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PM Daily Market Commentary – 8/1/2019

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  • Fri, Aug 02, 2019 - 12:10am

    #1

    davefairtex

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    PM Daily Market Commentary – 8/1/2019

Gold jumped +31.43 [+2.20%] to 1457.59 on extremely heavy volume, while silver rose +0.07 [+0.43%] to 16.35 on heavy volume. The buck moved lower [-0.12%], bonds screamed higher [10Y yield -12.7 bp], while SPX plunged [-0.90%], and crude absolutely cratered [-5.88%].

What happened?

At 1:35 pm, Trump tweeted that he was placing a 10% tariff on all Chinese products due to the lack of progress in the trade negotiations.  And just like that, gold’s nascent downtrend was erased.

https://twitter.com/realDonaldTrump/status/1156979443900067841

…the U.S. will start, on September 1st, putting a small additional Tariff of 10% on the remaining 300 Billion Dollars of goods and products coming from China into our Country.

Gold fell to new lows in Asia following yesterday’s disappointing FOMC press conference (“a mid-cycle rate cut”), but then bounced back reasonably strongly in London and New York, as the buyers bought the dip. Then came the Tweet: gold launched higher, rising $28 through end of day. The massive bullish engulfing was definitely bullish (47%), and forecaster moved higher, and is now back in an uptrend. The rally also pulled the weekly forecaster back into an uptrend too, leaving gold in an uptrend in all 3 timeframes.

Gold/Euros actually broke out to a new multi-year high today as a result of the rally. Gold/Euros is actually not all that far from the 1391 high set back in 2012. While we tend to focus on the highs in USD, a breakout above the 2012 high in Euros is something we should pay attention to.  Europe is a big continent, with lots of money, and really no place to hide from the coming storm.  Here are some 10-year bond yields just for fun: Swiss: -0.76%, Germany: -0.46%, Italy: 1.56%, Greece: 2.06%.  That Greek number is just nuts.  There really is no place to hide over in Europe.  And this is before the recession has really hit.  When the ECB starts to print for real once more, how far will the Euro fall?  Will they shut down cross-border transfers?  Make cash illegal?  Charge people money for bank deposits?  They have been at the zero bound for 10 years.  What actions will they deem “necessary” to keep their pensions and power…excuse me, I mean, to keep the Eurozone alive?

I believe that money is moving in anticipation of these actions.  Whatever they happen to be.  We will be the last to know, of course.

COMEX GC open interest jumped 15,870 contracts. Thats 49 tons of paper gold, or about 7 days of global production.

Futures are projecting a 87% chance of one rate cut in September (+30% in just one day), an 97% chance of one rate cut by December, with a 73% chance of two cuts. That’s a massive increase in just one day.

Silver kept falling in Asia and London, dropping almost 35 cents overnight, with the day low of 15.93 which was hit around 8 am. Then buyers showed up, pulling price out of the cellar, and once the Tweet hit, silver jumped back up into the green. The bullish harami was definitely bullish (41%), and while forecaster moved higher, it wasn’t enough to move silver back into an uptrend. Silver remains in an uptrend in both weekly and monthly timeframes.

COMEX SI open interest rose 1,835 contracts.

The gold/silver ratio rose +1.60 to 88.82. That’s bearish.  Silver is back to underperforming once more.  Perhaps it was plunging copper prices that helped keep silver down today.

The miners gapped down at the open due to the overnight plunge in the metals, but then immediately started to rally, wiping out half of yesterday’s losses by mid-day. Then the Tweet hit, and the miners took another leg up, completely eliminating yesterday’s plunge. GDX climbed +5.09% on extremely heavy volume, while GDXJ jumped +5.11% on very heavy volume. XAU rallied +4.77%, the bullish belt hold candle was definitely bullish (53%), and forecaster moved back into an uptrend. Today’s rally also pulled the weekly back into an uptrend too, moving XAU back into an uptrend in all 3 timeframes.

The GDX:gold ratio jumped +2.83%, while the GDXJ:GDX ratio rose +0.02%. That’s bullish.

Platinum fell -1.35%, palladium cratered, dropping -6.15%, while copper plunged -1.53%. The other metals had terrible days; palladium was smashed at about 8 am – I’m not sure why – while copper was hit by the Tweet.

