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Crypto Update: It Ain’t Over Yet

It was a close call this May with a doom-saying title “Crypto Apocalypse?” where I shared with you an annihilating model for Ethereum and a bearish chart of Bitcoin.
Let us see what happened in the crypto market since then in the chart below.
Source: TradingView
Total crypto market cap had skyrocketed to the maximum of just over $3 trillion last November. Since then, almost ¾ of the total market cap has evaporated on the crypto crash down to $762 billion this June. That hurts!

More than $2 trillion of wealth was destroyed during that collapse. Some people were calling it a “crypto-winter” of the market. All of us have probably noticed that less videos and posts with clickbait titles on “how to become a crypto-millionaire” or new rising stars in the crypto-market have been popping up on social media lately.
In the next market share chart, let’s check the status quo of the market leaders.
Source: TradingView
During the collapse of the market, the main coin (orange) has managed to increase its market share tremendously from 40% up to 48% on the peak in June. How could that happen as it was bleeding alongside the whole market? The speed of the drop is the main reason.
Bitcoin was falling slower than the rest of the market as some coins, even in top 20 tier, were busted very rapidly. Just look at the second largest coin Ethereum, it was losing its market share badly from 22% down to 15%, a level unseen since last January.
These days, both top coins are moving back to its historic boundaries. So, the status quo of the market remains unchanged. Bitcoin has a small surplus and Ethereum is leaking wounds as it is still in the red. However, the latter could take this chance to bounce off the valley to break up this long standing equilibrium.
Watch the Ethereum merge set for September 19th when the Ethereum completes its transition from the energy-intensive proof-of-work (PoW) consensus mechanism to a more environment-friendly proof-of-stake(PoS) mechanism.

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An updated chart of Bitcoin is up next. Most of you accurately predicted the valley of the Bitcoin collapse in the range of $15k-$20k. Kudos to you!
Source: TradingView
This is the updated original chart I posted this May when the price of the main coin was close to $35k. The anticipated crash in the second red leg down almost hit the preset target at $12.2k. The price of Bitcoin has halved to revisit the $17.6k level unseen since December 2020.
The Volume Profile indicator (orange) proved the idea that the price should drop huge once it slides into the volume gap area between $29k and $10k. Indeed, the collapse was fast and huge on this trigger. The price is still in that low-volume trap. Moreover, the current rise of the price doesn’t look convincing as it resembles the sideways consolidation pattern ahead of another drop. So, it ain’t over yet.

The recent valley of $17.6k is the minimum target of a possible drop. The earlier preset target based on equality of two red legs down is still intact at $12.2k. Breakdown below $10k would open way in the $4k area according to the Volume Profile indicator.
The breakup back above $29k is needed to restart the bullish cycle for the main coin.

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Intelligent trades!
Aibek BurabayevINO.com Contributor
Disclosure: This contributor has no positions in any stocks mentioned in this article. This article is the opinion of the contributor themselves. The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. This contributor is not receiving compensation (other than from INO.com) for their opinion.

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Should We Prepare For An Aggressive U.S. Fed?

Traders expect the U.S. Fed to soften as Chairman Powell suggested they have reached a neutral rate with the last rate increase. The US stock markets started an upward trend after the last 75bp rate increase – expecting the U.S. Fed to move toward a more data-driven rate adjustment.
My research suggests the U.S. Federal Reserve has a much more difficult battle ahead related to inflation, global market concerns, and underlying global monetary function.
Simply put, global central banks have printed too much money over the past 7+ years, and the eventual unwinding of this excess capital may take aggressive controls to tame.
Real Estate Data Shows A Sudden Shift In Forward Expectations
The US housing market is one of the first things I look at in terms of consumer demand, home-building expectations, and overall confidence for consumers to engage in Big Ticket spending. Look at how the US Real Estate sector has changed over the past five years.
The data comparison chart below, originating from September 2017, shows how the US Real Estate sector went from moderately hot in late 2017 to early 2018; stalled from July 2018 to May 2019; then got super-heated in late 2019 as extremely low-interest rates drove buyers into a feeding frenzy.
As the COVID-19 virus initiated the US lockdowns in March/April 2020, you can see the buying frenzy ground to a halt. Between March 2020 and July 2020, Average Days On Market shot up from -8 to +17 (YoY) – showing people stopped buying homes. At this same time, home prices continued to rise, moving from +3.3% to +14% (YoY) by the end of 2020.

