This morning it is over 94 – the next stop is the 96s.
Bonds are in a bad spot across the curve… it is not to be discussed in the MSM.
Too much noise creating a fog.
The 6e (Euro) looks as though the 108 level will be targeted.
The ES LIS is 2540, The YM 24622 – Bullish above, bearish below.
The historical context of how much $1,250/oz. Au overvalues the DX can be seen in the two charts below.
Observe $1,245/oz. effectively backs Foreign-held UST’s at ~5%, or the lowest level in the 100+ years.
And that assumes that none of the $100T+ in US Entitlement obligations are counted.
22361 is overhead profit target for the December contract – with an extension overhead to 24420…
24-420 is convenient, perhaps that is the time to blaze up short.
Cosmic jokes abound – as the ES is trading on such low volume anything can and will happen.
A solid 5 to 8% correction is long overdue, just a question on when.
XLF puts looking tempting.
Euro trading a high for the session.
remains the 2463.50 zone – 120 ticks below.
A worsening crisis – Chairwoman Janet Yellen failed to mention the World’s Central Banks continue pushing on a string as worsening financial conditions consume the Global Financial System…
…With rates @ 1.25% and a $4.5 Trillion balance sheet, count me a non-believer, but then I’ve never believed the Federal Reserve to be anything but a creature on a string.
Chairwoman Janet Yellen: “Our more resilient financial system is better prepared to absorb, rather than amplify, adverse shocks, as has been illustrated during periods of market turbulence in recent years. Enhanced resilience supports the ability of banks and other financial institutions to lend, thereby supporting economic growth through good times and bad.”
A farcical thesis… would be gracious.
Disingenuous in the extreme for what was left unspoken – ZIRP, QE∞, $10.4Trillion of global debt securities trading with negative yields, all shined on.
Managed Money has been squatting within the ETF and passive strategies Complex for years – very little cash remains sidelined. A sharp downturn would require outright selling, as protection would not provide adequate capital for investment were it to be “In the money” at the proper time.
It rarely is, therefore unwinding much of anything appears to require an enormous lifting of all boats… something we should consider probable after the next correction.
ETF’s have herded capital into unprecedented positions. Years of declining volatility has become a one way trade placing greater risk of an abrupt and very sharp reversal.
I believe this dead ahead… a rapid and precipitous adjustment to the downside.
Liquidity and its attendant mis-pricing of Risk has never been so grossly distorted in my lifetime.
Passing the blame – “Increased resilience of the financial system” is now wholly dependent on the present Administration – their course of action(s) – regulatory reform long promoted is again the dire enemy of Wall Street and the Federal Reserve.
Janet Yellen has politicized the issues of regulatory reform – it is safe to assume President Trump will be walled in once again. The FED Chair may have made her last speech, but payback… she’s a cruel mistress.
Au @ 1308
Ag @ 17.32
$/YEN @ 108.62
1298.10 remains the overhead resistance for a push through intermediate resistance on the weekly chart.
Friday – we traded to it – but not through it. We could roll-over from here, but that may be too easy and too soon. And while the Algos are whacking everyone and collecting – why not continue to steamroll participants… in every direction. This is a hunt for spare change into September, it has been the same the past 3 years during the Summer.
1338 will present itself as the next upper target if this most recent extension holds and we break the Weekly DownTrend @ 1319.50.
1362.50 could come into the range should we break 1338.
I remain bearish the Metal Complex… intermediate to Longer term and would need to see the Monthly (1362.50) target met and exceeded for a number of trading days to accept the New Gold Bull Market – even then, I’d be extremely cautious.
We wouldn’t be out of the woods by any measure – with 1201 as the .618 and too may Daily gaps well below the 1276 profit target below.
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.
Gaps can remain unfilled for years – many years in fact within emerging Bull Markets. This would be the least preferred route – but may simply be “how it is” – wild volatile and disorderly.
A number of important factors are of concern, Crude Oil has the Commercials lined up against it to an extreme. Silver tends to behave as Crude’s Bird Dog, sniffing out the Bullshit.
China’s Oil imports fell last month – for the first time in a very long time. The Saudis are cutting production once again – seeing its competitors recover and begin to ramp production. For once the Saudis are playing by Production rules while many nations are not – in fact they are rapidly increasing output to take advantage of higher prices.
Remember we have run from $30 to $54 and back to $50.
