The never wrong guys still betting for the downside

I'm travelling this weekend. So just a quick blog for this week.

First of all, let me just show you the sentiment index for end of 2019 vs the current status (the blue line was added by me to indicate where was the index a year ago, 28!). 

I guess you don't need me to decipher what's the difference, right? The herd mood has drastically changed from the extreme depression (almost on the verge of suicide😵) to the extreme euphoria at the moment😇. As I have said before, we human beings, since our birth in this earth, have drastically and dramatically changed in virtually all aspects of our life except one thing: the mood cycle and herd behavior. There is no difference for thousands of years that our mood in one extreme will always be followed by another extreme in the other end; and the herd is always feeling comfortable to go with the majority chasing around.  Don't fool yourself into believing that this time is different. Not at all. So after the mood is just at a spit distance to 100 in excitement that cannot go up anymore, you should be prepared for a shift to the other end....probably soon! I'm 100% sure that at some point in the foreseeable future, I will be telling you: Don't be too depressed!!

Then something related to the mood as well in the precious metal sector. Last August, I was saying that the precious metals would go down for a correction as the never wrong guys, the commercial traders (see here), had bet heavily for the short side. Sure enough, gold had dropped from $1550ish to as low as $1465ish. Now, due to the "faked" alarming situation in Iran after the removal of the Iran's top general by the US force, gold jumped to as high as $1595 following the incident as the major media has been universally telling us that a World War III is near in the sight. Sure if a major war breaks out anywhere in the world, gold will be one of the only few that will be chased up. It is natural that people pump their money into gold in hurry for protection as the future traders (the dumb money) have bet in record for the upside of gold. So what the smart money (the Commercial traders) is doing with their money? Well, believe or not, they are still adding more short bets for gold (nearly historically high volume), meaning they believe gold will go down more than up in the next few months. In the past 10 years, we have seen two times in a similar extreme situation for gold and each time a sharp correction in gold followed in the scale of 15-20% to the downside. Will this time be different? Sure anything is possible but my money is definitely on the side of the never wrong guys.  😋😎