Still Waiting

It is often said “If you have not, boast not”. So while the media tries to figure out what no one knows anything about, we continue to do what we’ve been taught to do best… Wait.

For months now we have warranted caution. We mentioned that the markets are currently consolidating their new levels and nothing major should be expected until September. However where the predicament lies today it seems we have far less time than imagined.

With a conflict of some sort brewing in the Middle East, what was previously a mode of caution now has evolved into speculation. Even many technical analysts are at a loss as to what the general direction for returns should be. Even on a fundamental level few are knowledgeable as to what amounts of the fears have already been built into the price.

We have modified our outlook on three basic scenarios. When and if either of them hit the trend will be enormous as well as volatile. Either you’ll profit on the winning side or falter on the losing side.

Precious Metals have already been consolidating for quite some time now. If we were to see any breakout above the strong $15 resistance for silver, probably due to general fear (Iran, the Dollar) then $25 silver is just a few trading days away. On the other hand, if we see a breakdown below its trend line – about $13 then there will most probably be a continued sharp decline all the way back to $10-11.

The same goes for stocks. Although the general trend looks down, a strong buying by overseas investors may send the Dow up beyond expectations.

So what to do?
Stay tuned and stay alert. Keep a lot of cash on the sidelines. Better to be right on half your wealth than to be wrong on all of it. If silver breaks below $13, hold with ample cash aside or sell strong and wait for a buy signal – once again around the $10.50 level. I’ve been expecting this decline for sometime being that the overall trend for the past five years has been nothing but straight up. But also bear in mind that these may be the last time that silver will come anywhere close to the single-digits.

Likewise with stocks. If sharp sell-off days ensue then shorting the Dow may be your best option especially that this would show the beginning of a general deflation of equities and profits.

On the contrary if they break their resistance to the upside, expect booming returns for those diligent investors.

But until then, we wait.


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