Professor’s Comments June 10, 2019
Posted by OMS at June 10th, 2019
Last night, President Trump tweeted that he was removing tariffs on trade with Mexico indefinitely after Mexico agreed to help stop illegal immigration. This is causing equities to move higher on the futures market, with bonds and gold moving lower.
As I mentioned in previous Comments, I want to use this pullback to buy gold. I still believe that equities are EXTREMELY overbought, to the point that my equity-bond-cash indicator is currently suggesting that a standard portfolio should not contain more than 40 percent equities. It also is suggesting that an aggressive portfolio should be void of equities. This is because the risk-reward factor in the indicator is extremely high now, causing the indicator to put a lot less weight on equities. Our Model Portfolio, which is pretty aggressive, is now 100 percent in cash.
Anyhow, that’s not why I’m writing this update. The reason is gold.
Last Friday, gold (the metal) closed at 1346 on the futures market. Gold appears to have completed wave 1 up of a five wave sequence that should take the metal to the 1600 level or higher. So If I’m right about the wave count, the pullback I expect should be wave 2 down. I don’t expect it will be much of a pullback, probably to the 1325-1330 level. IF gold (the metal) declines to this level, it will begin to form the ‘Bade’ of a nice Bullish Hockey Stick Pattern. If this happens, I will start looking to buy gold.
BTW, I believe the odds on this trade are high, so I might want to overweight the Model Portfolio. I’ll keep you posted.
h
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