Is the recent S&P 500 rally a bull trap? Momentum expert Michael Oliver says yes, and the consequences could be brutal. In this powerful interview with James Connor, Oliver draws eerie parallels to the 2000 and 2007 tops, warning that the market’s internal structure has already broken, and investors are being lulled into a false sense of security.
Key Topics:
- Why this “new high” in the S&P and NASDAQ is a dangerous illusion
- The collapse of leadership among the Magnificent 7 stocks
- Why momentum says sell, even as prices rise
- The U.S. dollar breakdown nobody is talking about
- A potential panic in the bond market that could force the Fed’s hand
- How commercial real estate defaults and soaring debt could set off a crisis
- Why silver may double to $60–$70 by year-end, and miners may outperform
- The commodity breakout that few investors are prepared for
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Michael Oliver 0:00
We still think, based on momentum, that the market is broken. This rally to a new quote, new high is a teaser. We do not trust it. We urge people not to trust it. Besides, there are better places to be anyway.
James Connor 0:19
Michael, thank you very much for joining us today. How are things in Colorado?
Michael Oliver 0:22
Oh, nice and hot. Not as hot as the East Coast, actually, but nice and nice Colorado one.
James Connor 0:27
Well, we had some killer days here, let me tell you. But things are cooling off. So things are looking up. And I want to get your views on the S P, because it’s been a hello, a few months here. Yeah, I want to, I’m going to recap on the S P what we’ve seen here in the last few months. The S P topped out in February at 6100 that was at an all time high. If no 6060, 44
Unknown Speaker 0:53
Okay. Okay. It
James Connor 0:55
bottomed in April at 4800 and it’s been lifting ever since. And if I went to sleep in February and I woke up now it’s like nothing changed, but we both know there’s been a lot of volatility here in the last few months, and when we last spoke in late April, I can’t believe it’s been that long, but you were of the mind that the S P was going a lot lower, but here we are at or near all time highs, so I’m curious to hear your thoughts on both the S P and the Nasdaq
Michael Oliver 1:21
in January, the S P dropped enough to cause our quarterly momentum of the S P. That’s not the price chart. It’s not some short term momentum metric. It’s a fairly long term metric broke structure, meaning, if you looked at the momentum chart, you’d say, Oh, the bridge and the River Kwai just cracked open. Okay, we had a spill. It didn’t get going until late March, April, with some news, which is unfortunate. News is never a good driver. And we had predicted in the middle of that move that the low a bounce point. We defined it as a bounce point, meaning, if you, if you’re in puts you better be careful. Okay, 4800 it stopped at 4835 and bounced sharply. That’s when Trump said, 90 day pause, and since then, has crawled incrementally, but ever so steadily, back to the old high yesterday and today. Took it out. We get up to 6080 something today, last I saw, we were dropping back to about 6040 so we did take out the high that was seen in February of this year. Okay, we still think, based on momentum, that the market is broken. This rally to a quote, new high is a teaser. We do not trust it. We urge people not to trust it. Besides, there are better places to be anyway, and have been for several years. Monetary metals have beat the pants off of the stock market. People don’t realize that, but if you do the measurements, you’ll see that owning gold three years ago beat the S P handily, not just the last six months. Okay, this topping action by the S P and the Nasdaq very much caused me to have deja vu back in 2000 at the.com top we put out a sell report on the first day of January of 2000 and said, Get out of the market. It’s topping. Sure enough, the market started to drop, then dropped sharply into February, about a 10% drop, but by March, it came back up and produced a new price high momentum still said, No, you broke stuff, you’re no good. Don’t trust me. And it labored all year, well, labored for the next six months, anyway, through the summer, at below and above our point of exit that occurred in January. So it basically went to sleep. Didn’t go up a lot more. It went up enough to make a quote new high. And it wasn’t really until you got into 2001 that all hell broke loose on the downside. That’s when the Fed cut rates. By the way, January of 2001 then the other deja vu. Let’s go back to 2007 top in the close of December 2006 we put out a report and said, likely topping next year. And we put a price range at that point we were the 1400s or 1300s I think in 2006 we said, you go to 1550 to 1600 would be the topping zone. Okay, in May of 2007 the market worked its way back up and got to 1553 I think it was so got up marginally into our zone, which, by the way, if you go horizontally all the way back to the year 2000 that’s exactly where it peaked@the.com, top. So the price guys see this thing a peak at 1550 Plus a peak at 1550 and somebody sold it. They’re thinking, oh, boy, if I sell the old high, they made a little bit of money because you dropped hard into August. Then what happened? You started the turn, and in mid September, you’re coming back up toward that 1550 level to try to take it out, impress everybody. The Fed cut rates. You goosed the market up about three more weeks into October, got to 1575 precisely in the middle of our targeted range. But a new price high, in fact, not only above the May high of that year, but above the 2000 high. So a massive dual price level was taken out. And so what if you’re looking at a price chart, you should do, what? Oh, boy. Okay, that was it. That was the top. You ooze back down. And all hell broke loose over the next year and a half, two years, okay? Fed, cutting rates all the way down. So now we have a similar situation. You make a high late 24 early 25 most indexes, almost all indexes, the mag seven were up there cheering, you know, along with it, you get a sharp drop into April, you work your way back up, and now, in a limited horizon view, you’ve made new highs, s, p, NASDAQ, 100 marginally like a percent above that high. If you look however, at the mag seven, you’ll see, like only two of them are back to their highs. Third one’s close, but that means only three out of seven now. Okay, the rest of them look, don’t even look like mag seven anymore. Okay. They’re the lower half of the last year’s range. And then when you go to sectors like commercial real estate, banks aren’t making new highs, Dow Industrials, they’re not making new highs. They’re not even that close. Healthcare sector looks like hell when you look even at a price chart. I can I can name more. But the point being that now we’re making the new high. And you hear it on CNBC and Fox Business about, oh boy, is the new high. And when you look around, even just at price charts, something’s wrong. It’s very narrow. Momentum says there’s something wrong. Don’t trust the new high.
