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The Nasdaq composite and the S&P 500 index have soared to new 52-week highs. The last stock market correction that occurred lasted about 11 trading days into the August 7 bottom. Last week, almost every trader and investor had their eyes on the central bankers’ comments from Jackson Hole, Wyo. Apparently, the central bankers did not say anything to spook the markets ahead of the U.S. Labor Day holiday, so at this time, everything looks great for the major stock indexes to trade higher into the end of the month. Below, I list three reasons why this current stock rally will likely end soon and cause the month of September to be a month to remember.

1. Geopolitical events could have a negative effect on the stock market in September. So far, the major stock indexes have climbed the wall of worry when it comes to the major geopolitical events taking place around the world, but that will likely end after August is over. The problems in Russia and the Ukraine are not likely to improve anytime soon; tensions will certainly build before any resolution or peace treaty takes place. There are major problems in the Middle East that do not seem likely to end anytime soon. In addition, the Ebola virus is also a huge negative that could negatively affect trade around the world in the coming months should the disease continue to spread.

2. Any weakness in the USD/JPY will disrupt the current carry trade that fuels the liquidity for the major stock indexes in the United States, Europe and Japan. You see, the weaker Japanese yen has helped the large financial institutions buy stock indexes like the S&P 500 Index and the Nasdaq Composite. This is a very leveraged trade and helps provide liquidity for the stock markets around the world. Everyone knows that Japan is diluting its currency at an alarming rate. This is why the stock market now rallies when the USD/JPY currency pair rises and declines when the currency pair sells off. A weak U.S. Dollar Index will now hurt the stock markets, primarily due to the yen carry trade. Recently, there have been many countries talking about getting rid of the U.S. dollar as the world’s reserve currency. If nations such as Russia, China, Brazil and others start to trade without using the U.S. dollar, it could spell problems for the stock market down the road.

3. Stock market complacency is now at an all-time high. Just think about this: there has not been a 10.0 percent stock market correction in over two years now. Every stock market dip has been viewed as a buying opportunity. Investors believe that central bankers will just continue to stimulate markets via money printing if stocks decline. Currently, the Federal Reserve is tapering its QE-3 program, and is expected to end the QE-3 program this October at the next FOMC meeting. The last time the Federal Reserve ended a quantitative easing program, the major stock indexes staged a correction of more than 10.0 percent. Could this happen again? This has also been the best year for new stock offerings (IPOs) since the tech bubble in 2000. If that is not a sign that the investing world is as complacent as ever, nothing is. Get ready—this September is certainly going to be an interesting month.

Disclosure: This article was written by Nicholas Santiago. Nicholas Santiago is a co-founder of In The Money Stocks. Nicholas Santiago and In The Money Stocks represent that Nicholas Santiago does not own any stocks mentioned in this article at the time this article was submitted.

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This morning, many of the leading retail stocks are trading flat to slightly lower despite the rally in the major stock indexes. Leading retail equities such as Dollar Tree, Inc. (NASDAQ:DLTR), Target Corp. (NYSE:TGT), The Home Depot, Inc. (NYSE:HD), and Bed Bath & Beyond Inc. (NASDAQ:BBBY) are all trading lower on the trading session. It is important to note that the U.S. consumer accounts for roughly 70.0 percent of the gross domestic product (GDP) in the United States. The U.S. consumer has recently been hurt by high oil, and gasoline prices which act as a direct tax on consumer spending.

Traders and investors that want to track the entire retail sector can follow the Market Vectors Retail ETF (RTH). Today, the RTH is trading lower by 0.13 cents to $58.47 a share. Traders should note that the RTH has near term daily chart support around the $57.00, and $55.25 levels.

Disclosure: This article is written by Nicholas Santiago. Nicholas Santiago is a co-founder of In The Money Stocks. Nicholas Santiago and In The Money Stocks represent that Nicholas Santiago does not own any stocks mentioned in this article at the time this article was submitted.

The post What’s Wrong With The Retail Stocks Today? appeared first on Wall Street Insanity.

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Almost everyday on TV we hear one person or another calling for a major market top. While most of these forecasts have not worked out very well there will be a time when the stock market does top out and stage a meaningful decline. Listed below are three potential problems that could lead to a meaningful stock market top and a real correction of 20 percent or more.