The trend remains our friend with the Ratio of Silver to West Texas Intermediate Crude:
Presently Silver’s Price will remain tied to Gold. There is no “Miracle” anti-gravity sled arriving this year. That is same patent Bullshit peddled by the Silver Suicide Cult for two decades. It’s disgusting and simply more non-sense.
Silver’s chart is broken – Technically it isn’t worth discussion as it has broken every support that mattered.
One look at this chart tells us everything we need to know – Silver is busted.
Silver is both Money and a vital Industrial metal – it has been so for a very long time. The Monetary component may be lost on the consciousness of the current generations in the USA… but it is not in many Nations. Demonization took decades to fade from frontal lobes – the Baby Boomers are its greatest ally for now.
Technically – $17.87 is the next boundary target for the White Metal.
We did not hit our profit target @ $17.38.
$16.53 is bottom of the range for Bulls, failure here sends us back the Lows.
The Silver COT is lop-sided as well – but then JP Morgan has been repeatedly charge with “Rigging Large Trader Data” – meaning it has made adjustments to the Data of Producer/Merchant/Processor as well as SWAP Data for Silver… and it does end there…
JPM was accused and charged in the exact same scheme in the Energy Complex.
COT Report trustworthiness?
Whom and What are we to Trust?
It has become a completely manipulated waste in pricing risk.
A patently Fake CPI to protect the Long End of the Bond Curve?
Pension Funds chase yield – in order to meet their foolish projections – they continue to buy the long end of the Curve.
Imagine when the Long End is sold, yes the Fed absorbed a great deal of it to protect the Long End, but plenty of Bonds remain. Operation Twist did not remove Stateside risk, only reduced China’s hoard.
The ESF has no other option than to grab its citizens assets in order to make their masters whole.
Crypto-Currencies are merely a ploy to drive investment into a controllable and seizable form, yes they are the Future of Money. But Central Banks will remove the competition when it is beneficial for them to do so.
We could review BUY/SELL stops – the Algos hunt them up and down. Observing Price by Volume… another useful tool and yet it too is hunted like the plague. It’s Math and you can watch it play out live – Exhaustion is where the Bots show their hand.
And with Silver – they may well be gearing it up… we need to wait and see. The exact same applies to Gold – but it is far more technical as Silver is simply a broken commodity since 2011.
Will this change?
Yes, in time.
How Long – awhile…
In my gut and by the numbers I trust none of this, but playing the game as opposed to being played is our goal.
Fortunately the Algos tip their hand and once in awhile and it provides insights into the higher probability trades by the numbers as that is all a program truly knows… bits/bytes – numbers. And when it comes to running them – they are extremely precise while appearing sloppy. It’s a new perfect pitch every time, swung on and missed.
Their game is best played from a position of highest percentage entries… and when those fail – one must be patient to let their series of up and down complete.
A number of subscribers are surprised with Silver reaching the 17.10 to 17.30 range presented here. I am as well… it looks weak and demand continues to drop Globally – India’s surge was as we suggested – buying ahead of the coming GST’s slice of cake.
Five tiers have been approved for GST: Zero%, 5%, 12%, 18% and 28% for goods and services – lovely. Poverty in India is only going to grow much worse – every effort is being made to destroy the “Black Economy” – you know… the Tax Free, Free Market Economy on the streets and roads of rural India.
The push is on to eliminate money – the second attempt to remove the recenly introduced notes is nothing short of criminal intervention in an Economy that functioned quite well without Governance.
Governments can’t have this – it is not acceptable.
There are a number of important clues ahead. We need to permit them to trade and exercise patience as it is a very dangerous time to speculate. The Broad Markets are controlled in the extreme, well contained – with Karmageddon a ways off.
China will not allow themselves a loss of their buffer – North Korea.
American occupied South Korea would be over-run as an attempt by the US to advance on North Korea is an immediate threat to China’s borders – unless, of course there is a larger game afoot… and that would be… ugly.
Circumstance within our arrangements is deplorable for the majority of Americans – Their futures and those of the unborn consumers are in for an America increasingly facing further decline.
The Debt Ceiling will simply continue to be increased – not without the attendant drama(s). Those are dead ahead and will be used to hunt more Money in the Up/Down.
You may have noticed a more aggressive tone – indeed, things have changed and come alive once again. Summer is ending and a new Season begins after Labor Day.