The buck fell -0.12 [-0.12%] to 97.89. The buck continued moving higher in Asia and London, topping out at roughly 9 am, but then started to fall, and dropped a bit most following the Tweet, but really not all that much. The spinning top candle was mildly bearish (39%), and forecaster fell, but remains in an uptrend. DX remains in an uptrend in both daily and weekly timeframes.

Large currency moves include: AUD [-0.57%], CAD [-0.30%]. The Euro made a new multi-year low (May 2017) before bouncing back.

I was surprised by the relatively small moves in currency, especially given the huge rally in gold, and the large changes in projections of upcoming Fed rate cuts.  Perhaps the market now realizes that the Fed is really just acting to cushion the tariff blow.

Crude plunged -3.41 [-5.88%] to 54.54. Crude was having a bad day even before the Tweet, but plunged about $3 in the 45 minutes following said Tweet. The strong line candle was bearish (50%), and forecaster dropped hard, moving crude into a downtrend. The weekly forecaster also moved into a downtrend on today’s move. That puts crude in a downtrend in both daily and weekly timeframes.

Crude’s big plunge seemed to be about a worry over shrinking demand – tariffs will hit China, and they are responsible for demand growth.  Crude looks really unhappy right now.


SPX fell -26.82 [-0.90%] to 2953.56. Equities were actually up some 35 points immediately prior to the Tweet, but plunged more than 60 points in less than two hours once the Tweet hit. The odd-looking long black candle was a bearish continuation, and forecaster dropped into a strong downtrend. The weekly is now quite close to a trend change as well, but for now SPX remains in an uptrend in both weekly and monthly timeframes.

Sector map was led lower by financials (XLF:-2.27%) and energy (XLE:-2.26%), while utilities (XLU:+1.02%) and REITs (XLRE:+0.24%) did best. This was a bearish sector map.

VIX jumped +1.75 to 17.87. Risk is back!

TLT jumped +1.78%, breaking out to a new high. Forecaster remains in a strong uptrend. TY also did extremely well, breaking out to a new high also, up +0.91%. The strong line candle was bullish, and forecaster jumped into a very strong uptrend. TY remains in an uptrend in all 3 timeframes. The 10-year yield plunged -12.7 bp to 1.89%. This is a new multi-year low for rates – levels not seen since Nov 2016.

JNK fell -0.45%, with the forecaster dropping into a strong downtrend. The BAA.AAA differential fell -2 bp to +0.89 bp; this modest decline was due to yesterday’s Fed announcement; we will have to wait for tomorrow’s close to see what effect the Tweet had on this series.

CRB absolutely cratered, dropping -3.21%. All 5 sectors fell, led by energy (-6.59%).

So just like that, the effects from yesterday’s Fed announcement were just wiped off the boards.

I do not think the timing of this Tweet was an accident. Trump is in some very tough negotiations with the Chinese, and he really needed the Fed to cut rates so that it would cushion the impact of the tariffs on the currency, sentiment, and the economy. My guess: Trump waited an extra day after FOMC for things to shake out, and then dropped the bomb. I suspect he has been wanting to do this for weeks, but – perhaps – his advisors suggested this was probably the best sequence of events.  FWIW, I think so too.  It feels like a very smart move.

I sure would have liked to be a fly on the wall listening in on Trump’s calls with Powell. I’m reasonably certain he made this very case to Powell, and my guess is, Powell agreed that a rate increase was best for the country.  But during the press conference, Powell couldn’t exactly say, “Trump is going to drop a tariff bomb on the country tomorrow, so we’re cutting rates in advance to help cushion the blow.” But if you read between the lines, you could kind of see that message trying to slip out.  “We don’t have anything to do with tariffs and trade policy, that’s not our area.”  Or words to that effect.

However, independent of all the fuss from the Tweet, to me the big message (as the gold guy) came from the mining share performance that happened at today’s open. The miners gapped down at the open, but then rallied strongly, rising some 2%, as buyers raced to buy shares that were selling at just a 5% discount.  And this move wasn’t just a “first hour” phenomenon. The gains lasted right up until the Tweet hit, which launched the miners into yet another leap higher.