1. The currency market holds all of the cards. At this time, the most important currency pair to follow is the USD/JPY (U.S. Dollar verse the Japanese Yen). Obviously, when the USD/JPY chart declines it means the Japanese Yen is strengthening against the U.S. Dollar. When this happens liquidity comes out of the stock market. The reason that this happens is because the highly leveraged institutional traders are all betting on a weaker Japanese yen, so when the USD/JPY chart declines the institutions lose buying power and can no longer support stocks in the United States, Europe, and Japan. Recently, countries such as Turkey, South Africa, and India have raised interest rates to try and strengthen their currency against the U.S. Dollar for fear of a currency crisis. This could repeat again this year, so keep your eyes open for more currency problems around the world.

2. China has faced a lot of problems regarding their shadow banking system. Shadow banking is unregulated high-yield lending that largely takes place off banks’ balance sheets in China. This problem is very similar to the U.S. sub-prime crisis back in 2007. This shadow banking problem has not been solved yet despite the efforts by the Chinese central bank. This is certainly an issue that could trouble the Chinese economy in 2014.

3. Traders and investors must watch for potential conflict between Japan and China. Last year, both countries claimed ownership of a group of islands in the East China Sea. Leaders from both countries have recently mentioned that the relationship between the two countries is very poor. It is also important to remember that China is the second largest economy in the world. China also holds a lot of U.S. debt. Japan is the third largest economy in the world behind China so any conflict would result in serious problems for the global economy.

Disclosure: This article is written by Nicholas Santiago. Nicholas Santiago is a co-founder of In The Money Stocks. Nicholas Santiago and In The Money Stocks represent that Nicholas Santiago does own physical gold and silver at the time the article was submitted.

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If you ask any trader or investor what is the most important currency to follow, they would probably say the U.S. Dollar. After all, the U.S. Dollar is the world’s reserve currency. If someone in Asia, or Africa wanted to buy a barrel of oil they would need to convert their money into U.S. Dollars in order to pay for that barrel of oil. Almost every major commodity is traded in U.S. Dollars, so it is understandable why the U.S. Dollar should be followed. If a trader or investor trades the U.S. Dollar Index, they are trading the U.S. Dollar verse a basket of six other major currencies, including the British Pound, Euro, and the Japanese Yen.

Do you know which currency is most important that trades against the U.S. Dollar at this time?

At this time, the most important currency pair in the market is the U.S. Dollar verse the Japanese Yen (USD/JPY). That is right, the Japanese Yen is the key to the stock market at this time. When the USD/JPY chart moves higher it means that the Japanese Yen is moving lower. So why would a weaker Japanese Yen help the major stock indexes in the United States move higher? This is a good question, the answer is that the large financial institutions have a highly leveraged bet that Japan will continue to print more and more money to try and create inflation. Since the late 1980’s Japan has suffered from deflation. In 2012, the Japanese government and the Japanese central bank have vowed to implement easy money policies like the Federal Reserve to try and create inflation. The big hedge funds are aware of this, and now they are all in on this bet of selling short the Japanese yen, or basically buying USD/JPY.

Recently, the Japanese Yen has strengthened against the U.S. Dollar. So is it any surprise why the U.S. stock markets have been tumbling lower lately? This currency pair (USD/JPY) is literally moving the stock market in the United States and Europe. Just look at any chart of the USD/JPY and the S&P 500 Index and you will see how the two charts basically trade in lock step with each other. You see, if the USD/JPY chart falls or declines (yen strengthens against the dollar) the leveraged institutional money can no longer buy the S&P 500 Index, Dow Jones Industrial Average, or any other major stock index. It is all based on market liquidity and a leveraged trade. All eyes should be glued to the USD/JPY chart as it tells us everything we need to know at this time.

Disclosure: This article is written by Nicholas Santiago. Nicholas Santiago is a co-founder of In The Money Stocks. Nicholas Santiago and In The Money Stocks represent that Nicholas Santiago does own physical gold and silver at the time the article was submitted.

The post Your Eyes Should Be Glued to The Currency Market appeared first on Wall Street Insanity.

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Let’s face it, in 2013 almost every dip in the major stock indexes turned out to be a buying opportunity. Every time the stock market seemed to be starting a correction or meaningful pullback the central bankers came running out on TV proclaiming that low interest rates would remain intact for years to come. Just think about it, there has not been a single 10.0 percent correction in over two years. The last time the stock market even came close to a real correction in 2013 was in May when Ben Bernanke told the world that he would start to taper QE-3. As we all know, he quickly rescinded his statements and kept QE-3 going until 2014.

