PM Daily Market Commentary – 9/29/2016
Gold fell -1.40 to 1323.50 on moderate volume, and silver fell -0.08 to 19.17 on moderate volume also. The big news of the day was about Deutsche Bank – ten hedge funds reportedly withdrew money from the bank, a sort of a “hedge fund bank run” – which caused bonds, gold, and the dollar to rally, and equities to sell off.
“It is all about confidence now,” said Julian Brigden, an independent market analyst at Macro Intelligence 2 Partners, an independent research company that caters to hedge funds and is based in Vail, Colo. “If a client has some derivatives at Deutsche Bank, he starts to think — will I get paid? Things can get out of hand quickly.”
People have variously asked what sort of “pin” might cause the various bubbles to pop. This could be one such pin. It traces back to the US DOJ’s proposed fine of $14 billion on DB for their part in the 2008 mortgage criminal activity, and the complete inability of DB to pay this fine in its current state. Add to this Merkel’s statement that the German government was not going to bail DB out – and new we have the first hints of a bank run by hedge funds whose deposits would probably be bailed-in if the bank were to be declared insolvent. Any large depositor at DB has to now start thinking seriously about protecting themselves.
Gold was bouncing around near the day lows when the DB news hit; it rallied about $8 but then faded into the close. Right now, gold does not seem to be taking the news all that seriously, although we did get a clear indication that the market sees the news as a buy-gold event. On the chart we see that gold’s decline is slowing; candle print is a “high wave”, 17-23% chance of a low here.
December rate-rise projection is at 48%.
Gold open interest at COMEX fell by -9,176 contracts.
Silver spiked briefly higher in Asia, and then spent most of the day moving lower. Intraday, the DB news did not seem to affect silver prices at all. On the chart, we see that silver avoided making a new low, and printed another spinning top candle. Silver remains below its 9 EMA and 50 MA – no change today from the overall downtrend.
GDX fell -0.82% on light volume, and GDXJ dropped -0.95% on moderately light volume. GDX dropped back below its 9 EMA today – there was no follow-through from yesterday’s rally. GDX printed a spinning top, which doesn’t provide us with any information as to direction.
Intraday, GDX initially sold off on the DB news along with the rest of the equity market, but then buyers appeared and pushed prices back up – it wasn’t a major move, but it was a suggestion that the miners might not be caught in a DB-driven equity sell-off if one were to appear.
Platinum fell -0.24%, palladium rose +0.71%, and copper fell -0.70%.
The buck rallied modestly today, up +0.14 to 95.45. Much of the move came following the DB news; although the rally wasn’t all that dramatic, it did turn a losing day into a winning one for the buck. This suggests money will probably run to the dollar if the crisis becomes more severe.
Crude continued rallying today, up +0.56 [+1.19%] to 47.72. Crude was up more substantially, following on from the news about the OPEC agreement, but it topped out after the DB news hit the wires at 12:25, slowly selling off into the close. This suggests that in a struggle between a banking crisis and OPEC, the banking crisis will probably win. The DB news also might just have triggered some profit-taking after the big rally that happened yesterday.
SPX fell -20.24 [-0.93%] to 2151.13; everything was going fine until the DB news hit the wires at about 12:25, and that caused SPX to plunge 20 points in 30 minutes. Energy did best (XLE:-0.17%) while sickcare (XLV:-1.76%) and utilities (XLU:-1.50%) led the market lower, with financials (XLF:-1.40%) close behind. VIX jumped +1.63 to 14.02. Equities will not do well if the DB situation becomes more serious.
TLT rallied +0.25%, a losing day turning into a winning day because of the DB news.
JNK fell -0.46%, with risk off sentiment causing selling in JNK as it caused buying for TLT.
CRB was mostly flat, down -0.04%. No signal from commodities.
