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All Things Financial Must Rise (NYSE:FAS)

02/14/13 by  
Filed under Bourbon & Bayonets

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You can love gold.

Just don’t be long gold.

 

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We received the requisite ‘world is going to hell in a handbasket’ talkbacks in response to last week’s letter, Prepping for the Great Gold Fizzle, in which we wrote that gold still had some downside.  Our readers didn’t all agree, of course, and several offered us millennialist reasoning to support their claims.

To review, we wrote,

…if RSI and MACD indicators have anything to say about it, [GLD’s] next move will be down.  RSI moved sub-waterline the first week of December, and if current trends continue, MACD could confirm with her own dive by week’s end.  If and when that happens, GLD will accelerate toward the lower end of the trading band at 148.50.

It took a few more days than we expected, but as of midweek this week, weekly MACD has confirmed, and that’s good enough for us.  The fix is in.  Next stop for GLD is 148.50.

And for all those who wrote and still believe that a swing to $2500 gold is but a heartbeat away, we have only this to offer.

It’s possible to be right and to go broke.  Both at the same time.

Because the world will go to hell, eventually.  And certainly something better will rise on the ashes of the older, less perfect order.  And we also recognize the need to prepare for that eventuality, physically, emotionally, financially, spiritually – what have you.

But it’s not happening this weekend, friends.

Nor the next.

And in the meanwhile, your long gold position is burying you.

No, You Look!

Here’s the last six months of gold proxy GLD, the SPDR Gold Trust.  As you can see, trade in this monster has been bearish for nearly five months running.

 

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What’s clear is that a series of deadly rising wedges (in red, at top) have conspired to both send GLD lower by 8.5% and to keep gold holders in the game, hoping the next uptick will signal a bottom.

 

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Now we face a situation where GLD is buried beneath a descending trendline (not shown) and all her moving averages, while RSI and MACD continue bearishly submerged below their respective waterlines.

This is full-on bad news, and any cut below GLD 158.50, where the last flimsy line of support now sits, would put us on pace toward another 7% loss (at least) from these levels.

Because of the foregoing, we now expect volume to begin ramping up on the ETF, as latecomers to the Gold Bear party realize it’s after midnight and their favourite investment just turned into a cucumber.

And that goes double for you!

We’d be remiss if we didn’t add that within the same five month time frame highlighted above, silver has lost 13%, and the miners, with by far the dreariest technical picture of the group, are down by an unbelievable 25%.

We don’t hate just gold at this stage, friends.  We hate her whole family.

Which is not to say that gold will not shine again.  It certainly will.  And when it does, we will be there, in the pits, egging on all the doubters.  Just as we’re doing now.

Make money with your gold, friends.  Not love.

 

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While we’re at it, we like the bearish bond trade, too.

Here are charts of the CBOE’s ten and thirty year bond yield indexes, TYX and TNX, for the last six months.

 

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Note the uniform rise in yields (drop in bond prices) since the stock market began its ascent in mid-November of last year.  And note, too, that both yields have ascended above their long term moving averages (in yellow), with the rise in the thirty year outdistancing the ten year considerably.

We’re now entering a new phase of the bond market sell-off, folks, and we see little hope of a return to the safe haven, fixed-income days of years past.

The rise in yields is inevitable.

And the biggest beneficiaries of the backup will be the financials.

The financials as a group have positioned themselves for the rising rate scenario, with a collective, two to three year average portfolio duration that should cushion them against heavy losses while they benefit from higher rates on their own loan portfolios.

The financial tide is already rising.

Look here:

 

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The financials blew past Wall Street’s Q4 growth expectations, and we see no reason why it should stop here.

If you can find a good entry point, we say the triple leveraged Direxion Financial Bull ETF (NYSE:FAS) should pay off big.

We’re pounding the table.

Many happy returns,

 

Matt McAbby

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Comments

13 Comments on "All Things Financial Must Rise (NYSE:FAS)"

  1. rk on Thu, 14th Feb 2013 7:28 PM 

    Totally agree on FAS

  2. Tim on Thu, 14th Feb 2013 7:46 PM 

    Isn’t this seriously in the “overbought” range? Wouldn’t a big daily correction completely hammer your position.

