

Prepare For A Major Breakout In Precious Metals

It looks like we are ahead of a major breakout in precious metals. Look at the chart below:


The chart shows a popular precious metals performance measure - a silver / gold ratio. As you surely know, gold and silver prices go in tandem but silver overperforms gold during a bull market and under-performs during a bear market in precious metals.

That is a theory. In practise, very often the ratio is a lagging indicator. For example, in the beginning of this bull market in gold (no, I am not kidding - in my opinion, we are still in a bull market in precious metals) the silver / gold ratio was going down (January - March 2016). Then it followed the rule and went up.

Interestingly, in July 2016 the ratio printed its cyclical top and since then it has been going down sending us a message that not everything was good with the precious metals market. And yes, since July 2016 gold was not able to break above the latest cyclical top at $1,350 - $1,375 per ounce.

These days the ratio is once again very close to its multi-year bottoms (red and blue circles on the lower panel of the chart). However, the latest bottoms (red circles) were established when gold prices were very close to their bottoms as well.

This time (the blue circles) the ratio is at one of  its lowest levels but gold is not.

In my opinion, very soon the ratio should start another move up (if history repeats). It means that gold should follow the ratio but this time the move in gold should start from the current level ($1,330 an ounce). 

If I am correct (and lucky), we should see a major breakout in gold (and silver ) prices soon.  

Tuesday, March 6, 2018

Precious Metals Market - A Sign Of Improvement?

Since the cyclical top in gold prices (July 2016), the silver / gold ratio has been steeply going down:


Well,  it is not a pattern the gold bugs are looking for. Generally, the silver / gold ratio and gold prices go in tandem - the opposite pattern supports a bearish thesis on precious metals. And since the last top in gold prices the pattern drawn by the silver / gold ratio was typical for a bear market or a consolidation phase in precious metals.

However, today we have the first sign of improvement - the silver / gold ratio is breaking above its resistance (the dotted red line on the chart below):


On the other hand, the gold bulls should be cautious because gold is still below its strong long-term resistance of $1,350 - $1,375 per ounce. Most recently every time gold was close to this resistance its prices were bouncing off and...dropping. So, be cautious and patient...

Thursday, March 1, 2018

Note To The Subscribers - A New Pick Has Been Added

The third issue of the Simple Digressions Newsletter has been dispatched. Please, find it enclosed in your e-mail boxes.

Please, note that I have added a new pick to the portfolio.

Tuesday, February 20, 2018

COMEX - JP Morgan Silver Holdings Are Skyrocketing

Here is an updated chart showing JP Morgan COMEX warehouse silver holdings:

source: Simple Digressions

It looks like it is skyrocketing...

By the way, does anybody have any idea what this huge adjustment is about?

Sunday, February 11, 2018

US Stock Market - Expect A Short-Term Move Up

Last week VIX, a fear index, hit extreme readings of around 50 (the red circle on the chart below):


In the past such a reading was a clear indication of a short-term bottom in US equities. Simply put, the speculators trading VIX futures changed their attitude into total pessimism but...they were too fast. Look at another chart:

source: Simple Digressions and the COT data

Note that at the end of 2017 the speculators were holding a net SHORT position in VIX futures amounting to 97.2 thousand contracts (in that way strongly betting on higher prices of US equities). Now (February 6, 2018) they held a net LONG position of 85.8 thousand contracts (heavily betting on lower prices of US equities).
Well, in my opinion, the latest change in speculators' attitude was too big and too fast so...I expect a short-term move up soon.

Monday, February 5, 2018

JP Morgan And SLV - What Is Going On?

It looks like JP Morgan is moving its silver from iShares Silver Trust (SLV) to its COMEX warehouse. Look at this table:

data in millions ounces of silver

source: Simple Digressions

Note that since 2017 the changes in SLV holdings match the changes in JP Morgan holdings. This pattern is particularly clear this year - JPM increased its holdings by 7.9 million ounces of silver up-to-date while SLV reported a decrease of 7.7 million.

Last year JP Morgan added 37.3 million ounces to its COMEX warehouse while SLV reported a decrease of 20.7 milion.

Now the question is what it is all about.

By the way, there are 127.3 million ounces of silver at JP Morgan's COMEX warehouse. (as of February 5, 2018). To give you some comparison - the annual silver production is 886 million ounces (2016) so JP Morgan (or its clients) hold around 14.3% of the world's silver production.