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The Federal Reserve stepped up its 'talking rates up' rhetoric this week and gold has dropped. I find it amazing that less than two weeks after the last Fed meeting, they are already insinuating rate hikes are around the corner. This week a phrase was used about being 'preemptive' in hiking to fight inflation. The Fed has had years to be 'pre-emptive' and has done nothing until last December. This rhetoric has spooked a gold market that will have a light trading week with China's holiday activities this week. Somehow people are thinking the Fed might raise rates a week before the election in November? Fat chance that is going to happen much like it didn't happen in September. Friday's payroll report will be important and could easily derail any dreams of a November rate hike.
I took advantage of these low prices to add NUGT, AG, and even hard metal positions. It's nice to see that things stabilized today but there was some serious damage done this last week. NUGT is trading above a pretty strong support level around 10.50 which I will definitely buy more at if this price is hit.
The Fed is meeting again and we'll see what they do or say tomorrow when this latest meeting concludes. The markets are factoring a .25% hike in December along with a Clinton victory next Tuesday. With latest polls showing a narrow margin for either candidate it could prove to be a volatile week of trading. I'm posturing for a possible Trump victory because that would be a 'black swan' like event that few people would have predicted a month ago. I see more downside risk than upside gain staying long in this market. The only industries with bullish patterns are: gold miners & transportation- everything else is in bear territory. Telecomm is the latest fallen-angel that fell from a 100% bullish-percent to today's 75%.
For people following NUGT, I'm happy to report that today's trading action resulted in a 'Double-Top' trading pattern. I love double-tops because they usually pan out for a more bullish move in a stock. Hopefully, this will hold true for NUGT in the coming weeks. My positions bought in early October have 30% gains. My price target for NUGT for this mid-term period is $19.50 ish.
It's been a painful couple of weeks as a gold investor. In thinking about NUGT, The best thing I can say today is that NUGT had a reversal day today and closed up 2.78% when it was down more than 10% earlier today. The daily volume was pretty high today so perhaps this has flushed out some of the weaker holders of this ishare possibly. I bought as recent as Friday @ 9.17 and have even more skin in this game now.
I have to look at the price of gold since gold's price makes a huge impact on NUGT's value. Gold has some support at the $1200-1210 level has been tested 4 times since February of 2016. Hopefully, that level holds in this downward action- otherwise the next support for gold is all the way down around $1040-1080.
It's anybody's guess why a trump victory has so adversely impacted gold, but it seems to have- based on the $7 drop post-election. Trumps plan will likely increase the deficit the next few years with an influx of capital spending. The bond market is looking to higher interest rates and is also anticipating a Fed rate hike in December.
The one thing that hasn't gone away is the financial weakness that both the U.S. and many of its citizens have. Both country and individual has too much debt and it's getting harder and harder to service the debt- that gets harder to do when interest rates rise. The normal government reaction is to inflate away the debt and that is extremely BULLISH for gold and nugt.
Last edited by LaCostaRacer; 11-14-2016 at 09:45 PM.
The pain continues for me and any other gold bulls out there and I'm hoping that things are beginning to stabilize. Since the $1200 support level was breached this last week and I had to do some more thinking on what a logical next support level really is. My last post indicated 1040-1080 and that is true if you only look at a chart to make this assessment which is what I did when I made it. However, there are other things that also coming into play which might indicate another support level to look to. For sell stops, I will use a 97% of support level as the final arbitrator on what to do- this helps me not get stopped out like I would if I used $1200 but also seems to work in real life. For gold's case, this final level is $1164 which gold is barely above today.
I'm optimistic that the $1164 will hold for a couple reasons:
1. Silver is acting stronger and actually going up while gold is trending down. This was evident today.
2. The Dow/gold ratio that I post is at near the all-time high for 2016. It's currently 16.29 while the high for this year was 16.92. This ratio means gold is under-valued compared to the Dow. The 200 day moving average is 14.07.
I guess we'll know in the next couple weeks, if this theory on a $1164 support level was good or not. I'm hanging in there until after the Fed meeting- I expect a bounce once the rate increase happens like last time. The bounce might take a few weeks to materialize but it could be quicker this time around since almost everybody is expecting the Fed to raise rates. All ears will be listening for how the Fed spins the increase and projects future rate increases. Gold did very well in the late 70's when rates were going up with Paul Volker and I don't think there going to rise that quick this go around.
