Higher Highs, Higher Lows – Wider Range

The ES/NQ/YM/TF continues to power higher.

Z1 Flow of Funds for Q3 stands at a staggering 134% of GDP – $26.35 Trillion.

Resistance for the YM is now 25,080 – from a range of 25-26K we should see a pullback in the broad indices. A 3- 5% correction, although touted heavily in the weekend Financial Media – would be a gift. Will it occur – seasonally it’s an easy spike to 25K for year end.

Conversely, a sell the news type of event surrounding the Fed’s decision on a December rate hike could provide the fuel for a retracement. Core PCE will have an impact, although it appears we will see an uptick as general price levels have risen during the period. A 1.5% PCE would provide all the cover needed ahead of the the 13th.

Gold/Silver are done for now, 1192 – 1202 remains the open target prior to the potential for a full HWB to the $975 level. Silver will continue to trail Gold. The DX is on the cusp of a very large rally. BOJ interventions are no longer tracked at the St. Louis Fed, nor is the BOJ communicating them on  daily or even weekly basis.

Dark Pools continue to dominate , Algo’s are playing whipsaws daily, intra-day volatilities continue to expand while the VIX remains managed.

It’s all blue sky – January should mark an interim low or high, the December close will provide direction. We should see resolution into March where a Summer rally takes us to Dow 32,000 – 42,200.

 

Aussie Dollar

Over the next 6 to 8 weeks the AUD is setting up for a very large run.

This will be extremely bullish for Silver as well, the correlation is holding up nicely.

Silver can easily fall back and will IF the AUD corrects heavily, but this is the place I will be buying SI Futures with both hands.

The time is approaching and it could arrive soon, but year end appears. to be the safest time frame.

Operandi

The BOE indicated their rate hike was due to “Energy Prices” – this while the UK’s CPI is running @ 3%.

Brent NS to WTIC spread widened again, nearing $7.

With the API on deck after the close today and EIA tomorrow, we’ll see how much gas is left in the rally tank.

The price action has been extremely rewarding, I suggested the Energy Complex would be a best performer awhile back. It has exceeded my expectations.

With Core PCE dragon its ass in the dirt @ 1.3%, the Fed is desperate to stoke the fires of inflation.

We’ll see how this week ends up, as there are even larger targets in the 58s ahead, a pullback would be normal… “aggressive bids” remains the understatement.

The ES, YM, and NQ keep grinding higher, TF has some catching up to do prior to any indication of a ST reversal.

Gold is behaving in as though it wants to test the 1300 level, perhaps falling just short at 1299.

 

Crude Oil open this afternoon

Saudi Aramco’s tax rate was cut from 85% to 50% earlier this year, with a 20% royalty on revenues to incentivize investors for the future IPO.

The IMF has estimated a $70 break even price point to bring the Saudi budget into equilibrium.

“Would very much appreciate Saudi Arabia doing their IPO of Aramco with the New York Stock Exchange. Important to the United States!”

NYSE Authorized this some time ago, but I can’t help but wonder who’s intelligence tipped off the Kingdom… US, Russia or Insiders… beginning to look like Season 3 of Tyrant.

Yemen appears to be adding fuel to the Rig Fires.

Russia and China are talking about linking currencies to end the US dollar’s dominance

BEIJING (Reuters) – Russia and China were considering linking their national payment system, Russian Prime Minister Dmitry Medvedev said on Wednesday, as he called for a more balanced global finance structure.

Noting the rise of China’s Unionpay system and Beijing’s efforts to internationalize its currency, the yuan, Medvedev told a press conference in Beijing that Russia was developing its own payment system, known as Karta Mir.

“At the present moment it is being discussed whether Karta Mir should be linked to Chinese payment systems,” he said, while standing alongside Chinese Premier Li Keqiang.

That would have “good prospects” and “avoid those problems that sometimes arise when you use American payment systems”, Medvedev said, mentioning Visa and Mastercard without elaborating.

Russia started to create the Karta Mir system after Western sanctions were imposed on the country in 2014, during the Ukraine crisis. The system is now widely accepted in Russia.

After new U.S. sanctions were imposed, Moscow promised to intensify work to cut dependence on Western payment systems further. Among other things, it wants to create more domestic financial services such as its own ratings agency.

“I think that the more financial instruments there are in the modern world, the more stable the global financial system will be,” Medvedev said.

Visa and MasterCard stopped providing services to clients of one Russian bank after Washington imposed sanctions over Moscow’s annexation of Crimea from Ukraine and support of pro-Russian separatists in eastern Ukraine.

Yield Curve Deflating

The 30 year is falling much quicker than the 20/10/5’s.

