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• On the lighter side. Check it out!

The markets crashed today and for a lot of reasons. The Fed disappointed the markets last week with its suggestion that the .25% rate cut was not likely the start of a series of cuts. Then Trump slaps a 10% tariff on another $300 billion of Chinese goods. Today, China retaliated. First, they announced that they would cease imports of US agricultural products indefinitely, and then the big one. The Chinese central bank let the Yen devalue to 7 per US dollar, the lowest level in over a decade.

As a result the markets took it on the chin. All three major US stock market indexes suffered their worst days of the year today. Both the Dow Jones Industrials and the benchmark S&P 500 index fell nearly 3%, while tech-heavy Nasdaq lost more than 3.5%.

The S&P 500 was down  87.31 or 2.98%.  Looking at the Relative Strength Index (RSI) at the bottom of the chart, we can see that the S&P has now dropped below 30 to 28.01, which is technically oversold. That doesn’t mean that it can’t go lower here, but it does suggest at least a bounce is to be expected.

The next key support level is 2750.

The big winners today were the US bonds and gold.  At the bottom of each chart we can see that based on RSI both are technically overbought, suggesting that both are due for a pullback soon.

This drop is exactly the kind of move we have been warning about. Is this the start of a big correction or even the actual melt-down? We don’t think so, but it could be and that is the message we are trying to get readers to pay attention to. Whether or not this is the start of a major correction, you need to have a plan for when the melt-down happens.

Trend Technical Trader (TTT) is a hedging service that is designed to profit during market declines, and the deeper, more severe the decline, the greater the potential gains subscribers can realize if they follow the TTT lead.  In order to allow as many readers as possible to have the tools necessary to protect themselves during the next market crash we are offering a special discount to subscribe to Technical Trader. Save $250 and pay only $399.95.

Stay tuned!

We continue our series of publishing timely questions with our answers so that we can share with all readers. Today’s question is on the US dollar.

Q. I simply do not understand why the US dollar is rising against all other currencies even after the Fed cut rates. Can you explain? 

A. The simple answer is the US dollar is the ‘least ugly’ currency. One of the main reasons that we cover bonds, currencies, equities, commodities, and precious metals in the Trend Letter is because they are all connected. To be a successful investor you need to understand that global capital  flows out of perceived ‘unsafe’ areas and into perceived ‘safe’ areas.  Every week the Trend Letter publishes the yield on 10-year government bonds throughout the globe. We do it to help subscribers understand how bond yields can influence currencies.

Below is one of the charts we show each week. On the chart we have highlighted in red government bonds that have a negative yield. Think about that for a minute, an investor who buys one of these 10-year bonds is guaranteed to lose money every year, for ten years, until that bond matures.

According to Bloomberg there is now over $14 trillion invested in negative yielding bonds.

This is remarkable to us, as why would anyone invest in something for 10 years knowing that they are guaranteed to lose money? If you look back at the first chart we can see that the 10-year bonds in Japan (-.14%), France (-.19%), Netherlands (-.34%), Germany (-.45%), and Switzerland (-.81%) are all yielding negative returns. Then look at the US 10-year, it is paying +1.95%.

If you were an investor in Switzerland would you rather buy a Swiss government 10-year bond and be guaranteed to lose .81% every year, or buy a US 10-year government bond and gain 1.95% every year?  Global investors are taking their capital out of Switzerland, Germany, France, Japan and the Netherlands, and they are buying US bonds. In order to do that they must convert their local currency into US dollars. Below is a chart showing the currencies of these countries, and as we can plainly see the US dollar is the only currency that is in an uptrend.

It is not just bonds that global capital is flowing into. Foreign investors continue to move capital into the US equity markets which are outperforming global markets. Again, this means they must buy US dollars, which drives up the value of the dollar.  As the debt crisis that we keep warning about gets nearer we will see this trend intensify. When the European and Japanese bond markets implode, global investors will panic and rush to get their money out of those regions, looking for a ‘safer’ place to park their capital. The US dollar, and to some degree the Canadian dollar, will rise with this increase in demand.