The buying frenzy then kicked back into full gear and continued at unimaginable levels throughout 2021 as interest rates stayed near lows and FOMO increased.
Over the past 7+ years, the excess capital meant buyers could sell their existing homes, relocate to a cheaper area, avoid COVID risks, and reduce their mortgage costs with almost no risks. This “great relocation” event likely sparked the high inflation/CPI trends we are battling right now.
(Source: Realtor.com)
Extreme Easy Monetary Policies May Prompt A Harsh U.S. Fed Action In The Future
Traders expect the U.S. Federal Reserve to softly pivot away from rate increases after reaching a “normal level.” I believe the U.S. Federal Reserve will have to continue aggressively raising rates to battle ongoing inflation and global concerns.
I don’t believe traders have even considered what may be necessary to break this cycle – or are simply hoping they never see 14% FFR rates again (like we saw in the 1980s).
The harsh reality is the excess capital floating around the globe has anchored an inflationary trend that may be unstoppable without central banks taking interest rates to extremes. There was only one other period where I see similarities between what is taking place now and the recent past – 1970~2003.
Throughout that span of time, the U.S. Federal Reserve moved away from the Gold Standard and entered an extended period of money creation. This prompted a big increase in CPI and Inflation, leading to extreme FFR rates above 15% in 1982 to battle inflationary trends (see the charts below). CPI continued above 5% for another 15+ years after 1982 – finally bottoming in 2010.
What if the extended money printing that started after the 2007-08 Global Financial Crisis sparked another excess capital/inflation phase just like the 1970 to 2003 phase? What’s next?

Excess Money Must Unwind Over Time To Prompt A New Growth Phase
My thinking is the 2000~2019 unwinding phase, prompted by the DOT COM bubble, 911 Attacks, and the eventual 2008-09 Global Financial Crisis, pushed the devaluation of assets/excess toward extreme lows. This prompted the U.S. Federal Reserve to adopt an extended easy money policy.
COVID-19 pushed those extremes beyond anyone’s expectations – driving asset prices and the stock market into a frenzy. As inflation trends seem unstoppable, the Fed may need to take aggressive actions to thwart the global destruction of capital, currencies, and economies and avoid a massive humanitarian crisis. Run-away inflation will harm billions of people who can’t afford to buy a slice of bread if it goes unchallenged.
The U.S. Federal Reserve may be forced to raise FFR rates above 6.5~10% very quickly to avoid rampant inflation’s destructive effects. And that means traders are mistakenly assuming the U.S. Federal Reserve will pivot to a softer stance.
Real Estate Will Be The Canary In The Mine If Fed Stays Aggressive
I believe Real Estate could see an aggressive unwinding in valuation and future expectations if the U.S. Fed continues to raise rates over the next 12+ months aggressively. Once mortgage rates reach 8% or higher, home buyers and traders are suddenly going to question, “where is this going?” and “where will it end?”.

The Fed may have to break a few things to battle inflation trends. This same thing happened in the early 1980s, and real asset growth didn’t start to accelerate until the last 1990s (amid the DOT COM Bubble).
Real Estate & Financials May Show The First Signs Of Stress
I believe IYR and XLF are excellent early warning ETFs for a sudden shift in consumer/economic activity related to future Fed rate decisions.
Once the Fed moves away from expected rates/trends, the Real Estate and Financial sectors will begin to react to economic contractions and weakening consumer demand/defaults.
This potential trend is still very early in the longer-term cycle, but I believe traders are falsely focused on a possible U.S. Fed pivot, thinking the Fed will shift away from continued rate increases.
I believe the U.S. Federal Reserve must raise rates above 5.5% FFR in order to start breaking inflationary trends. That means FFR rates need to rise 125% or more from current levels (250 bp+) – which may be higher.
Learn more by visiting The Technical Traders!
Chris VermeulenTechnical Traders Ltd.
Disclosure: This article is the opinion of the contributor themselves. The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. This contributor is not receiving compensation for their opinion.

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text on shelf

Chart Spotlight: Target Corp. (TGT)

With millions of kids heading back to school in just weeks, investors may want to keep an eye on oversold retailers like Target Corp. (TGT).
Source: MarketClub
Granted, Target hasn’t been popular among investors.
After all, the stock collapsed on an earnings miss. EPS came at $2.19, which was short of expectations. Revenue came at $25.17 billion. Analysts were expecting sales to come in at around $24.49 billion.

