Multi-Month Retracement Approaching

Although the indices can move higher, we are witnessing an exhaustion point – Institutions are net sellers, the FED/ESF net buyers. Volume is near absent – Volatility only remains in the most liquid instruments – Energy & Currencies.

2575 remains the potential target for the ES – this places the SPX @ 2578/9.

China is reportedly beginning their new Yuan based contact for Oil tomorrow…. convertible to gold purchased outside of the SGE – ie. Global Markets.

Martin Armstrong believes 23,700 is possible for the DOW on this move.

I do not… Marty is plenty wrong, as are we all. Socrates issued 4 intraday warnings over the last week… 2 – Potential Sells, followed by 2 revealed targets for DOW and reduced risk profile as support lies at 20,000K now.

Whipsaws abound.

The Price of Gold is Fully pegged to the US DX – again

The game of hot potato has reversed – Currency markets understand the shift back.

The Gold Currency Index vs the Price of Gold clearly demonstrates.

Au-Oli
Au:Oil

This math in the preceding 3 charts shows that if you can get physical gold that for the past 100+ years has been worth between $2,330 – $30,850 for the price of $1,250/oz. – odds favor the purchase – as does common sense. All you have to do get that physical gold is price your oil in Chinese Yuan.

The “Everything has Changed” in August

Appears to be missing the ether with an exception – arbitrage.

The Chinese Yuan Oil/Gold contract is a rather large step forward in cutting off foreign official funding of US government deficits, and in particular US Entitlement & Defense spending.

It seems axiomatic – “certain parties” in Washington DC might see stopping the successful implementation of the Chinese Oil/Gold oil contract as a matter of National Security and yet those pulling the levers may permit it… it assures failure – a run on the US DX which implies Failure of our Bond Markets.

The same cannot be said for China… they view it a National Security.

Emerging Market Defaults

At the moment – the ONLY thing keeping Maduro paying are sanctions – US Banks are not permitted to participate in VZ Bond New Bond Issuance as well as the State run Oil Company.

Without the ability to restructure debt – creditors are likely to seize foreign assets of PDVSA and Venezuela if a default occurs.

VZ appears to Greece West.

Now that VZ has announced its intention to Price Oil in Yuan – will the Dollar demand for EM’s turn to Yuan and the DX simply be avoided and defaults the norm.

If so, the DX days are certainly numbered if this picks up any steam.

Central and South America are pivoting East – the pace appears to be quickening.

Apple 1 PM EST

With Apple on deck after Lunch – all eyes will be on it. Presently it is trading down 37 cents.

Crude Oil had a wild squeeze on volume, I am watching the 48.61 level for possible re-entry into a short position.

Gold & Silver remain in no mans land ahead of the Fed, the 1322 LIS is now in play, it could be tested prior to a reversal. I believe we need the 1378 to confirm a Bull trend for later… for now it’s working off a good deal of the over-bought condition.

NoKo is overdue for another rampage, what the effects will be is unknown.

The Corporate Tax Cut is looking iffy today… we’ll see what shifting sands develop, it may not be the giant dune our Corporate lords were looking for – another hand out might be delayed until we’ve had to gag for Fiscal Policies designed to recover from the impending dunk ahead.

We have hit our overhead target on the ES @ 2493.50 – I expect a sell-off after Apple’s news after a potential squeeze. Both the DOW & S&P have made higher highs that confirm we’ll be going higher after we complete a sell-off that should be rather nasty… at least this is what I see ahead. IF the metals fail to rally then they are done for now… GLD sucked in buyers… SLV as well.

Potential for Mission Accomplished… 1322 LIS is important.

This is a BS FX/Futes led rally in the PMC, complete Bullshit.

Something Nasty is upon us… Today was the first real day of participation by Institutions. The Fed will be the 15th with nothing real to add to any equation(s). Open Follows, we have had a great deal of ramps on contact roll-over to October – they have used up about all the juice they’ve got…

Should be interesting to trade.

 

Cons that Coined.

Eye of the Storm

Back to the drawing board for the Federal Reserve according to William Dudley… it’s time for the Federal Reserve to “rethink” inflation models which are failing to support further rate hike adjustments within their “Model.”

The ECB press conference last night was interesting – Mario Draghi was congratulated on his recent birthday nay one reporter… she then turned to a series poignant questions regarding Asset purchases – which were skirted.

The tough questions found rambling and often quite absurd pronouncements of stability and crisis management. Greece and Cyprus have been abandoned, their collective economies have been left for dead.

October, according to Draghi, is where it all lines up… They will begin to announce their intentions in this timeframe.

Draghi very briefly discussed the Euro’s strength and potential effects on exports and inflation targets, there was nothing specific.

Nothing aggressive, concrete or remotely indicative of future Policy – other than continued Liquidity injections with laser like focus to project control over Member Bond Markets.

I suspect the 125 level will be about it by October, it’s been an open target and one that leads the DX to 86-88 potential.

The Euro is up 14.3% this year, a very large move – the Yuan has reversed and is making new highs.

The long end of the curve had a very large imbalance yesterday – Bonds were halted. A noticeable and telling sign arrangements are being shuffled rapidly.

Gold Reintroduced – PetroGold

The United States Dollar for Energy trade is winding down.

China’s power elite has provided an alternative to the U.S. privilege of Currency Senoirage – they are “Prepared” to link Oil to Gold convertibility.

PetroDollars are not long for this world, the Dollars twilight loses another candle to the winds of change.

China sees new world order with oil benchmark backed by gold

Yuan-denominated contract will let exporters circumvent US dollar.

It should be noted – this is Not a Peg to Gold as some are suggesting, but a link to convertibility.

China’s move will allow exporters such as Russia and Iran to circumvent U.S. sanctions by trading in yuan. To further entice trade, China says the yuan will be fully convertible into gold on exchanges in Shanghai and Hong Kong.

 

 

 

Crude Oil Target 45.50

This has been a solid trade, My Profit targets are being met one by one. Seasonally Crude usually begins a large rally into September.

I have a retracement target @ 46.56 for CL.

EIA Report is due @ 10:30AM EST. A reaction is due, likely a retracement.

A quick dump to the 38 – 42 range would confirm New York got their price for Longs.

There is plenty of Oil sloshing around for now.

Expect this to change… as the Brent / WTI spread is widening, typically the US will become an even larger exporter of this premium oil.

The spread is extremely important, it has been widening for some time as European demand is being met within region.

At some point in the near future this will induce buyers of WTI.

I suspect Oil/Energy will be on of the top performing sectors in 2018.