Morcheeba

Whom do you trust – No one and nothing.

The Algos took control and ran us down on the DX/YEN with the short breaking. The DX spiked to near 94s on the 6/Basket – once the Algos began feeding on the Currency pair… it was over for the metals.

Gold and Silver were sold hard.

Gold broke it’s Line in the Sand @ 1272.

Silver has not failed it’s support @ 16.53 – yet.

Energy and the Metals are going to follow the Dollar/Yen – The Dollar finally got off its ass and rallied hard.

West Texas Intermediate Crude bares observation at this juncture, we broke our Long Setup and have some unfinished business with an overnight Gap prior to setting up the next short entry.

#CRUDE #CRUDEOIL #WTI #WESTTEXASINTERMEDIATE
West Texas Intermediate Crude

 

 

 

 

 

13/21 Cross setting up along a period of flatline consolidation.

#CRUDE #CRUDEOIL
West Texas Intermediate Crude 2

 

 

 

 

 

Simply put – I believe this trend will continue into Labor Day.

Waiting for a retracement to re-enter QM/CL Hedge:

#CRUDE #CRUDEOIL
QM/CL

 

 

 

 

Retracements are to be expected in the hunt for Money – the primary trends are going to see the Sands shift.

Yesterday’s meme:

In order for this to be a healthy Bull Market the 1276 would need to trade – it’s quite normal and expected… 1272 is support and failure would likely send us to back to the bottom of the range @ the 1201s with many bumps along the way – 1250, 1244, 1240.”

I doubt this is merely a dip-in on GOLD, but a larger reversal that will have a number of micro retracements towards the .618 @ $1201.

 

 

Reversals

We should see reversals in all Markets prior to Labor Day – September 4. Equities should retrace prior to the next drop. These are quite normal and given the market is well controlled on low volumes – quick and sharp reversals should be expected.

The Fear trade will quietly die off and begin a rapid re-adjustment or be moved aside for further gains later this year or it will simply implode under its own weight.

Technically – it’s been a very sloppy set of Markets. They do remain quite technical – hitting targets to the tick in many instances.

More on this Tomorrow. I remain bearish – Intermediate Term – on the Metals Complex, with a retest of the prior 2015 lows ahead at minimum – here are the qualifications:

Support is building underneath the PM Complex – 1220 to 1240 – a break of 1220 leads me to believe we will hit 1170 and should be break this level – the lows will be retested. Upside remains 1338 at the weekly downtrend – The monthly is 1362.50 – this is opened as well, but may be a stretch.

It’s going to become volatile once again – although in reverse once the Dollar begins to shake off the 92.50s and move higher. 91.88 remains the warning sign the DX could head lower still.

The Trade War is now front and center… bumpy road ahead.

S_1289 & S_17.175

Holding for retracement. Best setup so far was to take this higher probability Hedge.

Support 1280 & 19.96 – where buyers were triggered.

ES – the way to 2500 to 2520 is with Hedges.

CL – Silver traditionally follows.

ZB is having a bad day – Ahead of auction Primary Dealers are hedging as the order book looks lean.

Miners divergence is usually meaningful @ 75% +.

Buy Stops

Overnight Buy Stops were trigged in Precious Metals.

1280 and 16.95 sent both Metals higher overnight – shorts exited as their stops were hit.

1290, 1300 and 1307 are the next levels – 1338 remains open if these buy stops are triggered.

For Silver the overhead Buys remain 17.00, 17.25 & 17.40.

Profits targets for Gold and Silver remain – $1291 & 17.39

The USD/YEN pair is targeting 109s… will it get there… we will see.

For the S&P, a large number of Puts have been bought. Protection is being placed for hedge – one week ahead of OpEx.

We should see everything extend for now and then reverse rather dramatically. This is a very large trap, one that will see the Dow hit it’s target between 23,000 – 23,300. For it appears negative, but the response to outside influence has been minimal at best.

Positioning back to short once I see Momentum turn. This will add fuel to the downside for the Precious Metals Complex once it completes its profit targets.

Buying momentum dried up, the COT turned again (Hedged for downside), the Broad Equities hit weakness congruent with 2015 and 2016.

Protection trades are ongoing in all Indices – VIX, Bonds, Metals, Equities and Energy.

The Indices are in trouble, it will be fascinating to watch how they resolve.

1982 – Prior Positive Correlation Au/DX

Thanks to Christopher Aaron @ iGold Advisor for jogging my brain this afternoon. Chris was kind enough to send me his thoughts and analysis.

His piece brought my mind back around to an unusual environment… as the Markets grow increasingly complex over time. I was reminded of the prior positive correlation of the Dollar and Gold – 1982 to be exact.

As you can see – it’s been awhile since the US dollar and gold price moved in the same direction.

Gold being priced in dollars – the traditional correlation has been inverse. The most recent and short-lived Positive Correlation was in January of 2009 when the rally in the US dollar corresponded with the rise in the gold price – out of the 2007-2009 Finacial Crisis – both Gold and the Dollar rose together.

During 1982 recession hit many countries including the United States… The rise in gold prices can be partially attributed to future inflation problems (i.e.. Stagflation during the late 70’s and into 1980).

That was then… a paired movement in the value of gold and the US dollar suggested central banks around the world were losing credibility.

The US dollar has been falling for some time now – the twilight of its immense seniorage privilege could be closer than we imagine.

Gold usually informs the market that investors are worried about global economic stability outside of the US and preparing for the worst – this of course is tradition… it is missing due to an intense effort to stifle the Price of Gold and Silver since 1934. Since 2011 – this effort has intensified orders of magnitude.

Often things just get screwed up, this may well be one of those periods. We shall see – this was to serve as merely a subtle reminder – we can expect the unexpected – it’s not irrational, we simply don’ know until it ex-post.

Will it happen again, It could… than again, the DX could simply fall to 70 and that would be spectacular for Gold & Silver – but rather ruinous for our Nation.

 

Energy – Externalities: when the Globe begins pricing in Euro/Gold – The US will be unable to intervene.

Energy – the EROEI will eventually shows its hand. WTIC will return to $150 and above. A high mileage Vehicle is recommended.

Long Crude is going to be an amazing trade – likely one of the most profitable. Far exceeding the metals initially – Cl & QM recommended – NO ETF’s – they leak and basically rob you of the trade for the majority of time held.

Owning Physical will be the Play in Metals. Most Mining Companies are unhedged to Energy – purposefully so. They won’t perform as expected once reality sets in – this next run is a pure play on the Metals.

Will the Miners run… yes, of course, but over the Long Haul they are paper promises to delivery reserves in the ground. Very few will be LT Holds. Specs will chase the Juniors, they are assured of screwing shareholders once again.

The temptation will be too grand.

chart compares the month-end LBMA fix gold price with the monthly closing price for West Texas Intermediate (WTI) crude oil since 1946.
Chart compares the month-end LBMA fix gold price with the monthly closing price for West Texas Intermediate (WTI) crude oil since 1946.

 

 

 

 

 

 

 

Chart tracks the ratio of the price of gold per ounce over the price of oil per barrel. It tells you how many barrels of oil you can buy with one ounce of gold.
Chart tracks the ratio of the price of gold per ounce over the price of oil per barrel. It tells you how many barrels of oil you can buy with one ounce of gold.