My 1st Million At 33 – yes, you can do it too

Let us start from the big money, forex. Even though US dollar is very close to breaking the support, the fall is simply not for sure. In fact, I probably would bet the US dollar will have a small rebound. Among all currencies, Japanese Yen is probably one of the weakest major currency. One must ponder why. Without Yen rising against US dollar, US dollar will simply NOT going to go down hard. I guess that Japan has teamed up with USA to make sure the doomsday doesn’t come. Flooding the market with more Yen for more carry-trade will ensure plenty of liquidity for any potential stock market fall. Because US dollar is probably not going to break the support this time around, my guess is that it makes a gold bull market doubly hard. Gold could rise against a rising US dollar as it did before, but it’s just harder.

Here is the long term chart of US dollar. (Click to see better details)

And the short term chart of US dollar. It is currently VERY oversold.

Here is Yen vs Dollar. As you can see, it’s even weaker.

Global stock markets obviously have benefited from the abundant liquidity. However, if you watch the market actions closely, there is plenty of evidence that when the drop comes, it will be so swift that unless you glue your eyes to trading screen or use an automatic market sell for stop loss, there is no way of getting out of your positions. Look at the market actions for this week:

Two days (Tuesday,Wed) of gap-down open, and Thursday was a SHARP sell-off. In the span of 30 minutes, the market fell without ANY support. It appears that there are many ready sellers.

As for my own investment in precious metals, I see two big problems:
1. US dollar will likely to rise in the short term.
2. Stock market is overbought and can take down PM along with it. Despite that the technical and fundamental pictures of PM are pretty solid, the external factors are not so great. I continue to hold significant amount of sideline cash, refraining myself from being over-greedy to put the cash back into the general or PM markets.

HUI gold-mining index is forming a pattern of successive higher low which is bullish. But given the above backdrop, I have some reservations.

Overall, I suggest to be very vigilant and conservative. Don’t chase the market nor squeeze out the last 3% gain. But the distribution top is likely to be extended I believe because the Yen carry trades are still alive and well. The reversal however could be very quick as I have said above.