Stay tuned!

Update: July 29/19. On Saturday Martin was the featured guest on the Money Talks investment radio show. In the interview Martin warned that we are in the “final innings of this 10-year bull market” and said that “it is time to get prepared for the melt-down”.  Here are some of the key points from the interview.

• Bull markets tend to climb gradually, which we have witnessed since 2009, & then they typically end in a melt-up & ‘blow off top”
• The melt-up comes from FOMO, the Fear of Missing Out, where those on the sidelines finally jump in, right at the top
• When that melt-up ends & the ‘blow off top’ hits, we will enter a new bear market
• Bear markets happen much quicker, typically lasting about ¼ of the duration of bull markets
• These declines can be melt-downs which are steep & vicious
• When the melt-down comes it will likely be the biggest market crash EVER, it will be global
• It will have an affect on every type of investment… bonds, stocks, currencies, commodities, & precious metals
• The message is “it is time to get prepared for the melt-down”

To listen to the interview CLICK HERE. The interview with Martin begins at 18:14.

In the interview Martin offered Money Talks listeners the following special prices for Trend services. Here is a brief overview of each service.

Trend Letter:

Since start-up in 2002 Trend Letter has provided investors with a great track record, giving exceptionally accurate information about where the markets are going, and it has explained in clear, concise language the reasons why. Using unique and comprehensive tools, Trend Letter gives investors a true edge in understanding current market conditions, and shows investors how to generate and retain wealth in today’s climate of extreme market volatility.

A weekly publication covering global bonds, currencies, equities, commodities, & precious metals.

Timer Digest says: “Trend Letter has been a Timer Digest top performer in our Bond and Gold categories, along with competitive performance for the intermediate-term Stock category.”

Technical Trader:

A recession is coming, that much we should all be able to agree on. Sure, we can debate the exact timing, but the reality is the global economy is going to have a significant melt-down soon.  And when the economy falls into a recession the stock markets go down with it. It may start next week or not until next year, but make no mistake, it is coming.

Trend Technical Trader is a premier hedging service designed to profit in a declining market. Includes our proprietary Gold Technical Indicator (GTI).

Trend Disruptors:

Disruptive technology trends will propel our future and the reality is that no industry will go untouched by this digital transformation. At the root of this transformation is the blurring of boundaries between the physical and virtual worlds. As digital business integrates these worlds through emerging and strategic technologies, entirely new business models are created.

Trend Disruptors is a service for investors seeking to invest in advanced, often unproven technology stocks on the cheap, with the objective to sell them when masses finally catch on. Covering Artificial Intelligence (AI), Virtual Reality (VR), Augmented Reality (AR), 5G, Quantum Computing & many more.

Special Offers

With the threat of trade war tariffs companies like consumer electronics giant Apple are gearing up to diversify some of their manufacturing out of China.  This movement  is so common now it has a name… China Plus One.

Due to these tariffs, many American companies doing business in China have been forced to come up with a strategy to reduce dependence on China. These companies  have the bulk of their Asian operations in China, and want to keep manufacturing close by because of the supply chain for parts, etc., but they want to reduce the tariff bite as well as diversify a bit. In addition to the tariffs motivation, the increasing cost of labor (and other inputs) in China has accelerated the number of companies considering this strategy.

With China being such a big retail market, these companies are trying to ensure they do not move too much manufacturing out of China as they do not want a backlash form China. This is why Apple is calling their move a ‘trail’.

Vietnam is the number one beneficiary of this China Plus One strategy as it is considered a safe (for Americans ) country, with great cuisine and is a relatively inexpensive place to live well, and its wages are low. Also appealing to Western companies is that Vietnam is a member of ASEAN and Vietnam will be a member of the Trans-Pacific Partnership, while China is neither. India, Thailand, Indonesia and Malaysia are also destinations for companies looking to diversify their manufacturing in Asia.