Recently, the economic data that has been released has been better than expected. The GDP numbers in the United States (gross domestic product) have improved, the job picture has picked up a bit, the housing markets have been rallying, and the stock markets have been soaring to new all time highs. So according to this data the Federal Reserve should start to taper its $85 billion a month quantitative easing program (QE-3).

In 2003, the Federal Funds rate (overnight lending rate to the large commercial banks) was at 1.0 percent. That year was one of the most bullish years for the stock markets in history. In June 2004, the Federal Reserve started to raise the Fed Funds rate by a just a quarter point and the major stock indexes came under some turbulence throughout most of the year. So this tells us that while tapering isn’t tightening it is a cut in the easy money that the stock markets have become accustomed to for the past five years. Traders should brace themselves in 2014 for much more volatility.

The Federal Reserve claims that there is very little inflation in the economic system. For all I know they might be correct, but deflation seems to be their real fear or they would not be taking this easy money policy stance for so long. So, will the buy the dip mentality work in 2014? Sure the buy the dip mentality will work in 2014 as long as you buy a low enough dip. The only way that traders and investors will know when to get back in will be to follow the charts. I remember in 2008 and early 2009 how people started to flock toward technical analysis for guidance, now people just buy anything and wait for the central banks to pledge more easy money. If the easy money policies are now really coming to an end those days of just buying the SPDR Dow Jones Industrial Average (DIA), SPDR S&P 500 (SPY), or some other ETF are over. The game is going to be a lot tougher this year, especially for those who thought it was easy.

Disclosure: This article was written by Nicholas Santiago. Nicholas Santiago is a co-founder of In The Money Stocks. Nicholas Santiago and In The Money Stocks represent that Nicholas Santiago does own physical gold and silver at the time the article was submitted.

The post Will The Buy The Dip Mentality Work In 2014? appeared first on Wall Street Insanity.

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Gold has become the most hated commodity lately. What happened to the days when everyone had to own the precious metal? After all, more and more central banks around the world are printing money faster than ever. The Federal Reserve (U.S. central bank) is still creating $85 billion a month out of thin air. Other central banks in England, Japan, Asia, and Europe continue to do the same thing. So why has gold struggled so much?

It seems that gold is now trading inversely to the USD/JPY (U.S. Dollar vs the Japanese Yen). Today, the USD/JPY is falling sharply and this is causing gold futures to rally. Currently, the USD/JPY chart remains in an up-trend on the daily chart. Up-trending markets are very tough to fight since that is where the momentum is. Should the USD/JPY chart start to fall gold should start to trade higher. Traders and investors might need to take a wait and see approach, but I would say that you shouldn’t get too bearish on gold at this stage of the game. Gold could be setting up to make a sharp move higher very soon if that up-trend in the USD/JPY chart starts to reverse.

Disclosure: This article was written by Nicholas Santiago. Nicholas Santiago is a co-founder of In The Money Stocks. Nicholas Santiago and In The Money Stocks represent that Nicholas Santiago does own physical gold and silver at the time the article was submitted.

The post Can The Gold Rally Last Longer Than A Day? appeared first on Wall Street Insanity.

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Almost every trading day someone asks me if they should buy gold. Personally, I own physical gold and silver bullion since 2004, but if you are trading gold ETFs, you may want to wait before jumping on board at this time. As you all know, gold topped out in September 2011 at $1923.70 an ounce. Ironically, that same week that gold topped out it was upgraded by J.P. Morgan Chase (NYSE:JPM) to $2500.00 an ounce. Either J.P. Morgan Chase is just terrible at spotting tops or it was looking to sell to the amateurs that always buy the peak. My suspicion is the latter as most large firms have an agenda behind their upgrades and downgrades when equities are at extreme highs and lows. Just think about it, Goldman Sachs (NYSE:GS) upgraded oil to $250.00 a barrel when it was trading at $145.00 a barrel in July 2008. As you probably know, oil peaked at $147.00 a barrel a week after that upgrade. Again, the amateurs that followed that upgrade were just decimated when oil was bought at that high. Oil dropped to $30.00 over the next year. Now gold has turned into one of the most hated commodities out there by Wall Street. Currently, gold is coming under pressure due to potential tightening of the Federal Reserve’s $85 billion QE-3 program. Now let us be clear, the Federal Reserve has not begun to tapper yet, it is only floating rumors of a tapering. This can be seen by the recent rise in yields in the 10-year U.S. Treasury Note yield. So enough with that, here are three signs to look for that will tell us we should buy gold ETF’s again:

