Silver Prices Spike, But…

By Monetary Metals

Silver Prices Spike, But What Demand?

For a few frenzied minutes, while everyone was sleeping, the price of silver spiked 56 cents. Well, at least the West Coast of America was sleeping. It began at 8:30 in New York, where presumably most traders were not sleeping. And of course, it was afternoon here in London (where Monetary Metals just held a seminar). The catalyst was a news release: the non-farm payroll numbers.

$0.56, or 3.8%, is a big move for a whole day. It happened in 15 minutes (and most of the move occurred during 3 distinct minutes).

In addition to the big price move, there is one other fact silver analysts are pondering. There is a real shortage of silver coins.

Let’s digress for a moment. We are not exactly known for our belief in the rumors that often swirl around precious metals. How do we know for sure that coins are scarce? We watch spreads. There is always a spread (called a premium in this market) between coins and spot silver. Here’s a graph of the Eagle premium asked by Monex.

The Silver Coin Premium (Source: Sharelynx)
letter oct 4 coin premium, silver. gold and silver rose on Friday.

The spread has nearly doubled since July. An ounce of silver in the form of an American Eagle is selling for around $4 more than the same metal when it’s in the form of a 1000oz bar. That’s up from about $2. A big change.

Continue reading Silver Prices Spike, But…

NFTRH 363 Out Now

By Biiwii

We have been successfully managing an ‘in motion’ market since the August festivities kicked off.  It is October and Money Managers (NAAIM), Newsletter Writers (Investors Intelligence) are thoroughly spooked and Small Speculators are thoroughly short the market.  It’s a perfect contrarian setup.

Meanwhile, over in Goldbugsville there is a lot going on as well.  NFTRH 363 is 30 pages of commentary and in depth analysis on all of this and also gets its geek on (with the aid of‘s awesome graphical breakdowns) and gets inside the September Payrolls report in order to flesh out the dynamics in a flagging economy.

NFTRH 363, a very helpful market management report if I do say so myself… out now.

nftrh 363

The Two Faces of Stock Market Volatility

By Elliott Wave International

Which one should you heed?

Volatility, volatility, volatility. It’s all the financial world can talk about lately… and, well, for good reason. In the past few months, the world’s stock markets have endured some of the most gut-wrenching price swings since the 2007-2009 financial crisis.

But for many investors, it’s still not clear what this volatility means for the status of the bull market in U.S. stocks.

The reason why said status remains unclear is in large part because the mainstream pundits haven’t exactly been consistent with their punditing. (Note: NOT a real word!)

Take, for example, this summer. Before U.S. stocks fell off the cliff this August, the market was about as volatile as a yoga retreat. The trend was a slow, calm, and steady ascension to a higher self. In fact, the ultimate “fear gauge” known as the CBOE Volatility Index (VIX) had dipped below 12 for the first time since 2014.

Now, according to the usual experts, this extended period of market calm was a bullish sign, as these news items from the time explain:

“Market Volatility Hits 2015 Low… U.S. stock investors haven’t had much need for those crash helmets… It’s looking like the market could be in for many more months of muted swings.” (May 22 CNBC)

“Investors wo paid up for options in anticipation of volatility have lost money in the last three years, so as a result, no one is anxious to do it anymore.” (May 13 Wall Street Journal)

“One of the more bullish indicators has been volatility, and it remains that way. Stocks can continue to advance as long as volatility isn’t trending upward.” (June 23 MarketWatch)

Got it? Low volatility is a bull’s best ally.

But wait! Come August, the yoga-retreat-like market went from “Om” to “Oh My!!” via triple-digit daily leaps and losses (oh yeah, and one quadruple-digit intraday drop on August 24).

So, guess what the experts had to say about this new climate of precipitous price swings? Answer: That it’s also bullish. See:

“Volatility Is Actually Good For the Stock Market’s Returns” (MainStreet August 26)

“Yes, the Markets are Volatile — That’s A Good Thing… Stocks have been too nonvolatile for too long. You don’t get up-a-lot markets, big moves fast, without abundant gyrations. You should expect this bull market to raise its tenacious head soon, bucking off all the fear skeptics can hurt at it.”

So to summarize: Volatility down means “up” for stocks. And — “up” is also “up”?

How about a different take altogether?

