I have to admit to being slightly miffed regarding a recent Spreadbet Magazine blog in which the “full whack” was given to the Weimar Republic / Hyperinflation / Wads of cash in cheelbarrow scenario that it seems we are still facing with the continued unbridled money printing…
That said, I am grateful that over the past three years and more that I have not been tempted (too much) to call the bottom as far as precious metals are concerned.
What we do know from bubbles in general though is that they tend to burst rather later, and rather more painfully, than what the masses expected. This may be something to remember for those involved in central London real estate, or of course, even the Nasdaq and some classes of U.S. stocks…
Of course, it really is the U.S. and Fed Chair Ms “Helicopter protégé” Janet Yellen whom I would venture to suggest has got us closer to a Weimar style tipping point in terms of inflation risk. Gold melted through its 200 day moving average “like a blowtorch through butter” on Friday – a line appropriately taken from the James Bond film Goldfinger!
Even Crude Oil seems particularly well poised as a buy in a bull flag above its 200 day moving average – despite the apparent threat from “Fracking”. The question, referring back to the Weimar episdoe is whether the Hyperinflationists should start partying like it is 1921 or later? At the same time, we have to wonder when the attempt to control a spike in general prices will come – the early 2015 consensus may prove to be as much as 6 months too late if we see the commodities fire at the moment continue to blaze as it has in the past couple of weeks.
As far as how to trade this scenario – and for the non-followers of this blog, arguably being a little “late” as far as the bargain hunting is concerned, I would offer one angle on the obvious play which is of course mining stocks. Although here there has already been a substantial recovery, in a sector which is highly leveraged to rises and falls in the underlying commodities, there are some stocks which have noticeably missed out on all the fun to date either in relative terms.
As far as Rio Tinto (RIO) is concerned it can be seen that we are in the aftermath of what appeared to be an interminable rectangle consolidation, in place from the time of an unfilled gap to the upside through the 200 day moving average – now at 3,083p. The big plus as far as the consolidation was concerned is the way that we have been treated to multiple support points above the 200 day line ahead of the latest breakout. The expectation now is that at least while there is no end of day close back below the 10 day moving average at 3,384p that we may see a “minimum” upside as high as the May price channel top of 3,800p, and as soon as the end of March.
I have to promise (cross my heart hope to die!) that I had already had Avocet Mining (AVM) singled out today for inclusion on the basis that it appeared to be building a base, even before the near $0% rally early today! The hope now is that, for the time being at least, the stock has found a sustainable floor towards 8p and that the January bear trap rebound from below December support could at least drive the price action on for a test of the 200 day moving average / December gap top at 12p plus on a 1-2 week timeframe. But it is a weekly close above the 200 day line that we are really chasing here after the slap this stock has taken in recent months and years. That really would be the signal to get going on the long side.
Finally, a request from a special Twitter follower on Amara Mining (AMA). Here the daily chart shows the aftermath of a post October inverted head & shoulders formation, as well as the latest break of the 200 day moving average. This feature is still falling at 15.64p, with the as yet untested break above the 200 day line all the more bullish on this basis. Barring an end of day close back below the key moving average one would be gunning for a post September 20p resistance target and perhaps as soon as the next 2-4 weeks.
CLEAR DISCLOSURE – TITAN FUNDS HOLD POSITIONS IN AMARA MINING