1. If the recent low in gold futures (GC) from June 28, 2013 is briefly broken to the downside and then reverses back to the upside on volume. If this occurs it will signal institutional sponsorship and it will most likely be a solid low in place. This could also lead to a W-bottom pattern on the larger time frame which often signals huge upside potential.

2. Next, watch for a major downgrade from Goldman Sachs, J.P. Morgan Chase & Co or another major firm. Remember, when these giant firms downgrade stocks at lows it is often a sign that they now want to own that equity. Just look ay their past track records of upgrading and downgrading stocks at extreme highs and lows.

3. Gold is a currency, this is why central banks around the world own it, and this includes the Federal Reserve. So when you start to notice that asset prices are falling despite the easy money policies (money printing) by the central banks around the globe it is a good time to get on board and own some gold. After all, gold cannot be printed out of thin air or by a click of a keyboard like the fiat monetary system that we have today. Why do you think Bitcoin is becoming so popular right now? Bitcoin only has a certain amount available for use unlike fiat currency which can be printed infinitely.

Disclosure: This article is written by Nicolas Santiago. Nicholas Santiago is a co-founder of In The Money Stocks. Nicholas Santiago and In The Money Stocks represent that Nicolas Santiago does own physical gold and silver at the time the article was submitted.

The post Don’t Buy Gold Until These 3 Things Happen appeared first on Wall Street Insanity.

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Everyday we hear about the current government shutdown and the upcoming debt ceiling being reached by the U.S. government. The debt ceiling is the legal limit on the amount of money that the government is allowed to borrow in order to keep the government functioning. Why does the government have to borrow money to keep itself running? It is telling us that the government is spending money it does not have. A company or a household could not operate in this manner, they would have to file bankruptcy. Just look at companies such as J. C. Penney Company, Inc. (NYSE:JCP), and BlackBerry Limited (NASDAQ:BBRY); these two companies are cash strapped and possibly facing bankruptcy very soon. They cannot print money to stay in business, and if they do receive cash from a lender they are expected to pay it back in a specified amount of time. The government does not work this way.

The current global economic system is a system of credit and debt. Marriner Stoddard Eccles was the former chairman of the Federal Reserve from 1934 – 1948. He stated, the United States economy is like a poker game where the chips have become concentrated in fewer and fewer hands, and where the other fellows can stay in the game only by borrowing. When their credit runs out, the game will stop. So this tells us that the United States will always have to raise the debt ceiling regardless who the president is. Since 1980, the U.S. Debt ceiling has been raised over 40 times, so what is the point of having a debt ceiling?

The bottom line, all Presidents raise the debt ceiling. Ronald Reagan tripled the national debt while he was in office. Bill Clinton raised the debt ceiling eight times while he was the President. George W. Bush raised it seven times. Meanwhile, President Obama has raised it three times. In fact, every President since Herbert Hoover has added to the national debt. It has really been a long time since the United States had an Andrew Jackson in office. In fact, Andrew Jackson was the only U.S. President that ever paid off the entire U.S. Debt, this was in 1835. Unfortunately for President Jackson, a severe depression occurred in 1837 that cause the debt to spike to $3.3 million in 1838. Today, the national debt is around $17 trillion, that is sure a lot higher than $3.3 million.

This government debt is just a by-product of the fiat money system that we live in. It will always need to be raised especially during difficult and troubled times. The United States Treasury has to borrow more and more money to pay for its obligations. Eventually, there will be a day when the market realizes that the debt can never be paid back, but that could still be a long time from now. Either way, we should all expect a higher debt ceiling because our entire economic system is built on debt.

Disclosure: This article is written by Nicolas Santiago. Nicholas Santiago is a co-founder of In The Money Stocks. Nicholas Santiago and In The Money Stocks have no position in any stocks mentioned in this article, and does not intend to initiate any position in the next 48 hours.

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