Looking at the relatively moderate moves in the markets today, it does not appear that widespread panic has hit just yet. While today is Friday, and fun banking things usually happen over the weekends, I don’t think things are far enough along in this crisis for something to happen this specific weekend. I do think there will be many more hedge funds pulling “excess collateral” from DB before the close of business Friday. Will the trickle become a flood? It might. I’m sure there will be discussions in the German government over the weekend about what should be done. My guess is, any government-related answers will be negative for shareholders; any nationalization will almost certainly wipe out the shareholders just as a starting point.
Although the moves today were moderate, we can use them a guide to what might happen if the problem worsens: gold, the dollar, and US treasury bonds will probably rally, while equities sell off, probably along with oil as well. If this proceeds to a full-blown banking crisis, we might see some selling in anything with leverage – including gold because of all that paper at COMEX that will need to be unwound. This is what happened last time in 2008, but its a good idea to be alert for any differences as they show up.
We’ve been looking for our pin…and we might just have found it.
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Well what do ya know, DB up 13% today because of talk that the Feds are willing to reduce the 14 Billion lawsuit. I'm sure no insiders saw that one coming or anything.
Create an unsourced rumor and print it anywhere and the mindless algorithms will do the rest by buying the rumor. Not enough? Have another font repeat the same stuff somewhere else. Are we to believe that the French news knows more than anyone in the US or Germany about this? This is a stick save of the banking industry for the weekend (long weekend in Germany) while the brain trust gets together to try to come up with a better bandaid before the markets get going next week.
Remember when news stories had to have verifiable sources? So yesterday now…
I'm not sure it was the mindless algorithms. This sort of thing happened in 2008. Whenever there was any sort of positive rumor, the shorts would all flee in panic, as the soon-to-die bank jumped 10% in a day.
I expect if I were short DB, I'd have fled too. (I was short, just got chased out a week ago). That's why I'm more sympathetic to explanations other than "mindless bots."
It takes real long term stamina to remain short something like DB. If you want to enter short, do so after a bounce peters out, not as the rumors fly that the bank is soon to die. That's generally a low.
Unless you want to do a rip-van-winkle play and look at it 2 years later, shorting is a lot of stress. 🙂
And yes of course its all engineered. I'm guessing if it were done to the downside, the black helicopters would descend upon you in a real hurry. Upside manipulation in favor of dying banks is encouraged. Starting a bank run might even be illegal. Lying about a bank's health – of course that's perfectly legal.
It's good to be King (and almost as good to be able to write the rules).
FWIW, my code says the two-candle swing low for DB is in the top 1% – code gives it an 82-88% chance of being the 10-20 day low. It will be interesting to see if it plays out that way.
Coin show in NY White Plains. Conspicuous absence of moderate premium, high quality Gov. minted Gold bullion for sale. I literally could not spend all the money I brought. Spoke to some of the dealers – they are unwilling to put a lot out to sell because they believe prices will be rising..
I could have bought more loose Eagles and Maples.. but I really prefer PCGS or NGC graded (MS-69) and slabbed over loose. I think it's worth the extra $30 or so. One guy had two Perth mint Gold ounce coins in his case.. but he said they were not for sale….. apparently he had purchased them from someone at the show and they were going into his collection : ) I did though snag a 1988 Panda from his case that he had been sitting on for, "at least 20 years".. so that was cool. I love a coin with a backstory…. real money can be that way.
Oh, and 10 more 1964 Kennedy halves for the Constitutional Silver box…. getting kinda heavy that box : )
Visited the local coin dealer today (DCA). Here is what is happening in central California:
The bulk of his business falls into 3 bins. The first group are that individuals have inherited coins and PM's from mom or dad and have no interest in them. They sell and 'enjoy' the proceeds. The second group is hurting financially and simply needs cash. The final group understands where we are historically (or just don't trust the bastards running the show) and want to get out of paper badly. Todays conversation quickly moved to weapons and ammunition. (California is making the purchase of bullets very difficult starting next year).
What I found interesting is that the the local movement of metals, purchases and sales, is roughly balanced. In previous discussions the dealer was complaining about the amount of 'outside' gold he had to purchase to satisfy buyers. My take away is that (locally) more people are hurting financially and are selling what they can to survive.