The Biggest Investment Opportunity Right Now
Over the last week, I’ve outlined a number of trading concepts to you.
- Resistance is a particular price level that stocks struggle to break above. From a supply and demand perspective, resistance represents a level at which buying demand struggles to overcome selling pressure. As a result, this level acts as “resistance” to a rally.
- Support represents a line at which stocks refuse to break lower. From a supply and demand perspective, support is where buyers come into the market to absorb selling pressure. This is what stops the markets from breaking down further.
- Trendlines are diagonal lines formed by a series of moves that end at lower or higher levels. These lines help determine trends, and when combined with support and resistance, can allow you to make note of major changes in the markets.
- Breakouts are when an asset class breaks above or below a particular line of importance (resistance or support). Confirmed breakouts occur when an asset class maintains the breakout. False breakouts occur when an asset class falls back below (or above) the breakout line.
From a philosophical perspective, all of these concepts are designed to control your emotions and introduce discipline to your trading strategy. By focusing on specific price levels, you are locking in on what the market is actually doing versus how it makes you feel.
This kind of approach should be the foundation of ALL of your investing/trading. In simple terms, you should only put capital to work on something that has a high probability of working out.
I bring all of this up because the No. 1 question I’m hearing from investors today is whether or not stocks are in a new bull market. And the reality is, no one knows the answer to this.
Similarly, we don’t have answers to the following MAJOR questions:
- How long will the current economic depression last?
- Can the U.S. government negate the economic depression by providing trillions of dollars in stimulus?
- Can the Fed negate the horrific fundamentals by providing trillions of dollars in liquidity to Wall Street?
No one knows the answers to the above questions. As such, we have tremendous uncertainty regarding the economy and stock market going forward. That is a terrible situation in which to invest capital.
However, if you review the above questions again, you might notice that there is ONE definitive item that we can focus on…
The No. 1 Asset Class to Play Right Now
The U.S. government and the Fed are printing and spending trillions of dollars to combat this situation. Indeed, it is now clear that the ONLY path forward for these entities is money printing.
That is a sure thing. And it means gold will be erupting higher.
Indeed, while stocks are nowhere near reclaiming their pre-market meltdown levels, gold has already recouped ALL of its losses.
The precious metal has been on an absolute tear and is closing in on its ALL-TIME HIGHS.
Taking all of this into account, the setup for gold is far clearer than that for stocks. That is why I believe the biggest opportunity today for investors is NOT in stocks – but in the precious metals sector.
I’ll go into greater detail on this trend tomorrow. Until then…
Editor, Money & Crisis