Stocks Will Have A Waterfall Decline While Silver Will Skyrocket In August!

The Fed attempted to prop up the stock market In its latest announcement. They attempted to sound hawkish, however, the market paid no heed.  The Fed annulment was reflected in a manner that led the way to the dollar tanking and precious metals rising.

It is imperative to note that silver has industrial uses as well as monetary ones, which will come to the forefront as the gold bull market progresses.

“The Fed has had numerous opportunities to normalize rates over the past two years and has squandered them all,” said Peter Hug, global trading director at Kitco Metals Inc. in an emailed note after the FED statement, reports Market Watch.

Although a few analysts believe that the Fed has kept hopes alive for a September 2016 rate hike, the market does not believe so. A majority (88%) of traders believe that the Fed will NOT move to change rates in the next meeting of September 2016. In light of the Fed’s recent decision, I believe the Fed has no other choice than to leave the possibility of a rate hike on the table. Contrarily, they would look like total buffoons if they reversed course now.

This sudden spike in the price of silver has definitely caught a lot of analysts off guard.  I am suggesting that the fact that the Fed is now less likely to raise rates after the Brexit, and the fact that the dollar has been slipping a bit lately, are the primary reasons for silver’s rise…

The dollar bulls, who were optimistic about the Fed, pushed prices above the 97 levels. However, after the Fed’s decision, prices tanked…and rightly so.

Another reason for an increase in silver prices is the surge in demand due to its “industrial” applications. "Silver has (more room to run) because silver is increasingly used in solar panels now. Something like 10 percent of demand comes from solar panels. Solar panels are a growing source of demand for silver, so you have got an additional attraction for silver as well, as a commodity investment and also industrial usage," Jeremy Wrathall, mining team leader at Investec, told  CNBC on Monday, July 4th.,2016

The chart of the Dollar Index shows that for more than a month it has remained in an uptrending channel. However, recently the dollar broke down the channel, signifying that the traders do not buy the Fed’s hawkish policy.

The break of the channel has a target of close to 95.2, which also coincides with the 50% retracement of the total rise from the lows of 93. However, if the dollar continues to tumble, it will retrace the complete move.

The fall in the dollar will be reflected in the rise of silver. I believe that silver is on the cusp of a rally. Hence, we shall concentrate on the silver charts.

During the past seven months the silver bulls have seen a stupendous run from the lows of around $13.73 to the highs of $21.2 in early July 2016. However, I believe that the bull run in silver will continue after a small consolidation.

The chart of silver shows that it is consolidating in a range of 19.3 on the lower side and 21.2 on the higher side. If silver manages to break above this range, its price target is 23.0. However, I believe that silver will scale the level of 23.0 to reach the level of 26.0 by the end of this year.

Historically, August has been a rough month for stock investors. In the last 20 years, the stock market’s performance has been down -1.3% in August, according to Bespoke.

"I would expect August to be mediocre or weak," said Don Townswick, director of equities at Conning. 

Similarly, David Kostin, Chief Equity Strategist at Goldman Sachs, is bearish on the markets. The current price-to-earnings (P/E) ratio expansion cycle has reached the third largest in history.

Consider that the current rise in stocks has come on the back of poor earnings, dismal growth and huge financial risks on the horizon. The crash is imminent - and I believe that August 2016 and September 2016 will sow the seeds for the larger decline, as discussed.

I expect the equity markets to follow their negative record of August and September. Moreover, the initial moderate decline moderate will end with a sharp slide.

Conclusion

I believe that as “The Global Financial Reset” of the monetary system begins, there will be an increase in the demand for silver relative to the increase in the demand for gold. Gold is an establishment metal vis-a-vis silver. There are no central banks that are hoarders of silver, anywhere or anymore. There is no one in the establishment who considers silver as money, as of yet!

History is going to repeat itself. Therefore, we will see a sharp fall in August and September this year. Traders not expecting the Fed to raise rates again this year. Consequently, they are placing their bets accordingly.

Our short call on the dollar was timed to perfection. Furthermore, I believe that the short call we give on the stock market will also produce similar results. Get ready for more such profitable trades in the following months.

Get my analysis and trades at: www.TheGoldAndOilGuy.com

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