Independent of the Tweet effects, this tells me that even after the Fed’s disappointing “mid-cycle” rate cut, traders still bought the dip hard.  They couldn’t even wait for one day to see how things played out.  To me, that’s bullish.

I will leave you with this fun chart. The bitcoin traders have figured out that “google trends” is a good clue as to where bitcoin prices are headed next because it is a good measure of popular sentiment. Here is a similar chart, but with “buy gold” as the google trend search.  [Note: the cyclical spiky peaks are the months of November/December.  My guess: people like to buy gold for Christmas.  Who knew?]

This general lack of interest by retail strongly suggests we are at the very start of the next big gold move. Retail is – as of right now – not even in the picture.

How cool is that?

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  • Fri, Aug 02, 2019 - 03:05am

    #2

    davefairtex

    Status Diamond Member (Offline)

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    Posts: 3250

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    First Amendment Applies to Wikileaks

It looks like a win for Rule of Law, as well as common sense.  A US judge dismissed a DNC lawsuit against Wikileaks for publishing all those emails that exposed HRC’s 2016 rigging of the Democratic Primary.  Turns out, the publication was completely legal – just like the publishing of the Pentagon Papers 45 years earlier.

This precedent could pose a problem for Assange’s extradition.  If what he did was legal – why on earth should he be extradited?

https://www.thecanary.co/us/us-analysis/2019/07/31/judges-ruling-throws-huge-spanner-into-us-extradition-proceedings-against-assange/

A US judge has ruled that WikiLeaks was fully entitled to publish the Democratic National Congress (DNC) emails, which means no law was broken. The ruling is highly significant as it could impact upon the US extradition proceedings against WikiLeaks founder Julian Assange, as well as the ongoing imprisonment of whistleblower Chelsea Manning.

The judge ruled that:

[T]he First Amendment prevents such liability in the same way it would preclude liability for press outlets that publish materials of public interest despite defects in the way the materials were obtained so long as the disseminator did not participate in any wrongdoing in obtaining the materials in the first place.

A person is entitled to publish stolen documents that the publisher requested from a source so long as the publisher did not participate in the theft.

And one more:

If WikiLeaks could be held liable for publishing documents
concerning the political financial and voter engagement
strategies simply because the DNC labels them “secret” and trade
secrets, then so could any newspaper or other media outlet. But
that would impermissibly elevate a purely private privacy
interest to override the First Amendment interest in the
publication of matters of the highest public concern.  The
published internal communications allowed the American
electorate to look behind the curtain of one of the two major
political parties in the United States during a presidential
election. This type of information is plainly of the type
entitled to the strongest protection that the First Amendment offers.

Amen!

  • Fri, Aug 02, 2019 - 07:03am

    #4

    Chris Martenson

    Status Platinum Member (Online)

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    Very cool.

This general lack of interest by retail strongly suggests we are at the very start of the next big gold move. Retail is – as of right now – not even in the picture.

How cool is that?

Very cool.  I like it.

For whatever reason, it seems that tops only get made after the retail investors have been sucked fully in.  The opposite of the issue you highlighted with low attention being paid to gold right now.

On that front, for equities, are conditions sufficiently cooked to once again screw over mom and pop?

It might be:

Rather than climbing the proverbial “wall of worry” the recent move seems to be more of the riding the escalator of optimism.

Investor sentiment has reached the extreme optimism zone—a contrarian indicator—according to the Ned Davis Research Crowd Sentiment Poll, suggesting some caution is warranted in the near term.

(Source)

While retail bagholders is an essential component, I don’t think anything really changes until and unless the ultimate dumb (or rather conflict-of-interest money) money blinks and wanders away from the light.

That $800 billion (yearly) to $1 trillion (yearly run rate) of corporate buybacks is a HUGE tailwind for these ridiculous “”markets.””

Not much can happen when there’s that sort of perma-bid happening.

At any rate, when (not if) the worm turns in this story, we suddenly discover that there a lot of ruined (i.e. “leveraged”) balance sheets out there in corporate-land.

For the third time in a fraction of a generation, we get to learn that credit bubbles are 1x units of fun on the way up and 2x units of pain on the way down.

The ‘slow learner’ club is a painful place to be a member.