James Connor 7:22
There’s so much happening in the world right now, especially when it comes to geopolitics, and if you need help understanding how these events will impact your financial future, consider having a discussion with a professional financial advisor. You can find out more information@wealthion.com slash free. Once again, that’s wealthion.com/free now back to the show. So even though we’ve had this big move off of 4800 up to 6100 you’re saying the momentum is not really.
Michael Oliver 7:52
Momentum is, in fact, if you looked at a momentum chart and compared to a price chart, maybe you’ve got some of those. Andy, price looks great because it went up, nipped out a new high. But when you look at momentum, there was a structure, like a floor on momentum that was very clear, wasn’t clear on price, and you broke it, and you’re up under the floor right now, incrementally up ticking, meaning when you got near the floor a few months ago, in fact, the action started to slow to a snail’s pace, very incremental gains every day. You know, 510, 20, s, p, points, etc, etc. And now finally, a new high. You’re still up under broken momentum, trend, structure, so NASDAQ, 100 and the S P, and you’ve lost your leadership. Mag seven. Aren’t mag seven anymore. And too many sectors are chuckling at this. And these are sectors that back in 2024, and early this year, we’re up there with the s, p, at the high happy with it. Now suddenly they’re not back up there. So even the price charts. If you’ll survey the horizon, something’s not going on here that should be going on if, in fact, the new high means anything you
James Connor 9:09
mentioned that there’s only two of the MEG seven that are at or near.
Michael Oliver 9:13
Nvidia would be one, and Microsoft another. I think maybe meta is getting close. But when you look at Google, look at Amazon, look at Apple, look at Tesla. Those are the rest. They don’t even look like, you know, anything like the s, p or the NASDAQ. Something’s happened. And then when you go to other sectors, two min, two important sectors, you know, too many important sectors, health care looks like hell. An annual momentum of healthcare blue a structure going back 15 years. So it really looks like heck in terms of momentum. And that was one of the quiet, comfy sectors to be in for the last few years. Other ones I’ve written down, let’s see we got the bank sector not making new highs consumer discretionary. You. Used to be a leading, what you call a risk on sector, which, when the market’s strong, boy, it’s a leader, okay, look at an X, L, y chart sometime and tell me you’re making new highs. Okay, something’s wrong there. Health care, IWM, which is Russell 2000 it’s not making new highs. That’s not even that close. Okay, so and all these sectors were at new highs early this year, but now suddenly they’re divorcing. So even with an unsophisticated analysis like that, just looking at some price charts, you’re missing your leadership. This is Phantom, you know so. But momentum tells us don’t trust it. This is likely like the summer of 2000 when they took out the highs and made us look silly. But it turned out momentum was right, or that 2000 October, 2007 high, which took out all the highs of the prior, you know, 2002 1007, huge price breakout as soon as it broke out. It was a short Okay, so don’t focus primarily on price.
James Connor 11:10
Yes, to your point about Apple, it is still down 20% on the year, and this is in spite of the move, or despite the move that we’ve seen in the s, p, yeah, last few weeks. So yeah, there’s definitely trouble there. You mentioned the make seven is no longer leading. So what is leading?
Michael Oliver 11:27
Well, the AIs are still leading. Okay, that’s extremely narrow, but not tech. Broadly. It’s not, it’s not doing the same thing with the mag seven, which was primarily tech, as we know, it’s not, it’s not leading anymore, but some of the other key sectors that have hefty weight within the S P are just waving goodbye to it. They’re divorced themselves from it, and nobody’s making the note that I see, at least on analysts, on CNBC or whatever about well, you know, notice that they’re not making new highs. Nobody’s they’re all just focused on the S, P and the Nasdaq 100 and I do not trust the rally and our focus at MSA. Now, after we got our bounce, did I expect that bounce to lead the new highs? No, but I thought it would be a serious bounce, and it was far more serious. You made a new high. It still doesn’t change the momentum, trend picture, it’s broken this rally, if you looked at a momentum chart, is a rally up under that which it broke. So if you looked at the momentum chart and saw the rally, you’d say, sell it there. But price says, oh boy, look at me. Uh, usually momentum wins.