  3. george stewart on Thu, 14th Feb 2013 8:24 PM 

    Of all the stuff that hits my mailbox yours is the real deal. Some of these guys are perennial bears and that gets tiring. Some of them are touting incredible track records and want to sell expensive advice. You guys just call them as you see them- with a nice bit of humor thrown in. I want gold and silver to ‘take off’ soon as much as anybody, but wanting it won’t make it happen- as you correctly point out. Thanks much!! -George Stewart

  4. dave on Thu, 14th Feb 2013 8:29 PM 

    The downtrend in gold and silver will likely be short in duration and will turn violently on the bears and will end badly for the bears. gold 3000.00 in 2013 and silver 100.00 in 2013!

  5. Louis Blasiotti on Thu, 14th Feb 2013 8:49 PM 

    We are in for another market correction which will affect everything. Possibly 20 to 40%. The only investments which will not be affected are the ones which have gone through hell already, namely housing. I hope I am right as it presents another opportunity for everyday folks to make some money in the market if they buy at the bottom. It seems to me that the only people who did not make money in the past 3 years are the everyday folks who were scared out of their wits by the immoral media.

  6. Michael on Thu, 14th Feb 2013 9:46 PM 

    Metals are out of favor for now. Lower prices are good for those who have been patient and followed your advice. Rates must rise, eventually, once Fed policy aligns with market forces. Stocks will continue to be the place to be, until they aren’t. Good insights, thanks.

  7. bmc123 on Fri, 15th Feb 2013 3:57 AM 

    I have nothing to say about gold, silver, etc. at this moment – just wanted to say you guys are some of the funniest writers out there. I get a real laugh from your stuff – and of course the bonus is you seem to know what you’re talking about as well. Keep it up and never change!

  8. jack on Fri, 15th Feb 2013 4:31 AM 

    My charts of Williams%R, Detrended Price Oscillator and Stochastic Momentum Indicator all signal agreement with your position.

  9. vernon allport on Fri, 15th Feb 2013 7:01 AM 

    You should spend more time correcting your blunders on being short IYT and GMCR than continually patting yourself on the back for this lonely correct call on GLD.

  10. dietrich jenny on Fri, 15th Feb 2013 7:33 AM 

    It’s pretty easy to point out that gold has been disappointing for well over a year closer to two years than it is to be clear on what the future will bring. I think that the money that will be coming out of bonds for the foreseeable future will find its way into the stock market and several other investments that a year ago would have seemed too risky to buy. Right now the consensus seems to clearly be the gold is headed down on the short term and up on the very long term, but a consensus is never a comforting thing in the investment world. Let’s throw caution to the wind and say the opposite is going to happen one scenario of which being gold will soon turn up again moving substantially higher or it’s not going up in the long-term. It’s going down for the foreseeable future and much longer, with all the central-bank purchases we have to wonder how is it that gold is moving down with such huge investment coming from not only the central banks but various other entities that have refused to own gold for many years I would just warn that it is in moments of bearish complacency that the sellers of gold are often caught quite offguard by extreme moves to the upside whether they be bear market rallies or reversals in price at the moment when many people of decided the good times are over. Let us not forget that Goldizen insurance policy against the inevitable and we can’t expect to be worn or clearly aware of an inevitable crisis when it hits it will come out of the blue and it will be something we wished we had prepared for so selling all your gold now because of some to chart patterns is a dubious decision fast then I would suggest lightening any overweighted portfolios him out of goal but keeping the substantial position in case we’re all quite wrong and right now and things look wonderful they are not.

  11. Lindy Spears on Mon, 18th Feb 2013 12:36 PM 

    I LOVE your newsletter!!!! You make my day!

  12. larry s on Mon, 18th Feb 2013 12:37 PM 

    Great choice. See you there.

    Larry

  13. Steven on Sat, 8th Jun 2013 1:29 AM 

    Hey Matt,

    I miss getting Bourbon & Bayonets on a regular basis… Informative & amusing, a dangerous combination!

    Unfortunately, I’ve been tossing a little change at silver on the way down, around 23.50 & 22,90. Not very comfortable about it right now.

    This little voice says wait ’til $17., but when the price drops I start to rationalize my way into another purchase. Care to tip your hand on what you guys are looking for to go long on AG??

    All the best,

    The Zerrinator


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