It turns out that Mario Draghi is Super Mario. Mario Draghi is an ex-central bank governor of Italy who just took over from Jean-Claude Trichet the presidency of the European Central Bank (ECB).
In a surprise bold move, Draghi announced that the ECB is lowering its main rate from 1.5% to 1.25%. This rate cut will either avert the looming recession from Europe, or make the recession milder.
This cut in interest rate came despite inflation in the eurozone at 3%, which is a three-year high. Draghi’s predecessor Trichet saw the ECB’s mandate as controlling inflation irrespective of the economic slump. Inference from the bold action by Draghi is that a major shift in policy in Europe is occurring. It appears that finally monetary authorities are about to give priority to growth.
Considering that eurozone is a major part of the world economy, Super Mario has changed the game for stocks, gold, silver, oil and currencies.
The following are the actions we are recommending:
- Take profits on a short silver position. Prior to the announcement, our models had just given a signal to add to the short silver position and were close to giving a short signal on gold.
- After plugging in the rate cut, we are no longer inclined to short sell silver and gold. If there is a big dip in silver and gold, and all six screens of the ZYX Change Method are met that may be a time to buy gold and silver.