Calling an exact bottom of the 2011 commodities bear . [SLV]

One of the nice things about not being dependent on ad revenue is that I can boldly state my views without apology.  Anyone who has not seen me call the big turns damned near to the penny on multiple occasions before will just roll their eyes.  Well, roll away but know that this is not a random call.  You want random financial musings?  Go listen to Cramer or to the presstitutes on CNBC.  My models are not always right and sometimes they are not even close but I don't do random.  As a result, we always know very quickly if my models are correct or not.  You will never hear me tell anyone "Oh I know I said that was the bottom but you haven't lost much, just hang in there, it will come back".  I don't do that because no, it probably won't come back.  When the model breaks you have to sell and then step back and reassess.  It might just need one more small wave down but it could also be completely wrong.  The model allows you to stop small mistakes before they become big ones.  EW is the perfect trading tool to use for the old trading adage let your winners run but cut your losses short.

In any case I have been looking to make a case for the exact bottom as you can see from the backlink.  On the left is my model which called for one more spike down and then a vee recovery.  The actual movement down was more severe than I had modeled but the important aspect was that it was a single motive wave.  After the HT marked in red on the left, that is what the EW model says should happen.  When it comes to wave amplitude there are guidelines but not absolutes.  It's only the wave shape or "count" that has absolute rules.



Well that's nice and everything but it's only one piece of evidence.  A more important one is the high level chart shown below.  I count 5 complete waves down since the 2011 peak.  Yes, the current wave could extend downward but another feature of the chart which is not part of EW is the little spike down which I call a unicorn tail.  My wife named them that so I just went with it so that she would sit through a market analysis recap each week.  These tend to accompany strong bottoms and today we had a big unicorn tail which had about a 30% swing in just a short time in JNUG.

My target price for silver is going to scare you or at least it should: $120 within 3 years.   The primary driver of this target is that this is where the top rail of the expanding wedge will likely be at that time.  In other words, this is what the model says.

Now, if you are a "fundamentals" person you will want to know how this can possibly happen given all the talk of "the coming deflation" that we have heard of late.  Folks, I don't want to upset anyone's apple cart here but GDXJ traded down to almost exactly my long standing target of $18 on July 24.  That is significant because it represents a 90% loss from the peak.  Like the great depression where the DJIA was down 89% from the peak.  Commodities have experienced massive deflation despite record currency creation (we must be careful not to refer to the dollar as money because it most certainly is not) for years on end.  

The broader markets (stocks and bonds) will probably crash despite the inflation because of loss of confidence in the fed. As mentioned many times in these pages, unbacked currency is intrinsically worthless and it trades at a faith-driven value based on the confidence in the issuer.  PERIOD.  When confidence is lost in Yellen (because she is in fact going down in history as the disposable fed), people are not going to want to hold the dollar.  Additionally, there are a lot of other countries which have large dollar reserves (cough cough China) whose economies are literally in free fall.  China has undertaken massive stimulus and capital controls in order to try to stop Mr. Market from panicking.  While it is destined to fail, they are getting the currency to do this by buying their currency back on the open market and then spending it into their economy.  They are using their dollar reserves to do this.  Their problems are now our problems in this globally connected debt Ponzi.

Need more?  Below is the chart of the 10 year treasury interest rate.  It put in a wave 1 up from the bottom, then a 3-3-5 expanded flat correction to for wave 2.  The E wave of the falling wedge threw under and has since busted back up into the channel as first confirmation of trend change and is now threatening to break out the top rail.  When traders see that they are going to know that interest rates are rising.  And of course they would rise because people are selling treasuries, not buying them.  Supply and demand 101. 

Rising rates signal inflation to many people.  So treasuries are now entering a serious bear market, stocks are not safe, foreign markets are really really not safe.  Hmmmm.  Where else can people go to be safe?  I think that would be gold, silver and commodities which are priced low to boot.



And finally, let's not forget the velocity of money chart which is at or near the end of 5 waves down.  That means people will soon stop hoarding dollars and instead pass them to the next sucker.  That takes them out of people's pockets and puts them into the economy.  That is inflationary.

At the end of the day I expect we will end up with a global supernova economy.   That post was from 2011 but I was writing about it long before that, even before I began this blog (I used to write a regular economic insight email to friends and family before the blog).

I've written it many times before but thinking people will understand the magnitude of what is likely going down here.  Expect riots, massive crime waves, etc.  A few simple and cheap preps will go a long way toward letting you sleep at night.  Stock up on several months of food in case there are supply chain interruptions like are happening in South American countries for several years now.  Own a gun and ammo and know how to use it.  Keep minimal cash in the banks!!!  Bank deposits are legally treated as investments, not savings.  That means the government reserves the right to steal your deposits if its corrupt fractionally reserved (AKA legal Ponzi scheme) banks get into serious trouble.  The last time we faced economic collapse, Congress was threatened with martial law if they didn't agree to the bail outs.  But all that did was make the middle and lower classes poorer while enriching the upper 1%.  It is because of the bail outs that we have record wealth inequality in this country.  I do not think the political will is there to do that again.  Someone is going to get haircutted in the deal.  If they don't have your money then it cannot be you.  Remember, in a crisis possession is 9/10ths of the law.