“Throughout the quarter, we faced unexpectedly high costs, driven by several factors, resulting in profitability that came in well below our expectations, and where we expect to operate over time,” Target Chief Executive Brian Cornell added.
It’s why the TGT stock plummeted from about $207 to a low of $140.
But the pullback has become overkill, creating a solid opportunity.
Source: MarketClub
For one, according to the MarketClub tools, the intermediate and short-term trends are moving in the right direction. MarketClub is showing green weekly and daily Trade Triangles, which is an indication of further short term upside in the beaten-down retail stock.
Other analysts, such as Wells Fargo’s Edward Kelly, are just as bullish.
Kelly just upgraded TGT stock to overweight from equal weight, with a new price target of $195 a share. Even with negatives, the analyst says the sell-off is overdone, creating “the opportunity to pick up a proven share gainer into an underappreciated earnings recovery at the right price,” as quoted by Barron’s.
The back-to-school season could make the stock even more attractive.
According to K12dive.com, “A 2022 back to school survey from consulting services firm Deloitte shows concerns about inflation are not stopping parents from spending more than last year to get their children ready for the new school year. Although 57% of parents are concerned about inflation’s impact on the cost of school products, 37% plan to spend more than they did last year, the survey found. Deloitte estimates this will result in an 8% annual increase in back-to-school spending, which calculates to $661 per child versus $612 in 2021.”
Target also has a strong history of running during the back-to-school season.

In 2019, for example, TGT ran from about $80 to about $106. In 2020, TGT ran from $118 to $134. In 2021, it ran from about $237 to $263. And while the U.S. economy isn’t doing so hot at the moment, I still believe TGT could see another good run as kids get set for school again.
With MarketClub’s shorter term green Trade Triangles, oversold conditions, bullish analysts, and back-to-school season just weeks away, Target could be a winner.
Ian CooperINO.com Contributor
The above analysis of Target Corp. (TGT) was provided by financial writer Ian Cooper. Ian Cooper is not a Registered Investment Advisor or Financial Planner. This writing is for informational purposes only. It does not constitute an offer to sell, a solicitation to buy, or a recommendation regarding any securities transaction. The information contained in this writing should not be construed as financial or investment advice on any subject matter. Ian Cooper expressly disclaims all liability in respect to actions taken based on any or all of the information on this writing.

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gold bars

Gold Stocks Trading At Deep Discounts

It’s been a mixed Q2 Earnings Season for the Gold Miners Index (GDX), with most producers posting solid operational results but revising cost guidance higher to reflect inflationary pressures. These pressures are related to fuel (diesel) and labor inflation, partially related to a tight labor market in prolific mining regions.
However, a few companies have bucked the trend, and others are in a position to claw back any margin declines experienced this year. These miners are the ones to own, and due to depressed sentiment in the sector, they’re trading at large discounts to their net asset value, with two being prime takeover targets.
Alamos Gold (AGI)
Alamos Gold (AGI) is a mid-cap gold producer operating in Mexico and Ontario, Canada, that has three mines and a development project in Manitoba.
The company was one of the few miners not to raise its cost guidance this year due to diesel hedges and operating high-grade underground mines. Notably, it’s also tracking nicely against production guidance, explaining the stock’s sharp rally following its Q2 results.
However, the real news for AGI was the release of its Island Gold Phase 3+ Study, which has outlined an operation capable of producing over 270,000 ounces per year at all-in sustaining costs below $600/oz.