James Connor 12:37
So you mentioned discretionary spending. So let’s talk about that, because here we are now. I can’t believe we’re in q3 already. I don’t know where the last six months, but we’re going to start seeing q2 numbers out pretty soon, and it’s going to be quite interesting. We saw so many companies in q1 come up with profit warnings, and they took down their guidance for the year just because of this uncertainty associated with the economy, but when we look at discretionary spending, Walmart, a few weeks ago, came on, they cut their guidance for the year. They took their numbers down three to 4% down from 5% so people aren’t shopping at Walmart. Big chunk of their sales has to do with food, believe it or not, 50 to 60% one of the big trends we’ve seen here in the past year are these buy now, pay later companies, and one of the biggest is called Klarna. It’s still a private company, but it’s it was expected to go public sometime this year. They just came out with their numbers, and they said that their loan losses are up 17% year over year, they went from 117 million to 136 million. Okay, so all these people living on credit is starting to catch up. One another company that came out here for the second warning this year is Louis Vuitton, high end retailer. And I thought this was quite interesting. They actually said the slowdown they they saw in q2 was one of the biggest they’ve seen in the history of the company. A lot of that has to do with Asia, and just the lack of sales in Asia. And for to further that point, China industrial profits just came out here in the last few days, they were down 9.1% in the month of May. So inflation, deflation is really starting to kick into China. Maybe China is really going to steamroll on the downside here in the coming weeks or months. And I should also mention that a big part of Apple Sales, I believe, around 17 to 18% of the revenues come out of China. So you were talking about discretionary spending. And I thought I would throw out a few numbers here, just to reinforce what’s happening with the consumer.
Michael Oliver 14:47
Yeah, no, in the in the high stranglehold of long term rates, like 30 year T bonds, for example, they just, they won’t get off the off the bottom they’re trying to make for several years now. Since late 2022 the T bond price has just gone sideways. We even gave it the benefit of the doubt, because some momentum indicate a shorter term. Said, No, you could rally up and maybe get the T bonds futures, which have made lows like in the 110 area, get up into the mid 120s and nip out the rally highs of the last two years in that seeming basing process. And of course, if they rally, it means yields come down. Okay, they got up to 122 I think it was in early April, from like the one teens, that the 130 it looked like that rally was underway, and in two and a half days, there were 111 again, that’s like a crash in the government bond market to have that kind of drop in two days. And since then, they’ve gone dull in the lower quadrant of the last couple of months, action, which is not good, because look at commercial real estate. RWR is one. ETF to look at, VMQ is another. They both hold about the same holdings. These are big companies that own real estate of industrial type, nature, shopping centers, computerized centers, et cetera, et cetera. As I understand it, we don’t pay attention to fundamentals. That sector is heavily in debt, and a lot of that debt is due in 2025 and 2026, so it’s not just the consumer. You’ve got major companies. In fact, a couple months ago, I think the largest shopping center complex in the country defaulted on debt. I think it was 10s of millions of dollars or even a couple 100, but it just defaulted on its debt. Well, something’s happening, and if you look at the last few days in RWR, while the S, P has done this, it’s done that, and that’s not a sector people are looking at, but you’ve got to look at the debtors, because when the debtors finally puke it up, there’s a lender somewhere, right? Okay, you know the banking system. Watch the financial sector, because you can’t afford to have the commercial real estate sector suddenly become a sideline headline. Oops. What’s going on over there? You know, who cares about Nvidia? You know, suddenly, and you mentioned the dollar earlier, that’s going to become a factor as well. Yeah,
James Connor 17:17
before we look at the dollar, I just want to continue one, okay, one point that you just made, you were talking about debtors and interest rates. And of course, the US has $37 trillion in debt, and I just read an article recently, and it was talking about the importance of the US getting their rates down. And this is one of the reasons why the President is all over the Fed to lower rates, because a move of one percentage point in the Fed rate, okay, if it moves up 1% that adds another $300 billion in interest payments. Okay, just think about those numbers. They’re staggering. So you go from 1 trillion in interest payments to 1.3 like that. Okay, cool, so, and that’s the government to your point. What’s happening with this commercial real estate? It’s the same sort of thing,
Michael Oliver 18:12
yeah, yeah. And it’s, you know, it’s not little this, this guy and that guy and they lose their mortgage. You know, we’re talking about big companies and a weighty sector. When you look at it and compare it to an S, P chart, you chuckle, okay, it’s too significant to ignore. And this obviously, if something happens there in multiples instead of like that one Shopping Center complex and large one, you suddenly hear another one and another one, then attention is going to shift and emotions will shift too, because people will be ambushed by events they didn’t expect. Everybody thinks it, all that matters is Nvidia. Okay? Actually, if you look at an NVIDIA chart, it’s a boring situation. We’re at 55 plus right now. New highs, okay, but go back a couple years, and you’re not making much money, you know, it’s really been a clump of ink, and you’re poking out above the high a little bit. Other things have been making money, but the other factors could come into play, and we think one of them is the dollar, not just the long bond rates staying high and choking. And by the way, I think the bonds could have an implosion of sorts. Right now we’re 114 area on the T bond futures. You don’t want to see them get down into 110s again. If you do, you might get a mini panic in the government bond market. That’s something the Fed will panic over. It may not be one of their mandates, but they’ll panic.
