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Mish's Daily: Gold and Gold Miners: Read the Tape!

February 10, 2016

By Mish Schneider


History is an angel falling backward into the future”-Laurie Anderson

Given the results of New Hampshire primary with two populist candidates (Trump and Sanders) winning the Republican and Democratic vote respectively, I researched the history of the US Populist Movement.

It didn’t take too long. The Rise and Fall of Populism: 1892–1896 pretty much sums it up.

Born from a tariff that hurt farmers, the farmers aligned with the liberal Democratic party to form the Populist Party. From there, during the election of 1892, the Populist Party candidate did fairly well, but Grover Cleveland (the Democrat) won the election. He became the first and only president to serve two nonconsecutive terms.

Cleveland inherited The Depression of 1893. At the time, the U.S. Treasury was already nearly empty. The US was on the gold standard. The Populists wanted unlimited, cheap silver money. Wily investors were trading silver for gold creating a sinking gold reserve.

The US could not afford to go off the gold standard because if it had, the economy would have crashed completely, ruining its financial credibility abroad.

Interestingly, J.P Morgan (the man, not the bank), saved the day by lending the federal government more than $60 million.

However, by the next election, William McKinley (the same guy who supported the high tariffs to farmers) became president. He ran on a pro-business platform. Once president, he killed the Populists dream of free silver when he signed the Gold Standard Act. That Act stabilized the value of the dollar to one ounce of gold.

Hence, the end of the Populist Movement.

Naturally, I wonder whether history (however transformed) will repeat itself on some level. What motivates this Daily, is wondering how it might affect the Stock Market.

Gold, Silver, Recession, Wealthy Banks, Pro-Business-all of these words and phrases are popping up every day.

Is it surprising then, we should see gold, gold miners and silver all up, while equities continue going south?

Last night I wrote that our 16 chart patterns did not indicate a bottom is near. Although the market began the session hopeful, it closed red while gold, gold miners and silver closed green.

Do the winners of the New Hampshire Primary have any culpability in Wednesday’s market action? The better question is; how does our current American political landscape impact the market?

If folks are tired of the status quo and want change, that unknown factor of what will change and by how much is enough to give the stock market the willies. It’s enough to make investors fly into gold and treasury bonds. Read the tape-it’s right there.

Incidentally, McKinley, credited with leading the nation back to prosperity, was assassinated in 1901. He was shot by an anarchist.

S&P 500 (SPY) Could be a giant head and shoulders top with the neckline break under 181ish. Only a move over 195 will save this from that formation.

Russell 2000 (IWM) MY TOTAL BAD. I tweeted this filled the gap to 97.91. But the gap is to 97.96 which still has to be filled if has a chance of holding any rally

Dow (DIA) Still holding the 6-month calendar range low at 158.23. Over 162 better.

Nasdaq (QQQ) This look like it already broke to some degree that head and shoulders top. However, under 94 would confirm that better

Volatility Index (VIX) Over 30.00 should see a new leg up

XLF (Financials) The new low Tuesday could be ephemeral

KRE (Regional Banks) I figure the bottom will smack me in the face when happens-all I see now is a relief rally-and even that was short-lived

SMH (Semiconductors) Broke 46.14 the 6-month JCRL. Not good

IYT (Transportation) 128 is the 200 week moving average. Want to see it close above there this week to get even remotely happy.

IBB (Biotechnology) Bounced from the 200 week moving average at 239.40. A weekly close over 252 improves this appreciably. A close below not so much

XRT (Retail) Still under the 6-month JCRL.

GLD (Gold Trust) After the Inside day correction, the buyers returned. Looks like 117 could be next resistance point if holds around 114

SLV (Silver) Holding the 200 DMA at 14.45

GDX (Gold Miners) Over 10 million shares traded in the last 30 minutes today. Correction over.

USO (US Oil Fund) Made a new low to 7.89, bounced but then closed weakly.

XOP (Oil and Gas Exploration) Watch this to hold 23.59 if this has any chance

TAN (Guggenheim Solar Energy) 19.54 here we come?

TLT (iShares 20+ Year Treasuries) What a move! On new multi-month highs

UUP (Dollar Bull) Expect to see an eventual move down to around 24.20