As I was writing my weekly article yesterday the “markets” were getting hammered. By the time I got the approval to send it out the “markets” had the third largest percentage rally in history. I knew that in the short run I could look like a fool but since the “markets” are still grossly overvalued the PRICE would still have to adjust to the corresponding VALUE- or lack of it.

How did I know this? The two biggest percentage rallies in history took place in … 2008!

This is classic Bear market action.

Did the VALUE of the “markets” just magically increase by trillions of dollars in a few seconds? Did they magically lose most of it back the next day? The answer is NO.

The most likely scenario is that the blast-off on Wednesday was nothing more than a short squeeze as the “markets” started flying higher on the tariff delay news. Gregory Mannarino, who has friends on Wall Street, has stated that news of the tariff delays was leaked prior to the announcement and there were some suspicious large trades. No surprise.

The reason that the price action is so violent is that if you are short a stock that means that you have sold the stock and are hoping to buy it back at a lower price. As the price rises the losses you could incur are limitless. If it keeps going higher you could be wiped out. The more leverage- the more likely. This leads to rational people Buying to cover and close the short position out and then a cascade of more buying takes place, and the result is what it looked like yesterday.

Today, over ½ of yesterday’s gains are gone.

On the other hand, GOLD was up over $100.00 yesterday and has followed that up by being up $78.00 at 1PM Thursday.

Basically, gold is back at all-time highs and still grossly undervalued in my opinion and stocks are resuming the downtrend and are still historically overvalued.

History is saying be careful here.

Think long and hard about what assets you can trust going forward. My list is pretty slim.

Be Prepared!

Any opinions are those of Mike Savage and not necessarily of those of RJFS or Raymond James. Expressions of opinion are as of this date and are subject to change without notice. The information in this report does not purport to be a complete description of securities, markets or developments referred to in this material. The information has been obtained from sources deemed to be dependable, but we do not guarantee that the foregoing material is accurate or complete. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. There is no guarantee that these statements, opinions, or forecasts provided herein will prove to be correct.

Commodities are generally considered speculative because of the significant potential for investment loss. Commodities are volatile investments and should only be a small part of a diversified portfolio. There may be sharp price fluctuations even during periods when prices are overall rising.

Precious Metals, including gold, are subject to special risks including but not limited to price may be subject to wide fluctuation, the market is relatively limited, the sources are concentrated in countries that have the potential for instability and the market is unregulated.

Raymond James is not affiliated with Gregory Mannarino

Diversification does not ensure gains nor protect against loss. Companies mentioned are being provided for information purposes only and is not a complete description, nor is it a recommendation. Investing involves risk regardless of strategy.