James Connor 19:42
Okay, so you touched on the US dollar a couple of times, and you recently came out with a note on this. Tell us about your thoughts on the US dollar. Well,
Michael Oliver 19:50
we’ve been watching the dollar over it’s one of the categories we watch, but if you look at what’s happened to the dollar index now, I’m not talking about the dollar’s real value that’s constantly. Decay, just like the Euro and the yen. It’s just competitive decay, okay, in real value. But when you measure the dollar versus the Euro and the yen, which is the dollar index, they constitute 71% of the dollar index. You’ve had a boring situation from 2023 through 2024 and in much of this year where the price was stuck in about an 8% range of price action up and down. But no, nothing really dynamic and no real trend, just oscillating sideways in March of this year, when we were coming down off the off of a rally high at 104 21 we closed that month we said, That’s it. Major bearish on the dollar index. Now price chart has a level at 100 that seemed to matter to the price guys, but we were breaking that. We’re still 104 at that time. But we saw on annual momentum, a massive structural breakage of a trend that goes back well more than a decade. So momentum said, Hey, you’re broken now. Even price right now, if you draw price channels on the dollar index, you can see we’re challenging the price channel. It goes back a decade plus. But if we close out this month, or any month this year below 9835 and right now, as we speak, it’s 97 something. Okay, you’re going to blow a 10 year average momentum structure that’s even worse than the three year average structure saying you’re broken so big it’s it’s the biggest you can break. And I would think the dollar could start to implode down to where it’s been in decades before, in the 70s. That, in itself, would be a major upset, because then the quiet one, the major forex markets, which have been dull, quiet 2324 suddenly become a volatile factor affecting other investment areas.
James Connor 21:55
And I believe the DXY index is down 10% on the year. So where is it? Is it right around?
Michael Oliver 22:02
It’s trading. No, it’s trade about 97 today. Oh, 97 Okay, last two days, it’s traded to a low of 97 which is the lowest it’s been in three or four years. But it technically broke at 104, so seven points above here, we said, That’s it. It’s over. We’ve got a secondary breakage level, which we’re now below as well, with a day left in the month. And if you don’t close back above it, 9835 and it’s unlikely you break further structure, which I think this time will generate far more than just single percent change. I think it could get you moving in a more volatile manner, which creates a factor that wasn’t a factor for the last couple of years because it was so dull, it wasn’t moving much. If you’re a foreign investor, and we understand that foreign investment US stock market, is now at the highest it’s ever been. For the last couple of years, you’re impacted by a downward shift in the dollar. Because, you know, you take your euros and yen and you buy US stocks and dollars, okay, so you not only care about US stocks, but the dollar. And you just like, got gut kicked already. Even though the s, p is back to its size, your investment is not back to its size in your currency terms. And if you start dropping more precipitously, that could also affect what foreign owners or US Drug government bonds, so it’s a factor that could come into play. And I don’t hear it as being talked about much, which is fine, that’s the way you want it, because that’s how ambushes occur.
James Connor 23:36
Yeah. So to your point, you’re taking a hit on the currency and also US assets, whatever they may be, yeah, be the s, p, the NASDAQ. It doesn’t matter what it is. So it’s like a, yeah, getting paid twice.
Michael Oliver 23:49
No, it’s another factor that affects your sense of how am I doing. You know, US investors, they don’t care about that. They they ignore the ongoing collapse or decay in the US, dollar value, intrinsic value. One market that doesn’t is the monetary metals. They don’t ignore that.
James Connor 24:07
So there is hope that the USD and the Canadian dollar will get back to parity, so I can finally afford a trip to the
Michael Oliver 24:16
US. It’s one of the components, but it’s a lesser component of the of the dollar. It’s down like seven or 8% or something of the dollar index. But, yeah, it’s anyway, that’s another factor out there that, you know, there are four categories, and one of them was asleep. Now suddenly it’s waking up, and there’s no headlines yet. Wait a second. You know, maybe there will be also look at the debt. As you mentioned, consumer debt. Why is consumer discretionary, so anemic that used to be one of the front runners. You know, Amazon, for example, is like 20% of that EPF, and a lot of names you would know, suddenly they’re not making new highs. What’s wrong? What’s wrong with the consumer? I thought everything is fine, and there’s another ambush. Coming too. The other Ambush is commodities are going to turn up. And I don’t mean war news, buying of oil, which is a mistake for anybody who bought oil at war news, but I’m talking about, in general, the commodity category looks primed for a major next up wave, which would upset all kinds of assumptions, as we know.