  • Fri, Aug 02, 2019 - 09:24am

    #4

    Chris Martenson

    Status Platinum Member (Online)

    Joined: Jun 07 2007

    Posts: 4797

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    Retail gold purchases crash…

More fuel for the golden bull fire:

Although demand for physical gold and silver bullion pushed slightly higher this month, one analyst said it is investment demand that is driving the market, not physical.

The latest data provided by the U.S. Mint shows that a total of 5,500 ounces of gold, in various denominations of American Eagle gold bullion coins, were sold last month. This is the worst July performance in 12 years.

In total, July sales were up 10% compared to dismal June sales. For the entire year, gold bullion sales totaled 114,500 ounces, down 26% compared to the 155,500 ounces sold during the first seven months of 2019.

Bart Melek, head of commodity strategy at TD Securities, said that physical sales numbers are not typically market drivers and weaker physical demand should not be too much of a concern.

Source

  • Sat, Aug 03, 2019 - 10:51pm

    #5
    Nate

    Nate

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    CAF podcast

Investment advisor and former Assistant Secretary of Housing Catherine Austin Fitts says what is going on in the economy is going to come to an end after the Presidential Election no matter who is in the White House. Fitts explains, “I think we have to face it. We are in trouble now. Is it going to get a lot worse after the 2020 election? Absolutely. When Trump came in, he may not have realized how bad it was.   What he’s tried to do is grow out of this. He has basically gone full-on fiscal stimulus and tax reduction to try to grow his way out of the problem. It’s not working, and one of the reasons it’s not working is he is discovering the model in Washington is everybody is on the take. Nobody is interested in building up the whole. I think what Trump is saying is if you don’t make the pie bigger, we are all going to starve.”

Fitts says we also face multiple risks such as “Inflation that is averaging 10% nationally.” The cost of money is another big risk as the “the little guy has a credit card charging 17%, and big banks can borrow from the Fed at 2%.” Another risk is “healthcare freedom.” Even the quality of the food you eat is a growing risk because of deregulation voted in by Congress. Finally, there is risk of conflict both domestically and abroad. Will the U.S. dollar maintain its role as the reserve currency? Fitts has long said, “That is a military question.”

  • Sat, Aug 03, 2019 - 10:57pm

    #6
    Nate

    Nate

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    CAF podcast part 2

Investment advisor and Former Assistant Secretary of Housing Catherine Austin Fitts says forget about the notion of a coming economic meltdown, we are already living in an unfolding financial calamity, now. Fitts explains, “The likely financial calamity is an acceleration of the ‘slow burn.’ It’s not that the stock or bond market comes apart. It is that the stock and bond market continue to be subsidized by liquidating all sorts of people, animals and living resources. In other words, we are liquidating all of life. To engineer central control, we are levering up the debt, and we are liquidating people and countries and things to basically keep that game going while somebody is walking off with tremendous amounts of money that they used to engineer central control. So, we have had an ongoing calamity since the mid 1990’s–serious financial calamity. If you are the people of Libya, you have already had your financial calamity. Calamity is not a big bang that we all experience together. We almost got ours in 2008 and 2009. Calamity is an ongoing process. Some are composted so others can live.”

Fitts also points out all the debt, including the $21 trillion “missing” money from the DOD and HUD. Add the missing money to the $22 trillion and you’ve got more than $43 trillion, and that is what we know about for certain. Fitts says everybody needs to be in on the economic fix of the debt system. Fitts contends, “We can’t sit around eating popcorn and wait for Donald Trump to fix it. We have to get into the trenches and fix it ourselves. We have the power to do it. If you look at your statistics, a lot of people have stopped watching CNN and started watching USAWatchdog.com. That is real power. . . . Why does anybody watch CNN?”

Fitts says, “We have now defined politics as entertainment. Every voter and every person is missing $65,000 from the ‘missing’ money ($21 trillion). Then there is $75,000 for each person for the bailouts and your ‘missing’ money, and you’ve got $140,000 per person. You are on the hook for that and probably another $50,000 in the next couple of years.  If you are on the hook for $150,000 and maybe another $200,000 total, that is $350,000. So, add that up for every family, and no wonder they want to play divide and conquer.”

Fitts also gives her opinion about what is going to happen with all the big legal cases that Attorney General William Bar is handling. Fitts thinks it will not be a very transparent outcome for “We the People.”

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