Expect the stock market to stay supported into the July 29th Fed meeting. A pullback of some size is projected into the first 10 days of August. Our current expectation is for SPX 3000 to hold (SPY 300). An uptrend into early September is then projected. Due to the extra liquidity from the Federal Reserve, corrections post-Covid are fast and furious, lasting just a few days when allowed to occur. Normal corrections are aborted by the Fed injecting excess liquidity and when they finally occur, we get a violent 3-5 day sell off. We expect this trend to continue into the November elections. We expect to buy one of the main indexes after the next correction in early August. The results should be a strong trending trade into Labor Day.
The metals and stock market are now coupled. This correlation is the one we have been waiting to occur. The strongest metals trades occur during this alignment. We expect this relationship to stay this way into 2024. For those not in any metals positions please do not panic - you have not missed anything. The metals are putting in a top. There is a nice pullback coming the first 10 days of August. We will enter positions there for a large trending trade into fall.
Silver recently turned its yearly trend up. This is very big news for the future of silver. We are now hearing from Fed minutes that projected inflation of 2% is too low and they may move their target up to 3%. This is big news for silver, which tends to explode during inflationary periods of time. Silver will be stronger than gold and the gold miners into May 2021. An ideal entry for us will occur after the next upcoming pullback in early August. We will be entering long term options trades for SLV in the next 3 weeks that we expect to pay exponential returns.
By year end, expect to see excessive sentiment in silver over the red dotted line and prices over $25+ into December.
Shorting in general is difficult in modern markets. The greatest percentage of the declines occur over just a few days. So 90% of the time you are in a losing or a flat trade. That is hard for many human traders to cope with. However, we will attempt another DUST entry when we see confirmation of our predicted downturn. Tops in the metals sector are complex. So if you can handle getting stopped out with potentially a few small losses, you will be rewarded when the dam breaks. DUST could see $30+ on the next pullback.
We expect to see DENN start buying its own stock below market. Hedge funds and pension funds have increased buying into the restaurant sector as they seek limited downside and future yield. Trades like this are very hard to find for institutions.
Earnings are this week on Friday, July 24th, for BLMN. We expect them to beat and provide a better than expected corporate outlook with the wildcard of new business structures and/or franchising opportunity.
We sold CLF because it failed to break through the 200 DMA after 2 days of trading, not a good sign. Secondly, we have a cycle low for the steel sector August 10th. Lastly, earnings are due shortly and this name has a tendency to trade in a volatile fashion into past earnings. We had potential for a quick retest of $7.50 prior, which still may occur. A break above $6.20 may bring us back into this trade. The steel sector will be ignited in the second half of the year on the inflation and infrastructure move. CLF can run fast and hard due to both the huge short position and their double exposure to the steel industry. They produce steel themselves now with the acquisition of AKS steel last year as well as mine the iron ore which they sell to the largest steel companies in the world.
Everyone wants instant profit in the market but that isn’t always possible. Three to four times per year there will be 30-45 day periods of very tough trading with no large trending moves. Bulls and bears can lose money alike during these periods. We have just gone through one from early June into mid-July. Anyone can pull up the largest daily gainers list and say "why wasn’t I in this stock that moved 5 points today?" Four to five months a year these casino stocks will tempt traders with sexy stories and quick potential gains. 95% of them end badly once the music stops and are built on nothing but hype. If the average trader stays with stocks like this, they will lose money in our opinion. There is a reason 99% of all day traders lose money. If you aren't a new member, you watched us anticipate the rebounds in equities late March, April, and May. We are about to enter a three month stretch that is going to be every bit as good as any of those past trading periods. So if you are a new member and getting frustrated from a tiny sample size of relative trading time, we recommend patience.
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