James Connor 25:17
Well, I think one of the reasons why this market is so tough to predict. I mean, nobody can predict the future, but still it’s there’s a lot of cross currents out there. And one of the things that really confounds me is what, what the what I see the stock market is doing. I know when you speak to an economist, they’re going to say, well, the stock market’s not the economy, but I always see it is a good predictor of what the economy is doing and what people are thinking. And yet, at the same time that the markets are making these new highs, I keep seeing all these other other economic indicators that that are showing signs of trouble and but one thing that’s really hanging in is the unemployment rate. It’s 4.1 4.2% in the US now in Canada, the unemployment rate is really ticking up nationwide. It’s 7% in the province of Ontario, where I reside, it’s 8% in the city of Toronto, okay, the largest city in Canada, it’s 5 million people. It’s uh, approaching 10% just think about those numbers. Mike, oh, okay, the youth unemployment rate in the in Canada, it’s 14.1% that’s the highest has been since the mid 1990s and I think what’s really happening here is just uncertainty associated with the economy. A lot of companies are not hiring, especially summer jobs, internships, and I’m surprised we’re not seeing more of that in the US. I mean, I just read recently Procter and Gamble is laying off 7000 people. Microsoft also announced that they’re going to lay off 1000s of people. What are your thoughts on that unemployment?
Michael Oliver 26:52
Somehow it doesn’t show up in the government data points, does it? I don’t know. I haven’t looked at the last couple reports. There’s one coming up in a week, you know. But one of the factors that kept it bloated was government hiring. Now that may have changed too recently, but it’s a lagged indicator. In other words, if you go back to 2000 or 2007 and look for unemployment, is a signal to sell. Now stock market told you first. In other words, if this new high in the s, p is what we argue. It is a trap. And suddenly you begin to unwind back down again. And I’ll give you a number. You don’t want to see 5700 again. Okay, now we got the 4800 I’m saying we’re now, you know, above six, you don’t want to see 5700 next quarter. Okay, that would be a solid sign that the whole High was a fake out. And by the way, if you’re a price guy, and the data points will follow the market, that’s, that’s what the point I’m making. So the data points that Powell likes to look at, they’re going to smack him in the face, and he’s going to look kind of stupid, because they do lag the market. They never lead. Now he’s going to have another problem if just one more fed Governor crosses the line, because he had one that said, No, we need to cut now. And then suddenly there’s two. Need to cut. Now you get a third one starts to become a chorus. And then suddenly he looks reluctant. For what reason are these three people stupid? Or is he doing it for another reason? Anyway, he’s got a political problem. If he loses, like one more fed governor, and the data points will follow and vindicate cutting rates, you know, they’ll get what they need. But then there’s the other factor. I said, you know that T bond market watch it and watch the dollar, because those aren’t on the mandate list, but they will have an impact on things that do affect the data points, and that’s when suddenly, heads will turn quickly and late.
James Connor 28:58
You’re not suggesting the Fed is political? Are you?
Michael Oliver 29:01
No, I don’t care. You know, I frankly have said that this particular market economic event that’s about to happen, and I think a lot of it’s going to occur between now and the year end, in terms of price drama in certain markets, Dollar Index, for example, perhaps a panic in the T bond market that causes a central bank to wet themselves. Stock markets, oh, the new high didn’t hold what’s going on here, things like, oh, commercial real estate, oh, company did what. You know, these type of events aren’t like we were in the late 70s, or the gold bull move that went to 2000 you know, 2011 and 1900 and the stock market drop in 2008 and nine. This is different. I think this is going to be far more serious. I think the wave effects will hit reality, people in the street, so to speak, to. Uh, their day to day lives, whether they hold stocks or not, hold stocks in their retirement accounts. And of course, if they do hold stocks in their retirement account, they might soon have nothing to smile about. If I’m right about the trend direction of the stock market, that’s the only thing they can smile about right now, not their credit card debt, not their student loans, not their late mortgage payments, but Oh, my stock market portfolio is back near a tie or whatever. This time around, you could have some major fundamental changes in reality, in the sense that certain institutions go by the way. Certain notions of what’s right and wrong in terms of policy go by the way. And I would think I’ll make a bet when this is gets more past the crisis point, there won’t be a central bank, that there will be enough countries elsewhere that revert to a non fiat currency, meaning the gold backed or silver backed currency, where even in the US, which we’re now lagged, that reality will suddenly realize there’ll be enough realization that, hey, you know, this boom, bust cycle process that we’ve been in for 100 years, caused by monetary booms and busts, which lead to stock market booms and busts, hasn’t been working. They’re always too late, or they always cause something. How about we just have a currency that’s real? You know, you can’t inflate it overnight because you want to. I suspect a lot of these kind of things will happen. I’m not advocating or predicting. I’m just saying this is different this time. So don’t expect like gold to go up to certain level and have a major bear market this time. I think you might go up to a certain level, wherever that may be, and it’s not anywhere near here, and it’s institutionalized. So it’s a different reality we’re dealing with. I think,
James Connor 31:50
yeah, there’s no way Powell is going to have a relaxing summer. He’s got the president.
Michael Oliver 31:57
All he needs is again, one more one more governor to say, hey, you know you’re wrong. And then suddenly, oh,
James Connor 32:04
so the meeting in June that came and went, they didn’t they left free time change. What do you think is going to happen in July?
