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PM Daily Market Commentary – 10/26/2017

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  • Fri, Oct 27, 2017 - 12:13am

    #1

    davefairtex

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    PM Daily Market Commentary – 10/26/2017

Gold fell -11.00 [-0.86%] to 1267.60 on very heavy volume, while silver dropped -0.16 [-0.94%] to 16.80 on moderately heavy volume.  ECB Chair Draghi surprised the markets by being more dovish than expected; this resulted in a huge Euro sell-off [-1.34%] which caused a large dollar rally [+0.98%]. The strong currency moves were the proximate cause of the decline in PM today.

So what did Mr Draghi say that caused such consternation? He announced that he would start tapering bond purchases in January, reducing them to 30 billion Euros per month, but extended the bond-buying program for another 9 months, and suggested that further bond-buying was open-ended – basically QE to infinity. This was seen as substantially more dovish than expected, and once fully digested by the market, caused a strong, steady sell-off of the Euro.

Gold started selling off during Draghi’s press conference, and continued falling alongside the Euro, eventually making a new low to 1266.40 near end of day. Today’s long black candle was a bearish continuation. Forecaster dropped -0.12 to -0.44. The downtrend is intensifying.  Gold in Euros rallied, given that the decline in the Euro significantly outstripped the fall in gold.

COMEX GC open interest rose by 2,843 contracts.

Rate rise chances (Dec 2017) remain at 97%.

Silver followed gold lower, dropping alongside the Euro and finally making a new low to 16.75. Silver also printed a long black candle which was a bearish continuation. Silver’s forecaster dropped -0.41 to -0.45. The hints yesterday of a slowing downtrend are now gone.

Open interest in COMEX SI rose by 191 contracts.

The gold/silver ratio rose +0.06 to 75.47. That’s slightly bearish.

Miners fell also, with GDX dropping -1.75% on heavy volume, while GDXJ dropped -1.48% on heavy volume also. Both miner ETFs made new lows. GDX printed an opening black marubozu, which might be a reversal (35%), and GDXJ printed a long black candle which also might be a reversal (36%). The RSI7 for GDX and GDXJ is now 19 and 18 respectively, which is heavily oversold. Forecasters both dropped: GDX -0.26 to -0.76, GDXJ -0.11 to -0.52. Downtrends are intensifying.

Today, the GDXJ:GDX ratio rose, but the GDX:$GOLD fell. Juniors actually did better than the seniors – a faint note of optimism.

Platinum fell -0.69%, palladium rose +0.95%, and copper fell -0.33%. Copper has fallen into a downtrend as has platinum, while palladium is turning back up again. The moves in the other metals were actually fairly benign.

As mentioned the buck rallied +0.92 [+0.98%] to 94.40, breaking out to a new high. The strong line candle was a bullish continuation, and the dollar forecaster jumped +0.58 to +0.52. The hints of the buck entering a downtrend have been utterly blown away by today’s breakout. Today’s currency move was mostly about the Euro, which fell -1.58 [-1.34%] to 116.57, smashing through the important 117 support level and into the “air” beneath. If the Euro continues to sell off after the ECB meeting – and the technicals sure seem to support a continued move lower – gold will almost certainly suffer for it.

Congress also seems to be on track for passing the Trump tax cut.

In the chart below you can (perhaps) make out a reverse head & shoulders pattern, ending in today’s breakout.  That’s bullish for the buck.

Crude rallied +0.65 [+1.25%] to 52.82, ignoring the dollar rally, pushing higher into the 52-54 resistance zone. There was no market-moving news that I saw for oil. Candle print was a closing white marubozu which was a bullish continuation. Forecaster rose +0.12 to +0.42. That’s a steady uptrend. Next specific resistance level is 54. Oil is looking quite strong. It is not overbought just yet, with the RSI7 at 67. There seems to be plenty of room for oil to run higher. A break above 54 would be huge news.

SPX rose +3.25 [+0.13%] to 2560.40. SPX opened higher, tried to rally during the day but the rally failed. Without a new high or low, the candle code didn’t comment on the doji candle, which we assume is a bearish continuation. Forecaster thought it was positive, bouncing back +0.43 to -0.06. That’s still a downtrend, but not a very strong one. Materials led (XLB:+1.33%) while sickcare plunged (-1.00%). I think Trump’s campaign against opioid addiction will end up hitting the profits of some drug companies. “And that’s why we call it the sickcare system.” I’m shocked, simply shocked that these companies would addict millions of people just to make a profit. http://www.dictionary.com/browse/moral-bankruptcy

VIX rose +0.07 to 11.30.