What has the Monetary Order in store for the Hoi Polloi?
A large dose of Confusion, Fear and Chaos.
Where is it all heading? Clearly not to a welcome destination.
With the latest declaration of a “Trade War” with China – the response will be instructive for the Longer Term horizon. There will be a very large reaction and where it points will provide the short term response in all Markets.
The dial is being turned up to 11 quickly.
Which begs the question why now?
What is the desired outcome?
Where will The United States Capital Stocks head?
How deep will the effect become over the next few months?
Is this the end of the Federal Reserves Liquidity-Fest for the next few years?
We can begin to assess some of the above in thesis and theory based upon History.
91.88 is my Line in the Sand for the Dollar low. Should it break this level and close under it – the potential for further downside increases in probability.
92.50 is acting as support for now.
The Euro would need to break above 119.50 on a closing basis to mover higher – 120 to 125. Irrationality rules as Europe is clearly in dire straights as well.
11750 – 11800 is acting as support – should it fail and close under – the 112s open up with the Gap Fill at the 108s. Volatility has picked up and will continue as the Algos remain on the Hunt for every penny.
The Yen is range bound – it did close its Gap Fill… Caution is warranted now as it spiked and was sold down. The next few weeks should prove to be pivotal for the Yen.
Fed Funds & Capital Flows continue to lead Short Term Rates.
Momentum, Strength and Trend are quite Bearish and have been for some time. The boundaries for Fed Funds is 764.050 – 1220.500.
The Dynamic Yield Curve in retrospect is interesting – as should the Dollar strengthen – something will need to give to prevent the Short End of the Curve from becoming unruly.
In the past – an Equity selloff has been used to contain accidents.
I believe this will no longer perform as intended and the Federal Reserve understands. Yes it will provide short term relief… but it will remain very short in duration.
Capital flows have reversed Globally with China’s Bond Market becoming the largest recipient.
Bond Connect arrived just in time this was no coincidence and why I presented its importance back in July – it represents an exit.
China’s Bond Market is absorbing inflows at a record pace now. It can reverse quickly as a “Trade War” will cause disrupt all movements Globally.
Prior August declines in 2014, 2015 & 2016 were volatile. Large retracements during each of these seasonal declines were typical. Will it be different this time? I do not believe so, Monday’s are typically low volume affairs with participation on the weaker end of the Price action during the week.
I believe tomorrow has the potential to be quite different – participation will have increased as the weekend Headline News did little to calm the already nervous and twitchy Investor herd. A large Gap down overnight would appear to be a high probability.
Always consider the irrational – a best practice. We will need to watch it trade first.
The Dow has remained a leader for months on end. This is atypical as the ES has been the leader and is understood to be such by participants. A divergence began awhile back and it festers to this day. Over the past few sessions the ES has “appeared” to revert to its leadership role, but the time period observed is extremely short. It has been easier to move the Dow/INDU as it has a far narrower component.
Among the Public – the DOW is what is most often mentioned, rarely does one hear the S&P given the same weighting in perception.
The INDU has traded below support @ 21,862.
21851 was the Friday Close.
This indicates a dip in of support by 11 ticks, one tick under the 12 rule.
An extension to lower lows is clearly being suggested.
22,179 (Cash) August High from the 21,496 July Low – provides a HWB (50%) @ 21,837 for Cash.
I’m using Stock Charts as most do not trade Futures and receive the benefit of Fib discipline without confusion.
21,858.32 was the Friday Close.
We need to watch for the Overnight gap down below 21,837 Cash.
21,842 was Friday’s low, 5 ticks away.
2407.70 was the July low – the August high is 2490.87.
The HWB stands @ 2449.25.
Friday’s close – 2441.32 – the ES failed at ST Support.
The Dow remains in divergence for now against the ES loss of support, although the DOW is very close to losing support.
Moving out to a larger draw in time… April 13, 2017 – the low was 2328.96.
A draw from Low to the High of 2490.87 – the HWB would be 2409.90.
2425.53 is the Gap Fill on the Daily.
These are the levels that need to be watched this evening.
Please remember – large retracements are part and parcel of the prior August sell-offs in 2014, 2015 & 2016.
It is quite possible a far larger retracement to the downside is being traded, it simply has not shown itself – yet.
The potential for a far deeper retracement cannot be discounted.
Precious Metals update will be presented later today in Part 2 of this update.