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“Risk On” Mode is Here…
What Happened to Stimulus and Uncertainty?

The stock and resource markets liked the news this week. They were happy for several reasons… Biden’s certified win was a relief, reflecting political stability. Then there was the good news about the coronavirus vaccines and the nomination of Janet Yellen to head the Treasury Dept.

You’ll remember Yellen was the Fed head from 2014 to 2018, and she’s respected by both parties and Wall Street, notes Mary Anne and Pamela Aden, co-editors of The Aden Forecast newsletter.

This made the stock market jump up and yesterday the Dow Industrials and the Dow Transportations again hit new record highs, reconfirming a Dow Theory bull market confirmation (see chart). The S&P 500 also hit a record high and so did Nasdaq and the small cap Russell 2000 index. This is telling us the stock market sees better times ahead and we now recommend moving back into the stock market with a 20% position.

On Wednesday, Nov. 25, the U.S. dollar index hit a new 2½ year low and we believe it’s headed much lower. For now, the dollar will remain weak by staying below 93, and very weak below 92. This renewed weakness may be telling us that gold’s D decline is near a low, and here’s what we’re watching.

Gold’s D decline is finally getting steeper. It’s been taking its time to decline since its August highs. The break this week below $1850 was needed to see a steeper normal D decline. Remember this decline is usually the worst intermediate decline in the gold market. So we’ll have patience and ride through this trough. It’s always an uneasy feeling to see a market fall. As they say, the market is the only place people don’t want to buy when it goes on sale. Think of this as a Black Friday buy! But not yet… it’s coming.

Wait for more weakness to develop. Although the weak dollar and firm currencies may be suggesting the D decline is about over, it isn’t over yet. The chart shows gold fell to its July low and it’s weak below $1890 and especially below $1850. The indicator is nearing its D low area but it could still fall further to its extreme low area like it did in Dec 2016. This means if gold breaks below $1800, you could see $1750-$1700 tested. But if gold jumps up, it would be out of the “D” woods by closing and staying above $1930.

Gold shares have fallen too. The HUI index fell to its June lows once it broke below 300. It could fall to 260 and still be in a bull market. Our positions are down but when this decline nears maturity we’ll recommend buying near the low areas.

Silver is holding firm with the help of a strong resource sector. With copper at new highs and flirting with its 2018 highs and while other base metals and shares are on the rise, it’s been a big help to silver. But if silver closes below $23, it could still weaken further. Gold shares and silver are not oversold. We’re riding through the weakness. We had mentioned to lighten up if you didn’t want to ride through weakness, but now we will stay with the positions we have.

Platinum is finally rising and looking better, but several resource stocks are strong. Rare Earth and Cannabis are also rising with steel, aluminum, copper and zinc. Crude is also breaking out to new highs since March when the pandemic started, on the good news. Energy shares are rising too and so are the world markets. This resource force is growing, and we’ll grow with it.

Editor’s Note: The Aden Forecast, co-edited by Mary Anne and Pamela Aden, 1 year, $250, is considered one of the most influential investment publications in the world today. The Aden Forecast, now in its 39th year, specializes in the U.S. stock market, mutual funds, U.S. interest rates and bonds, the international stock and bond markets, the foreign exchange and precious metals markets. For more information visit www.adenforecast.com.

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