The New Chairman

03/15/18 04:28:40 PM

by Koos van der Merwe

The new Federal Reserve Chairman, Jerome Powell, took the reigns of the Federal Reserve with a depleted board and a list of challenges.

Security: GLD,NUGT
Position: Buy

All three major indexes closed lower on Tuesday, February 27 when the Fed Chairman, Jerome Powell, highlighted the strengthening economy during his congressional testimony, hinting at possibly four interest rate increases over the year ahead. Then President Donald Trump announced on Thursday, March 1 that he would be imposing a 25% tariff on steel imports and a 10% tariff on aluminium imports. The U.S. stock market tumbled with the Dow plunging as much as 600 points in early trading. So, what now for the months ahead? Where do you put your money? The past market crashes have always suggested gold or interest-/dividend-bearing stocks, but one should always never forget that President Trump is a business man, and a clever one at that. As a businessman one makes an upsetting statement, and then waits for those hurt by that statement to come back with satisfying suggestions open to negotiation.

Figure 1. London Gold Price.

Graphic provided by: AdvancedGET.

The chart in Figure 1 is a chart of the London Gold price suggesting that the price of gold is now rising in a major WAVE III. A move above the July 2016 top of 1370 will confirm this. The RSI-14 indicator is trending up, suggesting that this will indeed occur. So, with the Gold price expected to rise, what gold shares do you invest in? There are many, and each should be carefully analyzed to decide which share to buy. One share I watch is Direxion Daily Gold Mining (NUGT).

Figure 2. Direxion Gold Mining.

Graphic provided by: Omnitrader.

The chart in Figure 2 is a daily chart of NUGT with the Vote line suggesting that the share price is still in a sell mode. However, the share price hit the lower Bollinger band at $21.25 on March 1 and bounced upward. The RSI is also suggesting a rise in the share price. Also notice the double bottom, which is another bullish factor. So this is a share tied to gold that should be watched.

Looking for a stock that pays a high dividend or interest in the US market is a tough job, however, a look at Canadian interest bearing stocks is probably the way to go. The risk of course is the US$ to C$.

Koos van der Merwe

Has been a technical analyst since 1969, and has worked as a futures and options trader with First Financial Futures in Johannesburg, South Africa.