Trader Scott comments on the gold rally and Swiss Franc – January 22, 2015

Trader Scott here,

Gents,
More explanation of my last email, avoiding mistakes, a long list, and how to follow some things that I am watching. Quickie about the gold rally and Swiss Franc.

It’s amusing to watch the so called contrarians buying oil related investments and thinking they’re real smart. Trends can last a very long time. These contrarians consistently lose money because contrary investing ONLY works at the TURNING POINTS and recognizing the turning points is very hard to learn and even harder to implement. There is almost 0% chance of a huge rally in oil any time soon. We have to have a massive selling climax FIRST and that is no where close. I will become a contrarian when oil is ready to reverse up.There is a decent chance that we will never see the $147 high in oil from 2008 ever again. The reasons for that – alternative energy availability, global warming hysteria, carbon taxes, etc.

A $35 minimum low for oil and a shot at $20 later on and the ramifications from this will drag on for many years. The geniuses out there claiming the huge benefits of this drop in oil are clueless. There are some benefits, but those positives are spread very widely across the economy with minimal benefits per entity. The negatives are very concentrated. Making it more dangerous is that many of those negatives are LEVERAGED and using derivatives. This is a huge mess. So as I have been stating for so long on this show, Autumn of 2015 is when the huge unraveling of EVERYTHING returns ala 2008, only much more dangerous. However this time, both the stock market and gold will benefit and they will be tied at the hip.

A long list of the side effects of a continued oil fall — Tesla, solar and wind power, gas taxes, shale, loss of US employment, declines in capital investment, new real estate problems arising in Texas, North Dakota, etc., junk bond contagion, increased military intervention, more currency distortions, smaller GDP, more conundrums for central banks, and many more. Does Andrew have any others?

The technical work that I do on the market is impossible to explain, but there are some things you could be watching. These are beginning to show the return of systemic financial stress. Government bond yields in Spain, Italy, and especially Greece are beginning to diverge and are heading back up. Junk bond yields are increasing. As I’ve been warning – watch the Gold price vs. Euro, Swiss Franc, and Yen. Low end real estate problems returning for a new leg down late this year. Subprime auto derivative problems. Continued US dollar strength which will conversely destroy the US economy and finally lead to some type of quasi new reserve currency.

As to this gold rally. Love them or hate them, hedge fund buying is the only way in current markets to have a huge price rally. I will tell you chartwise where you will see hedge funds start to be aggressive buyers. We have not had a WEEKLY HIGHER HIGH closing price since the record high in September 2011. A weekly close in gold above $1350 will bring hedgies back en masse. Expect a big fight at that price. Nevertheless, continue watching gold versus the other currencies. And remember the much, much higher gold price down the road will be courtesy of the Chinese and the Indians, not Western Bloc countries.

Lastly, the Swiss Franc debacle is another warning signal for me that late this year the confidence in both the monetary system and Central Banking finally begins its’ IMPLOSION.