This would make its Island Gold Mine (130,000 ounces per annum at ~$900/oz currently) one of the lowest-cost mines globally and a top-5 in Canada from a profitability standpoint. I believe this is a game-changer, but due to the poor sentiment sector-wide, the stock has not enjoyed the premium it should for this news.
Assuming the expansion is successful and the company can receive permits for its Lynn Lake Mine in Manitoba, Alamos has a path to become a 750,000-ounce producer at sub $850/oz costs by FY2027 a major upgrade from 460,000 ounces at $1,200/oz currently.
This should command a large premium to net asset value ($11.00 per share), yet it trades at a discount at a share price of $7.40, making this a rare opportunity to pick the stock up on sale.
So, from a growth/value standpoint, AGI is a must-own name if one is looking for gold exposure.
Karora Resources (KRRGF)
The second name worth keeping a close eye on is Karora Resources (KRRGF), a small-cap gold producer operating two mines in Western Australia.
While the region has seen cost escalations due to a labor market that impacted Karora’s Q1 results, the company should have a much stronger second half of the year. From a bigger picture standpoint, it has paved a path toward 90% production growth by 2026.
During Q1, Karora produced 30,000 ounces of gold at all-in sustaining costs of $1,396/oz, translating to a significant margin hit.
However, this figure had $300/oz in COVID-19-related costs, and the company will benefit from increased productivity and higher grades in H2 2022. That said, even with H2 improvements, its FY2022 costs will likely come in at or above $1,040/oz.
(Source: Company Filings, Author’s Chart)
While some investors might be discouraged by the increase in costs year-over-year, it’s important to note that Karora’s plans to nearly double annual production with a second decline will lead to a meaningful drop in unit costs. This will be driven by higher throughput and additional nickel production, with the latter translating to higher by-product credits.
So, while costs could rise 3-5% in 2022, I see this as merely an aberration in the long term. In fact, if Karora can execute successfully and grow production from 120,000 ounces to 200,000 ounces by 2024, we could see costs decline to record levels below $950/oz.
Despite this rare combination of production growth and margin expansion looking out to 2024, Karora trades at a market cap of $430 million, leaving the stock trading at a 60% discount to its estimated net asset value.
Based on what I believe to be a fair P/NAV multiple of 1.10, I see a 180% upside to fair value ($6.82). So, at a current share price of US$2.40, I see Karora as a steal, and I see any short-term margin compression baked into the stock already.
Skeena Resources (SKE)
The final name on the list is Skeena Resources (SKE), a small-cap gold developer that’s working to restart one of the highest-grade gold mines globally.
Since SKE began work on the Eskay Creek Project in 2018, it has had considerable exploration success. This is evidenced by the project now being home to nearly 6.0 million gold-equivalent ounces, with Skeena envisioning an open-pit mine with modest upfront capital and operating costs below $700/oz.
Once in production (the goal is for late 2025), this would make Eskay Creek one of the lowest-cost gold mines globally, commanding a premium relative to its peers.
So, why did the previous operator halt mining operations?
With gold prices under pressure in 2008 and less extensive infrastructure in the area, the previous operator was forced to focus solely on the material above 12 grams per tonne of gold. There’s only so much gold at these grades that a company can uncover.
However, due to these ultra-high cut-off grades, the operator left behind millions of tonnes of 4.0 gram per tonne material, which Skeena is after.
A mine plan reliant on these much lower grades is made possible due to the new infrastructure that includes a 287kV Northwest Transmission Line and the Volcano Creek Hydroelectric Power Station that’s 7 kilometers from the site and much higher gold prices ($1,700/oz v. $750/oz).
(Source: Skeena Resources Presentation)
Based on the current mine plan and after factoring in inflationary pressures, I have estimated a net asset value of $970 million for Skeena’s Eskay Creek Project, plus an additional $300 million for exploration upside (ounces not yet in the mine plan), and its high-grade Snip Project as well as additional properties in the Golden Triangle of British Columbia.

Compared to Skeena’s market cap of ~$430 million, Skeena trades at a fraction of fair value. In an environment where producers are seeing rising costs, Skeena is a very attractive takeover target, given that its projected operating costs are more than 40% below the industry average ($1,230/oz).
Obviously, there’s no guarantee that Skeena will be acquired, but producers are flush with cash and looking at ways to claw back lost margins related to inflationary pressures. In my view, this increases the probability of Skeena being taken over within the next year, and I would estimate a bid above $9.00 per share if a suitor wanted to make a serious offer.
This translates to a 70% upside from current levels, and producers could use their strong balance sheets to get this deal done to avoid share dilution. So, with more than 100% long-term upside if Skeena goes it alone and short-term upside in a takeover scenario, this 65% decline in SKE is a gift.
Gold stocks are a volatile group to invest in, but if one buys the best when they’re hated, they can generate sizeable returns. In my view, Alamos, Karora, and Skeena are three of the best, and they’re now trading at their most attractive valuations since March 2020. Hence, I have recently started positions in all three names.
Disclosure: I am long AGI, SKE, KRRGF
Taylor DartINO.com Contributor
Disclaimer: This article is the opinion of the contributor themselves. Taylor Dart is not a Registered Investment Advisor or Financial Planner. This writing is for informational purposes only. It does not constitute an offer to sell, a solicitation to buy, or a recommendation regarding any securities transaction. The information contained in this writing should not be construed as financial or investment advice on any subject matter. Taylor Dart expressly disclaims all liability in respect to actions taken based on any or all of the information in this writing. Given the volatility in the precious metals sector, position sizing is critical, so when buying small-cap precious metals stocks, position sizes should be limited to 5% or less of one’s portfolio.

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