Michael Oliver 32:12
I don’t know if they can get some data points and one more Governor shift, even Powell may have to sit down on his chair and let the other guys take control. I don’t know. They’re laggards, and they’re really not a driving force. They’re driving force in the sense that they ongoingly decay the money in it in terms of its real buying power. Every decade, you almost double the money supply. And lately, we’ve been really accelerating the money growth them too, and they create interest rates or the cost of money. It’s like, you know, what’s the price of corn? It’s fixed by the government. Well, no, it’s not. But the price of money, which is an essential transactional commodity, its price, is fixed by the government. So it’s a socialist money unit. Well, but then it decays constantly. We put out a chart in a recent report for fun, the Venezuelan stock market. Boy, we put it on the front page and blew it up. It’s so lovely. It just exploding. You know, we should all invest in Venezuela. The problem is the money you can’t buy a loaf of bread with the it’s it’s exploding in price. But it doesn’t mean anything.
James Connor 33:20
You know, I didn’t realize they even had a stock market. I’m surprised.
Michael Oliver 33:23
Yeah, no, there’s, there’s some stock indexes down there, but, and they look great. I mean, you know, we said we should, we should be in the Brazilian stock market. So when the s, p makes a new price high, think about it, you know, is it really making a new real value high, or is it, is this some nominal you know, if you took the dollar value out of it, you’d see a different chart. In other words, yeah,
James Connor 33:47
yeah. Or, in another way to put it is, if I bought a house for a million dollars and they went to $2 million did it really increase by a million dollars, or did the value of my Well,
Michael Oliver 33:57
the money, yeah, yeah. Well, when your granddad built a house. It cost. The average price was 4000 bucks. Now the medium home price is $442,000 what’s happened in a couple generations? I guess homes are just better, aren’t they? Oh, the money’s degraded. You know, a loaf of bread when I was a kid was under 20 cents. Okay? You know, we have a wheat drought. No, we don’t. Okay, you get the point. The same is true with the stock market. And people don’t. Don’t think about that. Anyway, gold does. That’s the ultimate driver of the monetary metals. Is the ongoing decay in the Fiat stuff. Okay,
James Connor 34:39
okay, so let’s talk about gold. It’s up 25% on the year, and it had a great 2024 it’s starting off first half of 2025 is pretty good too. What are your thoughts? Where do you see it going? I
Michael Oliver 34:52
don’t know where it’s going, except to say it’s no longer going to lead. Our technical assessment is that silver and. Then the gold and silver miners will now move from the back to the front in terms of performance. They have lagged gold on an upside basis, on a percentage gain basis, they’ve gone up nicely over the last several years, but not as much as gold. So they’ve underperformed, so to speak. They’re technically at the point now of breaking out of that trend of relative underperformance. So when you don’t focus on the price of silver, which looks quite good, or the miners quite stout now, but the relative performance to gold and technically it is breaking out favoring them. So whenever that happens, it almost always converts into a net price acceleration in all the monetary metals, silver, gold and the miners, meaning they go up in an arm wrestling manner, and then suddenly, when they accelerate versus gold, outperform it. That’s usually when price also starts to go berserk. And I think we’re there. I think Silver’s crossed that line. I think it did it early this month, getting up to the high 30 fours. Again, there were two highs at 35 price. Guys noticed that we took that out. That’s not really that important, but there were some momentum factors that came into play in the upper 30 fours that said you’re out of here, okay. And since then, we’ve surged to 37 and right now we’re trading, you know, in a range, mostly in the weekly closes for the last four weeks, mostly above 36 just going to sleep up there. Quite firm. I think silver is about to go into the 60, $70 range. I think it’ll do it this year. That’s not the end of it. That’s the acceleration phase. I think we’re entering. I think gold will advance strongly during that time, but it will be outpaced by silver dramatically. Same with the miners. Where is gold ultimately going? Let’s put let’s give you some context. I don’t know where a technical target is, because the reality we’ve been talking about is so serious that when it unfolds, it’s 52 car pickup terms of where things might go. But if you go back and look over 50 Years of gold’s history, you’ve had a couple bull markets that were both eight fold moves from bear, low to bull. High bear, low to bull, high, eight fold, eight times our low was 1050 an annual momentum turned up shortly after that, by our metrics, at 11 140 and we’ve not changed our views since then. But if you go eightfold, you go to $8,000 and that’s merely replicating the dimensions of two prior bull markets that existed under far less dangerous dynamic potentials that we are currently in. So 8000 would merely be doing it again. So you can say, well, 8000 is a target, but it’s really not. It’s just a norm. But in that period, I think it’s the mama market. But watch silver and the miners, they’re the better place to be
James Connor 38:00
so silver is finally going to see its day.
Michael Oliver 38:04
Yeah, and I think the old highs at 50 were phantom anyway. If you look at them closely, they lasted like hours or a few days. They really weren’t like living up at 50 for a long time. And they were so long ago that if you factor in the continued degradation in the money unit that you’re measuring by, we probably have to be $200 just to match those $50 highs in real terms. And don’t be surprised by that number either. But no, I think that the technical acceleration is something we could define technically. There will be news stories, no doubt, that come into play, but there will be, like ambush news stories that come in after the fact. So if you’re not already in and you’re waiting for a reason, the reasons will come, but you’ll have already missed the move.