See, the mainstream experts did a first-rate job of determining that low volatility is bullish — AFTER years of record calm. And, that high volatility is bullish — AFTER months of record turbulence.

Elliott wave analysis, on the other hand, anticipated a historic reversal from low to high volatility BEFORE the tide turned. Here, the July 2015 Elliott Wave Financial Forecast warned “Here Comes High Volatility”

One gauge of volatility is the CBOE Volatility Index (VIX), a measure of the premium on one-to-three-month S&P options. In essence, the VIX is a sentiment measure, reflecting investors’ current state of emotion, from relative calm to outright panic…

This chart confirms the deep complacency. It shows the open interest in puts relative to calls on the VIX, which indicates the ratio of investors’ open option contracts betting on a VIX move. On June 19, the ratio dropped to 0.248, its second lowest level since February 16, 2007 (0.165), when the financials peaked, as just noted.

Monday’s sell-off appears to be just the start. When the stock market’s decline kicks into high gear, volatility will spike to record levels as will the p/c ratio. The era of low volatility will be replaced by head-spinning stock market moves that will shake global stock markets to their foundation.

stock market volatility

The next chart captures the dramatic explosion that followed:

stock market volatility

So, has a new era of volatility begun? And what does it mean for the U.S. bull market of the past six years?

Read our free report: Pandemonium in the Stock Market
Updated with new charts and analysisNo longer is extreme volatility contained to Greece or China. The massive waves are here in the States, just as our analysts predicted. Learn what’s behind the recent market chaos. Read excerpts and see eye-opening charts from Robert Prechter’s Elliott Wave Theorist, The Financial Forecast and our Short Term Update.

Get your free report now >>

This article was syndicated by Elliott Wave International and was originally published under the headline The Two Faces of Stock Market Volatility. EWI is the world’s largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.

Tinder Box

By Biiwii

tinder box to ignite stock market sentiment rally?We have been using the Tinder Box theme in NFTRH lately.  As in, stock market sentiment is so bleak, so depressed as to be a Tinder Box with the elements to ignite a flame that bounces the market, to clear the over bearishness at least.

We  have successfully followed a plan every step of the way… 1. down from the August breakdown, 2. up on the bounce to SPX 1975 or 2040 (hit 2020) and now 3. down to a test of the October 2014 / August 2015 lows, which is a decision point between a bounce or an entry into a bear market (by making a lower low to October 2014).

We arrive here amid an over bearish sentiment backdrop that is all out of whack with what has actually just been a twitch by the market in the big picture (with bull parameters still intact).  So whether this is the bounce, as it seems to be – and we are getting some follow through despite the volatility – or it comes from a lower level, it is going to happen.

There were the small speculators way too short the market and Investors Intelligence data showing newsletter writers having totally abandoned the trend they rode for eons (well, since 2011 anyway).  They are now advising extreme bearishness to subscribers.  Here’s the latest graphic on that, courtesy of Doctor Ed and the Daily Shot.

investors intelligence bull bear ratio, stock market sentiment way over bearish.

I am the guy that’s often jumping up and down about how unhealthy policy is and frankly, how immoral I consider it to be (calling Robin Hood!).  But morals and even right and wrong are different from market sentiment and market prices.  Regardless of how bearish things have gotten in the markets lately, the thing directly above is a massive contrarian bullish indicator, to the tune of lows only seen in the depths of previous bear markets.  So too was the small specs shorting data.

So as we noted in NFTRH, a bounce is coming and by the looks of things, it may already be here barring a reversal, which is always in play with the crazy in-day volatility this market has displayed since August.

s&p 500, stock market sentiment bounce?

High Yield Bear Market

By Biiwii

No ifs, ands or buts… Junk Bonds (high yield) have entered a bear market as they just broke down below the October 2014 lows, which is the bear parameter for the stock market as well.  JNK is similar… worse actually.

Never mind 20% rules about bear markets, this is now a downtrend on an intermediate basis and cyclical bear market (barring some sort of reversal stimulant, like policy making designed to take us further down the Rabbit Hole of debt, leverage and speculation).  Even if this bounces, it would have to get all the way above 89 to neutralize the trend.

[edit] Yes, I know much of this is related to the oil and energy bear market, but how long do we make excuses for it?  After all, oil’s rise to $140 a barrel was a massive promotion also spurred on by policy making, as part of the big inflation trade bubble that blew out years ago.



