VRA Weekly Update. VRA Investing System Podcast Hits 20,000 Listens, Golden Crosses Abound
/Good Friday Afternoon all. When Tyler came to me last year with the idea to start recording a daily podcast, my first reaction was “so you want to add to our 12 hour work days?”.
But Tyler is relentless. Would not take no for an answer. So I agreed. I honestly believed that with countless thousands of podcasts already in existence, this might be a short lived project.
But the numbers continued to build. Now, with hundreds listening to our end of market podcast, we’re locked in and having a blast with it.
Tyler shared the following with me yesterday. We’ve reached 20,000 total listens…
Thanks to everyone thats been listening! And Tyler, thanks for being relentless.
Give us a listen at VRAInsider.com/podcast
Market Action
Futures pointed to a lower open as we had weak futures trading overnight leading up to this morning’s economic reports where we had a bit of a mixed bag.
On the top line non farm payrolls missed big on estimates coming back with only 20,000 job gains compared to estimates of 173,000. However, wages beat expectations coming back at .4% compared to .3% estimates, and a very important indicator, the unemployment rate came in today at 3.8%, continuing the strongest job market in over 50 years, beating estimates of 3.9%
Futures are further under pressure after the news this morning, but there were more positive numbers to look at as housing starts for January came back strong with gains of 18.6% v. the estimates of 9.5%
Housing has been on a great run as well since the 12/24 capitulation, and similar to our markets has taken a pause in the last weeks after reaching overbought conditions. However, we continue to see strength in this sector, as it is now at approaches oversold levels, we fully expect to see this rally higher continuing.
Golden Crosses abound
As Kip mentioned in Yesterday’s Podcast all four of our major indexes are approaching what is called a golden cross, and I wanted to take you through a few very bullish examples of this we are seeing right now.
A Golden Cross occurs when a shorter term moving average moves above a longer-term moving average. In this case for our indexes, the golden cross is happening with the 50 day moving average about to cross the 100 day moving average. While this may not the most bullish golden cross that we could see, that would be the 50 day crossing the 200 day, in this scenario we are still seeing a highly bullish pattern, confirming the strength of the current uptrend.
I’ll spare you from having to look at each chart of our major indexes, as once you see one you will always know what to look for, and right now all four of our major indexes are in very similar patterns. What we are looking for here is the blue 50 Day MA crossing above the red 100 day MA.
For an example of a true golden cross take a look at the Emerging Markets ETF (EEM) as we are about to get the most bullish golden cross with the 50 day crossing the 200 day… more on China and emerging markets in a second.
I also wanted to show an example of how the golden cross can have an impact. This is one of the highest probability trading signals because so many people watch it, and since so many people trade it, it becomes a self-fulfilling prophecy. This chart is particularly relevant as we have been pounding the table that now is the time to own Gold and the miners for weeks now.
GDX had a true golden cross in earlier February and take a look at how it jumped once crossing this important technical indicator. Important note, on the poor jobs report, gold is +$13/oz with GDX up another 1.75%, on top of yesterdays 1.25%
Going back to Emerging markets and China, we have one last golden cross chart, FXI, which is right at a golden cross as we write. Continue to aggressively add to positions here as, similar to GDX, we expect to see a big move higher once we get through this golden cross.
I will say quickly here we did see some poor performance overnight from Asian Markets as the Shanghai composite fell 4.4%, it’s biggest single day loss since October. The Hang Seng was also down 1.91%, but it’s important to remember, Asian markets have been red hot to start the year, actually up higher than U.S. markets, so to see a pause in action is not terribly concerning yet.
U.S. Dollar
Changing gears here to a more fundamental factor, which had a big day yesterday, the U.S. Dollar. This is important for many reasons, but most relevant right now is that a strong U.S. dollar is a major headwind for trade and commodities. We have seen a pull back in Gold and Silver partially in part due to the strength of the dollar.
President Trump has been speaking against the over performance of the Dollar for months now. Not that he wants the dollar to crash but rather have a stable currency. Here is what he had to say just this past weekend, “I want a dollar that’s great for our country but not a dollar that’s prohibitive for us to be doing business with other countries.”
So called “experts” are saying there isn’t much that Trump can do about the currency value, however, I will point out that this is exactly what the “experts” said about Trump influencing Interest Rate hikes. What happened when Trump began harping on the FED? The FED held off of Interest Rates.
As you know, we’re highly bullish on precious metals and miners. For the parabolic bull market that we envision, the US dollar will need to reverse lower.
Here’s Kip’s tweet from yesterday.
Now, take a look at this chart of UUP (US Dollar Index). Again, we believe this could be a false breakout.
Volume has been incredibly light (and getting lighter), versus its strong move higher last year (which interestingly, did not hurt gold/miners….in fact thats when their breakout above the 200 dma kicked in)
UUP is now at extreme overbought (RSI) and heavily overbought on stochastics. And MFI (money flows) have reversed lower, even as the USD moved higher.
Again, this looks to be a false breakout. Here’s why a weaker USD is important. Foreign currencies (Europe, EM, China) have been crushed. This attracts short sellers in equity markets as well.
And just as importantly to US investors, a strong USD is not welcome news to US multinationals, which in many cases do 50% of their business abroad. Dollar strength makes those sales more difficult.
And finally, as I mentioned, we know that President Trump wants a lower USD. He got his way with the FED and rate hikes….we expect a similar outcome with the USD.
Until next time, thanks again for reading and have a great weekend…
VRA
Since 2014 the VRA Portfolio has net profits of more than 2300% and we have beaten the S&P 500 in 15/16 years.
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