TLT fell again, losing -0.33%. It avoided making a new low by a penny, but the black marubozu was a bearish continuation. Forecaster rose +0.06 to -0.30; I guess that’s because TLT avoided making the new low. Bonds continue to look weak.

JNK fell again, dropping -0.13%, following through off yesterday’s swing high. The long black candle was a bearish continuation. Forecaster fell a massive -0.71 to -0.80. Expect further moves lower for junk bonds. This is a strong risk off sign.

CRB rose +0.29%, making a new closing high. Only 2 of 5 sectors rose, and the leader was livestock (+1.05%). Livestock has been on a bit of a tear recently, up 12% over the past two months.

Blame Mr Draghi for your PM problems; today’s move in PM was all about currencies, and most specifically, the plunge in the Euro.  Gold in Euros actually rallied today – it even printed a swing low! – the drop in the EUR/USD was just that large.

Of course if your native currency is dollars, you are not a happy camper.  The miners continue to lead the metals lower.  They are quite oversold and the candle code is hinting we might see a reversal soon, but that almost certainly needs to wait for the EUR/USD to stabilize.

The buck appears to have broken out, and the Euro has broken down.  This does not bode well for gold priced in dollars.  So far gold is falling less rapidly than the Euro.  Will that continue if the managed money longs start to bail out more enthusiastically?  We will have to see.

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  • Fri, Oct 27, 2017 - 12:37pm

    #2

    Cold Rain

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    Draghi

I'm not sure why every time he sets the policy, the market is surprised by how bullish it is.  The ECB always ends up being bullish.  Who in the world is "really" expecting him to be hawkish?

  • Fri, Oct 27, 2017 - 06:21pm

    #3
    phusg

    phusg

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    So Draghi managed to announce

So Draghi managed to announce a pretty substantial 50% reduction in QE and at the same time caused the euro to break down? He's probably pretty pleased with himself.

  • Fri, Oct 27, 2017 - 08:49pm

    #4

    davefairtex

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    EB decision

Yes, market expectation was clearly for Draghi to do more – and the hints of QE-infinity was possibly the reason for the sell-off.  Its hard to say convincingly that "gosh, things are going just great" and as a result "we're going to print money into the indefinite future."  Cognitive dissonance and all that.  "Watch what they do, not what they say."  There is rot at the core of the EU, or else he wouldn't keep printing.

Under the covers, my sense is that this is about Italy.  Rates on Italian debt would explode higher if he stopped buying it, and so he's forced into continuing bond-buying indefinitely into the future in order to monetize their new debt issuance.

I'm guessing that this ends if "the wrong party" gets elected in Italy, so the money printing probably has an end date of around May 2018.

I do agree that Draghi is probably happy with the moves in the Euro.

A friend of mine once suggested that bond-buying was actually terrible for private confidence in the economy.  He felt that private actors who consider making investments and taking risk watch the central bank print money, and wonder, "what is it they know that I don't", and so in aggregate that results in "risk off" behavior by the private sector.

I don't think QE-infinity is a mark of confidence in the EU.  Its a mark of an economy that's still on life-support 9 years after the GFC.

  • Sat, Oct 28, 2017 - 12:20am

    #5

    davefairtex

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    your CPU is always “online”

I ran into an article about a little-known (to me, at least) "feature" of Intel chips manufactured since 2011.  What is this charming feature?

Each CPU has embedded within it a 3G radio/subsystem.  This little subsystem has access to everything on the bus.  It can wake components (your hard drive, your flash drive, your WIFI, whatever) and it can more or less do whatever it wants with them.

Basically, for computers with these chips in them, there is no "air gap" mode.  Its not clear just how far they can transmit – but they can definitely receive messages from a 3G network within range.  I'm betting with a big antenna and some effort you could enable two-way communication.

And … I'm not sure how the mobo is set up, but these things probably get power from the on board battery, so it doesn't actually need wall socket power to run.

It's called "anti-theft" technology.  I think there's a 100% chance this feature was added at the request of the NSA, who are clearly incredibly worried about our laptops being stolen.  Your Tax Dollars At Work.

https://www.intel.com/content/dam/doc/product-brief/mobile-computing-protect-laptops-and-data-with-intel-anti-theft-technology-brief.pdf

If you ever had any idea of securing anything you own in some sort of "air-gapped" mode…this should utterly eliminate any such hope.

One wonders just how many other devices or components have undocumented 3G chips in them.