The much anticipated interest rate hike occurred today- we're now in a .5 - .75% federal funds rate environment. This is still a very loose policy in which the real inflation rate is higher. NUGT got hammered today by dropping $1.17 or 14.5% while gold increased about $4.70 to $1163.70- just below the support level I mentioned last time. The Federal Reserve has doubled interest rates with today's hike
What spooked the NUGT market was the lingo suggesting 2-3 rate hikes in 2017. This rhetoric last year was similar to today and this rhetoric freaked out the market in January when things all sank in over the holidays. I think today's hammering of NUGT is probably the worst of it so if you have endured the pain now- probably worth hanging in for better times.
Last year the Dow increased 224 points while today it decreased -118.68 points on the most anticipated rate hike- the hike was more of a surprise last year in comparison. In looking at my Stock Trader's Almanac for 2015, I see the following trends for NUGT:
day #0: up $2.80 (announced rate hike to 0.25%)
day #1: down $4.70 (similar to today but stock was valued 5x more last year)
day #2: up $1.36
[weekend]
day #3: up $2.25
day #4: down $0.44
day #5: up $1.56
day #6 up $1.61
[xmas]
day #7 down $2.57
day #8 up 0.61
day #9 down $1.52
day 10: up 0.20
Summed 10 trading day movement: +$1.62 => $0.23 for 2016 projection. This would mean NUGT would increase by $1.30 in next 10 trading days.
(remember you need to divide these movements by 5 to compare to today's NUGT shares because of a 5 for 1 split)
The biggest difference I see between 2015 and today is the price of the DOW. The Dow was 17,7xx the day the hike was announced and it is 19,792 today- I see much more air in the stock market than with gold or gold mining stocks. The drop in stocks could be spectacular when the realities sink in during the next few weeks.
Well, the above numbers close out 2016. For all the drama with gold and silver this year post election, gold managed a +8.6% gain and silver outperformed with a +15.7% gain. If you consider the SP500 had a 9.54% (ignoring dividends), you'll see that silver outperformed the SP500 and gold lagged probably 3% or so. Incidently, gold broke a 3 year losing streak this year.
Since last posting, we saw that NUGT recovered some of the losses suffered post-election. I think we'll see a more positive performance in 2017 for a few reasons:
a) based on last two years of interest rate hike rhetoric and actual accomplishments, I see 3 hikes in 2017 as extremely unlikely. Each time the Fed doesn't raise rates helps NUGT and gold a bunch as we saw in 2016 mid year. Perhaps rates could go up in March but it's unlikely that we'll see a hike in June.
b) tax loss selling more than likely hurt NUGT and other mining shares in 2016- compounded by thoughts of lower taxes in 2017. If you believe this, then it makes sense to take loss in 2016.
c) the general markets may come under pressure for capital gains selling in 2017 based on premise of lower taxes. I'll be very interested in seeing how first 4 trading days this week.If markets tank, people naturally flock to gold.
During the NUGT doldrums, I added shares on 11/29 (still have 6.43% loss), and 12/15 (23% gain). I think we'll see another ballistic year for NUGT when it becomes clear that Trump's stimulus and tax plans are not nearly as good as the market thinks they will be. When people realize this, the dollar should weaken while gold/silver strengthen.
Last edited by LaCostaRacer; 12-31-2016 at 08:29 PM.
Since last posting, we have a new President and the Dow broke the mystical 20,000 level on 1/24. Since the last month, I see that gold and silver have outperformed the market while the Dollar has weakened. I expect these trends to continue this year when people realize that the Trump proposals probably won't make a huge difference. The border tax and expecting a massive change in U.S. factory production obvious things. Companies are not going to change long term plans based on a Trump promise- they are going to need a long term contract to entice them to build factories on U.S. soil.
Here are some metrics on some key year-to-date performance:
NUGT: 33.5% YTD gain
SILVER: 7.1%
GOLD: 3.2%
SP500: 2.5%
NUGT seems to have found support at its 50 day Exponential moving average the last couple of weeks and with a recent point-and-figure double top pattern before it broke down on Wednesday and Thursday of this week. The next key resistance level is around $12 and then $15 after that. 2017 has the makings of a repeat 2016 performance if the Fed shows any signs of slowing down rate hikes and the realities of Trumps policies are flushed out.
^ A couple of days makes a difference- I bet gold has outperformed with January's closing prices. Gold is now @ 1211 for a 5.1% YTD gain- not bad for one month's action. NUGT is now at 11.08 and has racked up a 45% gain in one month.