With the Fed widely communicating its intent to raise rates, failing to do so would create issues for the markets. Keeping sentiment stable is Job #1 now.

Yellen’s muted comments yesterday were to be expected, nothing good can come from any variance of the stated objective.

The Federal Reserve has made it clear –  its commitment to normalizing monetary policy – involves raising rates to a 3.0% level as soon as 2019.

This flies in face of proposed “Tax Cuts” and will certainly have an impact upon the broader economy were the Fed to overshoot. The added complexity of reducing a swollen and growing balance sheet places the Fed in a precarious situation – we’ll hit a tipping point in early 2018 at the latest as all cards are played by the Fed.

The Dollar will provide all the clues needed as to how this unfolds, I have a target for the USDX @ 98, we’ll see IF it gets there.

Year end rallies have been the hallmark of Wall Street’s moneyball… with low volumes and plenty of OPM, it’s going to be a wild close to 2017.

 

 

Dollar:Yen Strength does not equal Gold Weakness

I suggested several months ago the Dollar and Gold would become positively correlated at some point, whereby Gold ignores the relationship with the Yen ratio.

This may have well begun, then signs were there all this week, we’ll need to watch the 114.24 level for confirmation this flip has begun.

Crude Oil has moved to it’s 2017 Highs and front run them by one tick… Energy is becoming extremely intersting. API/EIA data shows the demand for energy Globally continues to grind higher as many areas within the complex begin to see a contraction in supplies.

The FED needs inflation, the genesis of real tangible price inflation can be created from energy price increases. I’ve noted this strategy for quite some time, it does appear to be in play as money velocity looks to be turning.

Last night move in the indices was a stop run, today we’ll see how funds position and If we will be up 1% or more as new money pours in at the beginning of the month.

New Highs at the open of November suggests the possibility of much higher highs into year end.

We have the potential to go vertical in Price(s).

Now the 2615s open for the ES and 23,730 for the Ym… these levels will indicate whether we run right to 3,000 on the S&P and 28,420 on the DOW.

 

Crude heading to 54.62s

Nice day for CL Longs – a large move to upside. With the Cross on the Daily there will room for a pullback, but then it should find a fair amount of new money entering the Complex.

Energy will be the big winner in 2018.

We are getting close to a ST high for the Indices, a minor pullback should do the trick in correcting most of the overbought condition.

Gold / Silver remain hostage to Bonds now… with the 10yr spiking, it’s going to get interesting.

2018 will be the Metals year, I expect we see a move up again shortly. The 6e is on it’s way to our 108 target, a solid short on the Euro completed the H&S and continues to drop – 113s next after a minor retrace.

FED Monday… December’s rate hike flattens the curve ever more so… it’s going to slowly chip away at confidence in the Bond Markets Globally and force Equity inflows… it’s certainly not going to asset the other Capital Stock – Real Estate.

of the 3 bundles – Equities remain the most viable as insanely overvalued as they are… Dow 36K+ looks like a lock.

YM Line in the Sand @ 23,274 – weekly bearish @ 23,084

We should begin to correct into November, targets range down to 20,1xx to multiple Gap Fills Below on the Daily.

Crude Oil inventories will be a market mover as the API numbers supported the Bullish case – Unfortunately as much as the FED wants inflation and the Saudis want a higher price for AARAMCO… we’ll need to watch it carefully as it can go either way – seasonally this is normally a very weak period – geopolitical events factor heavily into price.

Gold & Silver are struggling to hold their lines. The DX is gaining momentum.

We typically dip into Draghi, we’ll see what comes out the other side as the Euro-Taper gains further support or default.

This Weeks Plan

Monday’s being the typically low participation day (Friday Ditto) should provide some relevant clues as to when this mess begins to lose further steam.

Ideally, Sunday O/N thru Monday could see a large gap n’ go to the upside OR it could digest the most recent Fed Chair’s comments as the ugly they are…. we’ll see in less than 12 hours.

Should we continue to move up, Monday may be followed by several choppy sideways days Tuesday & Wednesday – resulting in a final high for this move off the Summer correction – a mere 550 points to the downside.

The flip side is we correct and then move higher into month end. November being the time for a move to the downside…. I’ll be watching the open this afternoon for direction – the DOW currently stands@ 23,328 – with 23,7xx the final target for the weekly.

It’s going to be interesting, this is certain…

Europe is coming unglued on many fronts and it will be interesting to see how Capital behaves into years end. Capital migration has been gaining steam of late as uncertainty re-asserts itself.

Boom and bust dynamics have turned far more forceful. Central Banks have countered any bust propelling this extended boom in Equities.

Are we approaching a period of consolidation, one in which the Central Banks permit a correction…

It’s approaching and November could end up the Month to relinquish reality.