  • Sat, Oct 28, 2017 - 10:30am

    #6
    phusg

    phusg

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    Thanks for the heads-up,

Thanks for the heads-up, 'nice' addition to the Intel Management Engine (ME) firmware that runs various proprietary programs created by Intel (also during sleepmode) including its remotely exploitable Active Management Technology (AMT):

Intel has confirmed a Remote Elevation of Privilege bug (CVE-2017-5689) in its Management Technology, on 1 May 2017.[12] Every Intel platform with either Intel Standard Manageability, Active Management Technology, or Small Business Technology, from Nehalem in 2008 to Kaby Lake in 2017 has a remotely exploitable security hole in the IME (Intel Management Engine).

See the Free Software Foundation for more on Intel ME.

  • Sat, Oct 28, 2017 - 04:29pm

    #7

    davefairtex

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    management engine

Yeah I saw that one too.

I do remember reading the spec for that when it first came out and I thought to myself: "boy, that's a security hole if I ever saw one."

That problem is definitely terrifying, but at least if you're air-gapped, nobody can hose you.

With a freaking 3G chip embedded in the CPU (the CPU!!!) you're just screwed.  Someone beams an unfriendly SMS message on the local 3G radio network and the packet takes out – or takes over – your box.  And there is literally nothing you can do. The damned thing is on the bus. 

Turn off WIFI?  Doesn't matter.  Turn off Bluetooth? Doesn't matter.  Unplug ethernet?  Doesn't matter.  Not only can that chip receive signals with the power "off", it can wake up any item on the bus it wants to.  "Disk sleeping?  No problem, let's just wake it up and take a peek at what's there.  And let's wake up the WIFI while we're at it and see who is nearby…"

This was such a colossally stupid move from a security standpoint, it just had to be a request by NSA.  I'd give a lot to look at the code that's resident on that chip.

 

 

  • Sat, Oct 28, 2017 - 05:38pm

    #8

    KugsCheese

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    davefairtex wrote: I ran

[quote=davefairtex]

I ran into an article about a little-known (to me, at least) "feature" of Intel chips manufactured since 2011.  What is this charming feature?

Each CPU has embedded within it a 3G radio/subsystem.  This little subsystem has access to everything on the bus.  It can wake components (your hard drive, your flash drive, your WIFI, whatever) and it can more or less do whatever it wants with them.

Basically, for computers with these chips in them, there is no "air gap" mode.  Its not clear just how far they can transmit – but they can definitely receive messages from a 3G network within range.  I'm betting with a big antenna and some effort you could enable two-way communication.

And … I'm not sure how the mobo is set up, but these things probably get power from the on board battery, so it doesn't actually need wall socket power to run.

It's called "anti-theft" technology.  I think there's a 100% chance this feature was added at the request of the NSA, who are clearly incredibly worried about our laptops being stolen.  Your Tax Dollars At Work.

https://www.intel.com/content/dam/doc/product-brief/mobile-computing-protect-laptops-and-data-with-intel-anti-theft-technology-brief.pdf

If you ever had any idea of securing anything you own in some sort of "air-gapped" mode…this should utterly eliminate any such hope.

One wonders just how many other devices or components have undocumented 3G chips in them.

[/quote]

 

So MAC address is logged at purchase time with buyer name?   So anywhere a laptop is taken "they know" where it is via WiFi locating?  If this cannot be turned off by the owner, then we don't own PCs either (see housing).

  • Sat, Oct 28, 2017 - 06:32pm

    #10

    sand_puppy

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    Cell phone transiever on Intel PC chips

This is stunning.  A built-in backdoor known only to insiders.

But when many intelligent people cannot recognize an explosive building demolition, even when shown high resolution video from multiple angles, I doubt that the public will be able to "see" this.

Probably just some crazy conspiracy theory.

  • Sat, Oct 28, 2017 - 06:39pm

    #9

    davefairtex

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    ok…maybe not…

Re-reading the documentation, I now notice there are two components:

1) anti-theft "AT" subsystem (which has full access to every system on your box) built into the CPU

2) a 3G modem

In other words, the 3G modem isn't built into the AT system; it is a separate device.

Whew.  I think the original source I found this on was confused.  At least, I sure hope they were.  They definitely thought that a radio was built into every CPU, but the docs at intel suggest otherwise – they talk about the AT system communicating with a "3G card" rather than some onboard 3G digital radio modem.

https://www.intel.de/content/dam/doc/product-brief/mobile-computing-protect-laptops-and-data-with-intel-anti-theft-technology-brief.pdf

At least, there's no smoking gun for this at intel, the way I thought there was.

For fun, you can google: "3G radio inside intel CPUs" and see what comes up.

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