Experienced investors have noticed that every year offers only a limited number of real, good opportunities. With ‘real’ and ‘good’ we obviously mean ‘profitable’. The key success factor is to identify emerging trends, and very well time entry points. The number of very profitable entry points is extremely low, say there are two or three very interesting opportunities every year.
So far, in 2016 we have seen a great investment opportunity in precious metals and base metals. The gold mining indexes (GDX, HUI, GDXJ) as well as some copper and other base metal miners (Freeport McMoran) have done extremely well, doubling in value in a matter of weeks.
It seems that this cycle is losing momentum now, and the rally is becoming extended. Today, for instance, we still saw a nice rally in precious and base metals, but we believe the upside potential is limIted in the short term. A retracement seems the more likely path.
That brings up the question: what is the next big investment opportunity of the year, and when will it arise?
Before we look at potential opportunities, we hasten to say that, although we believe the precious and base metals are overbought, we also observe a very ugly pattern in the U.S. dollar. As the first chart shows, the U.S. dollar has arrived at a breakdown point. The weekly chart shows another test of support. The chart pattern is not constructive to say the least. If this support area gives away, then commodities are probably going to rocket higher.
Before getting too excited, note that today’s price level coincides with double support: a horizontal trendline as well as the 90 week moving average (representing the long term trend), so we expect sufficient support.
The next opportunity of the year? We see a couple of candidates which deserve your attention.
Investment opportunity: India stock market
First, the stock market in India. No surprise here, we are focused on India for a couple of months now. As said in the introduction, timing an entry point is everything, as that makes it easier to get profits off the table later on. India has broken out recently, but we want to see a successful retest of the descending trendline. We are very close to that point now, so India should be very high on your watchlist, and you should be looking closely at the behavior of the Nifty 50 Index around 7700 points.
Investment opportunity: US technology stocks
Second, technology stocks in the U.S. Technically, the Nasdaq, represented below, can go both directions. The chart has a tired feeling, so we don’t want to jump in the Nasdaq right away. But note the pattern of higher lows since mid-2015. There still is a possibility that the Nasdaq will do very well in 2016, but the coming weeks will be critical. Watch how the Nasdaq 100 Index behaves around 4000 points, that will be telling!
Investment opportunity: soybeans
Third, the soybeans market is looking great. Admittedly, this is a very difficult market to trade, as there are unsafe instruments in this type of commodities. Technically, however, the soybeans chart points to a run to resistance which comes in at $1270. Next to that, the long term moving average is flattening. Plan your investment approach very well, because commodities tend to behave violently.
Precious and base metals presented the first big investment opportunity of the year 2016. If the dollar does not hold support around 93 points, we will see a continuation of the rally in metals. However, given strong support, we expect the rally in metals to slow down at this point. The potential candidates for the next big opportunity this year are stocks in India, technology stocks in the U.S., and soybeans.