The SP500 @ 2278 managed a 1.75% YTD gain to close January. I manage a number of accounts and the worst performing account is now at 3.7% and the best is 19%. I have three other accounts with >10% performance at the moment. Not all these accounts have gold exposure, but they all have silver exposure to some extent. The heavy hitting accounts have some form of NUGT and/or URA exposure.
Gold and NUGT in particular is outperforming the market of late. From a technical analysis viewpoint NUGT is looking very interesting for an additional run. It now has a triple-top chart pattern and looks like it will attempt to test $16.50. It went up 11.35% today on a slight down market day. I might very well poison the well for 2/7/17's market by this posting but the medium term looks extremely profitable even if it gives back some gains on Tuesday.
Gold looks to have a similar but less advance charting pattern- with a double top instead of the triple for NUGT. Gold's next resistance level is around $1260- after that it could pop up to $1330 in quick order.
Notice how the US Dollar is getting weaker- I see this as a general trend for 2017 and this only helps gold's cause.
I'm a firm believer in technical analysis/chart patterns. I know I've said this before, but charting a triple leveraged ETF/ETN for more than a few days is/can be a disaster. Why not chart the underlying(GDX)? If you chart GDX do you see the same thing?
Looking at GDX, 12/20 gave the perfect breakout backtest to buy NUGT, which NUGT would not have shown on its own chart. Back above 19.80 & Daily RSI Breakout add'l confirmation of strength.
'Out Of The Blue', March Rate Hike Odds Soar To Cycle Highs
Feb 27, 2017 3:04 PM
Having drifted flat for weeks at around a 1-in-3 chance - despite endless jawboning from The Fed - March rate hike odds suddenly surged higher today (to up to a 50% probability), or as Reuters put it "out of the blue."
Dallas Fed's Kaplan said this morning that a rate increase should happen sooner than later, adding that "[The Fed] wants to prevent a situation where we fall behind the curve." As Reuters notes this is entirely consistent with his and colleagues' recent comments, but somehow strikes a chord on otherwise uneventful day.
It seems the Fed Funds futures market suddenly decided to catch up to stocks?
Since my last post a month ago, gold has gone up fractionally while NUGT has gone down dramatically. Despite this week's weakness, NUGT is still outperforming the SP500 with an 8.5% YTD gain vs the SP500's 6.35% gain. The Dollar has surprisingly increased in value as well- perhaps on the notion that we will have 3 actual rate hikes this year? It seems like the market was wrong either last month or it's wrong now on the pricing of NUGT. NUGT is priced like we have 5% treasury rates and we certainly won't have those rates in 2017.
While the market seems to be assuming another modest rate hike in two weeks, almost nobody is talking about the 3/15/17 expiration of the Debt Holiday and the issues this will cause going forward. I'm anticipating a whipsaw positive reaction in gold and NUGT when this topic makes the regular news.
An increase in Fed interest rates will only exasperate an already stressed situation for the debtor government which leads me to think there won't be 3 rate hikes. A kind of safe bet since there weren't 3 hikes in 2016 or in 2015.
With this written, I bought more NUGT today on weakness @ $8.26.
I'm also feeling the pain. I'm comforted that gold seems to be clinging to the 1200.00 level and is just a little under the 1213 50 day moving average- well within the 1-3% tolerance I consider the error of a support level. The difference of late is that stocks, bonds, and gold are going down in lock step which makes some sense in a rising interest rate environment- at least for stocks and bonds. The Dollar is lower from my last post but was up a little today. Anyone that was around in the late 70s early 80s knows that gold can also go UP in in a high inflation rate environment as well. Eventually people will catch a clue that a 1% Fed funds rate in a 2+% inflationary world makes holding gold not such a bad deal.
In all likelihood the Fed will raise rates on Wednesday and perhaps the bleeding will subside until a month before the next Fed meeting and the cycle will repeat. The Debt limit issue is still very alive and that could give gold some support as the news starts reporting this info. It will be the Fed's statement tomorrow that will really change gold's near term outlook. Chances are Janet will talk 'tough' about more interest rates being appropriate much like she did last year and the same game will continue. The market has heard this spiel for a couple years now so the tough talk might be losing the effect it once had. If the Fed was really worried about getting behind rate increases, it could have jacked rates up .5% on Wednesday like Greenspan did.
I bought some more NUGT today right before market close @ $7.51. I'm confident these recent buys will be lucrative and have some more cash on the side if it should get down to $7.00 tomorrow. The pain is great now but the gain in the future will be too.
Last edited by LaCostaRacer; 03-14-2017 at 11:05 PM.
10-05-2016, 11:38 PM
$1.05 (-15.20%)