James Connor 38:59
So I just want to repeat one thing you said. So Silver’s trading around 35 bucks an ounce, give or take, you see it going to $70 by the end of the year. So you’re looking for 70 range, yeah, before looking for an explosive move here in the next few months, I mean, it’s already halfway through the year,
Michael Oliver 39:15
not even a doubling. But many markets do that. You go back and look, there’s a lot of base metals over the last few years have gone berserk on the upside, you know, and they fail. But this is a monetary metal, too, and a lot of investors fail to remember that. That’s why they dumped into silver in early April. We had the drop from 35 to 27 and a half and a week or so, most of it in two and a half days. Gold only flinched a little bit. They dumped on silver thinking, Oh, it’s part of the economy. No, it is a monetary metal. It is linked to gold. And if you look at long term history, the price of silver, it doesn’t correlate well to the Bloomberg commodity index. It correlates well to gold, and it’s been lagging gold on a percent basis, but it’s been trending with gold. So. Uh, and I think it’s just about to go into one of those phases where you can go back and see examples of this in the past 79 82,010, 2011 where silver just went rampant, you know, it left the earth, and it wasn’t due to factors that we’ve got anything like now, you know? So it’s different this time, and that’s, I’m not predicting. That’s the end of the bull. I’m just saying this is the next surge, and beyond that, God, I don’t know where we’re going. A couple 100 bucks an ounce wouldn’t surprise me. It’s depends on these other realities that are about to unfold in a dark direction.
James Connor 40:38
Okay, let’s talk about oil, and oil has been very volatile in the last few months. I mean, it went from 60 to 75 and now we’re back to 65 like holy God. What’s your take on oil? Here we
Michael Oliver 40:51
watch oil because we watch the Bloomberg commodity index, and oil is a significant component of it. Oil, gasoline, natural gas as well. But oil has been a weak component in the Bloomberg over the last couple years, while the Bloomberg dropped from that but it peaked about three weeks after the war began, Ukraine, Russia. So it didn’t go up and double in price in late 2020 21 because of the war. It peaked right after the war instead and dropped, and dropped. And it dropped from like 140 in price, Bloomberg commodity index, which is not high, it’s been to 237 back in 2008 Okay, and drop back down either side of 100 and for two years, it’s done. This is so boring. It stayed in about a, you know, 10% range. It’s up and down, trendless market either side of 100 unfortunately, that war event occurred, and I’ve learned over time, I can’t remember all the instances, but whenever there’s a war event and people buy something based on that, you’re making a big mistake. And this was a perfect example. First off, oil had a floor on price at $65 for the last couple years, and it would get up into the 80s and 90s during that time, well off the $130 high that it saw in 2022 but it was basic, but it plunged through the bottom of that base. Coincident with that stock market break, it got down to 55 so you had this floor, 6565 65 you plunged it out. We said, that’s a bear trap. Don’t believe the downside breakout. It’s not the way to go. It’s not going to continue down. And it worked its way back up. It got slightly over 65 again. And if you’d closed a week out above there that was an abort for us that said, I’m aborting back above the supposed broken floor. It did that. And then came the war news, and every idiot in the world bought oil thrown up to 77 and they got killed. Okay, justifiably. Watch now to see if it starts to gel in the mid 60s again. Because what that is telling you is that, yes, that drop to 55 was Phantom. It was a spike. And the old floor at 65 area is starting to gel as a floor again. And if at any time, any monthly close in this quarter, you see oil close a month out at 70, it’s breaking out on our long term momentum, even though, on price, that’s in the middle of the range of the last couple years. On Long Term momentum, it says waking up, he’s going up. And I bet that’s going to be coincident with the overall Bloomberg index registering a major breakout as well. By the way, when oil got dumped and is everybody’s focused on, it is the essential commodity. Look at Copper. That beast is back over five again, no headlines. There’s other things. Look at platinum. Suddenly, after years of the most boring action it’s ever produced, it’s suddenly reasserted itself, and it is not linked to gold, by the way, technically it’s it correlates well to the Bloomberg. So suddenly some metals are starting to move, not monetary metals, but I think oil will join too, and the key is to see it stabilize here after this fake rally and then the puke and start to move incrementally without headlines back over 70 close a month there, and assume it’s a green light. Well,
James Connor 44:28
when you’re talking about these metals, like quite often, oil and copper, are seen as a barometer of the economy. So if copper is at five bucks and yeah, maybe it’s moving, it’s a
Michael Oliver 44:39
false assumption it doesn’t correlate. Well, I know Dr copper, they call it, you know, it’s if you go back in history, you’ll find the linkage is not but it’s said to be period. And also look at Broad commodities back in the late 70s, when gold had to build bull market to 1980 you know, we were in. Global recession, the stock market was a total wasteland, and commodities exploded, you know, essential economic commodities. They were on the tail of gold. They didn’t do as much as gold and silver, but they did explode, and they they accompanied gold and silver up despite a global recession. But you know what? They invented the term stagflation. So it’s happened before in a very obvious way, but people forget it. They think, Oh, Dr copper, it tells the economy is good. No, it probably tells you something else, like maybe, for instance, this idea, it’s a cheap asset category. Commodities are cheap relative to even their prior price highs. Like, in 2008 the Bloomberg was at 237 Okay, right now it’s 103 okay. Is that expensive? In 2011 when gold peaked, the Bloomberg was like, I think 170 something. Okay, right now we’re 103 is that expensive, even versus those. So it’s hardly inflationary. It’s been dull for two years, and it’s reasserting itself. And momentum says trust in the upside move. It’s going to take several points, but that’s all, and I think at that point you’re going to see capital flow out of a risk on perceived to be high priced asset category into a lower priced, cheap category, and also the stocks that are related to those commodities is the place to be, like oil related, grain related fertilizer companies, copper miners, base things. They don’t want to be gold miners, but I think you’re going to see a lot of that sector of the stock market, which is vastly overlooked, suddenly be a safe place to be and a rewarding place to be, despite an economic downturn,
James Connor 46:52
all very interesting points. So we’ve discussed a lot here in a short period of time, and I just want to summarize a few of your points, and you correct me if I’m wrong? But when it comes to both the S, P and the Nasdaq, you’re very concerned about these levels. Do not trust it. The market’s just trying to suck in more investors. And I guess when I think about it, when I try to visualize it, it, would you define this as a double top?
Michael Oliver 47:18
No, there’s a price chart pattern you should pay attention to. Years ago, when I was starting in the business 75 I got hired by Hutton in commodity division in New York at headquarters. And I didn’t know anything about commodities or technical analysis, but there was this book, famous book, Edwards and McGee technical analysis book. And in there, there’s a chapter or several pages on a widening pattern. It’s called, and what it is is it’s called 54321, instead of a narrowing triangle, it’s an expanding triangle, where you make a higher high, a low, a lower high, a higher low, you get 54321, when you make point number five, which we’re doing now, where you exceed point three, which was back early this year in price, for the S P, not true with a lot of the markets, but the S P anyway, and the NASDAQ, you don’t want to turn down from that high. You better keep going, because that’s number five, and if you turn down, that is a widening pattern top in the making. That’s what momentum suggests the likely price outcome will look like that. That is a trap. And so it’s important now for people in the market not to put their sell stop below the low we made in April at 4800 but to find some place not too far from where we are now that says, Oh, this breakout is failing, and we will be focused on that at MSA not going to wait to take out 4800 we’ve got some numbers that will come into play a lot sooner, but that’s it’s a famous chart pattern Edwards and McGee widening pattern. Okay,
James Connor 48:56
so once again, you’re concerned about the levels on both the S, P and the Nasdaq. You think there’s risk to the downside. You’re also concerned about the US dollar. You think that’s going to be it’s already down temperature. It’s underway. We think it’s underway. I think that’s continuing. Yeah, you’re still very bullish on gold. You wouldn’t really give us a target in the short term, but it’s going higher silver. You think is going to become the new leader. You see it going from 35 to 60 to $70 by the end of the year. So significant movement. You think the equities are also going to do much better than the underlying metals. Yes, oil
Michael Oliver 49:35
will be a participant with Bloomberg. I don’t think Bloomberg is going to turn up, which I think it is. It’s in the process. The only problem was the recent rally in the Bloomberg, we got up to 107 something was largely due to that oil rally, and immediately dropped back down Bloomberg right now, 103 the number we need to see it get above is roughly in the 106 50 level. And close a month up there, you see that, and it’s a launch pad. It, and at that point, hopefully there won’t be war news. I don’t want any news. You don’t want a major trend change with a headline. That’s the problem with the recent drop in the stock market. There was a headline tariffs. Most bull markets top and the headlines come a lot later. Like you know, when did the first bank failure occur? In the 2000 789, drop, August of 2008 Lehman Brothers, oh, hell, you were halfway till you’re low by then, you know. So you don’t get the news until later. So you want to see it happen in a way that is not like, Oh, it was a headline, I gotta buy that. Just want to see it happen. And people say, Why is that happening? I thought he said, drill, drill, drill, you know, and yet it’s turning up, and so is the Bloomberg and that’s when you have a real panic, because most people aren’t expecting higher consumer prices. They thought, oh, that’s going to be under control. Now, what if it isn’t?
James Connor 50:56
Well, that was a great discussion. Michael and I want to thank you for making time with us today, I think the the next quarter, when we start seeing these q2 numbers coming out here in the next couple of weeks, it’s going to be quite interesting. We should plan on getting together again in August. We also got non farms coming out here. In a few days, we’re going to see a new GDP print that’s also going to be interesting. So there’s going to be a lot of new information that comes forth here in the next few weeks. So let’s plan on getting together again in August. If somebody would like to follow you online or read your research, where can they go?
Michael Oliver 51:31
Oliver, msa.com, MSA for momentum, Structural Analysis. Take your time tool to the site. We discuss our unorthodox method in fair depth and with a lot of archival charts showing tops and bottoms and how we saw them and so forth. So anyway, if you want some samples, staskes, we’ve sent you
James Connor 51:52
some. Michael, once again, thank you and good luck in the markets.
Michael Oliver 51:56
Thank you much. I’ll be back in August. There’s so
James Connor 51:59
much happening in the world right now, especially when it comes to geopolitics, and if you need help understanding how these events will impact your financial future, consider having a discussion with a professional financial advisor. You can find out more information@wealthion.com slash free. Once again, that’s wealthion.com/free