Playing Swami on Jobs

By Biiwii

[edit] +142,000… (BLS release).  I’ll not give up my day job as a market manager.  They’d laugh me right out of the Sacred Society of Gurus.  Hey, at least the Squid was worse; I read a blurb that Goldman predicted +215,000. 

I am the last person you will see playing Swami on important matters like when will the stock market’s bull end or when will gold’s bear market end.  One remains above the October 2014 lows and is thus in a biggest picture up trend and the other is still in a down trend, current bounce aside.

Those are simple parameters that cannot be argued with.  You add in some tools, like gold ratios or bond relationships or sentiment profiles, etc. and you can add in probabilities to help form your narrative.

But this whole Swami thing?  This ‘I burnished my reputation by calling the XYZ top or the ABC bottom’?  That’s all promotion and pandering to peoples’ inner casino patron.  I know I get obnoxious in hammering away at these guys and that is because they are promoters of a myth that any one genius is better at ‘calling’ the markets than the average genius.

The whole idea of making calls or predictions is flat out infantile if you ask me.  It is much more rational to proceed in the boring fashion of carving out a probabilities-based plan and being open to revising it.

Preamble aside, I now play Swami again on the September Payrolls data because I figure hey, it can’t hurt anyone the way 50% of the gurus can at any given time (there are always really smart people on either side of the prediction game for a given market).

Considering that HP just laid off 32,500 people in what seems more a strategic than economic related move, and that jobless claims continue to burrow southward and that the good ship America is fully capable of at least temporarily dismissing its declining manufacturing activity (and hiring), focusing on the strong dollar’s services consumption benefits… drum roll please… +197,000 with the notion that HP skews the thing to the negative side but is not a fundamental consideration.

jobless claims

Deflation: It’s Been a Stealth Move

By Elliott Wave International

Elliott Wave International’s European Financial Forecast Editor discusses deflation

In this new interview, Elliott Wave International’s Brian Whitmer explains the indirect connection between Europe’s volatility and deflation. Find out how Brian’s advising his subscribers prepare for deflation.

Not familiar with deflation? Learn more about how you can survive and prosper during deflation from the world’s leading deflationists — FREE.

Learn about the Unexpected But Imminent and Grave Risk to Your Portfolio PLUS 29 Specific Forecasts for Stocks, Real Estate, Gold, New Cultural Trends — and More (excerpted from Prechter’s New York Times bestseller Conquer the Crash — You Can Survive and Prosper in a Deflationary Depression)

Complete your free Club EWI profile to get instant access to this new eBook.

This article was syndicated by Elliott Wave International and was originally published under the headline (Interview) Deflation: It’s Been a Stealth Move. EWI is the world’s largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.

Correction on Yields

By Biiwii

Ref:  The ill-conceived post Yields Making a Signal? in which my brain cramped up, conspired with my eyeballs, and failed me.

The answer is no, they are not making a signal because with the 2yr yield declining less than the 10yr, the curve is still under pressure.  It still implies a flight to liquidity of bonds, a somewhat risk ‘OFF’ environment and is consistent with a deflationary backdrop, but it is not at all beneficial to gold as was noted in the previous post.

Again, my apologies.  I edited the previous post but wanted to put up a new one for certain entities that link or pull content.

10 year yield, 2 year yield

Yields Making a Signal?

By Biiwii

[edit] Aye aye aye…  distracted and hurried I looked at the chart wrong.  Everything written below is opposite to reality (except the deflation part, as both yields decline in the short-term).  I misread my own chart and thought the 2 was breaking down and not the 10.  Unbelievable.  I need a vacation, or a break from my in-day schedule, which is hectic lately.  Please accept the apologies of an embarrassed blogger.  I guess over years and years things like this are going to happen once in a while. 

The yield curve is still doing no better than potentially bottoming, but when viewed nominally and side by side, the 10 and 2 interest rates appear to be considering different courses.  The 10 is still up trending and the 2 is breaking down.

That would of course be a positive for the yield spread and a negative for most other assets (esp. with the curve rising in a declining short-term yields scenario) and could be a positive for gold.  Imagine if long-term yields were to rise (not predicting it, merely riffing) and short-term yields were to decline?  Wow.  For now, I’d just settle for a curve rising under the pain of short yields dropping faster than long yields (i.e. DEFLATION!!!!).  😉

2 year yield and 10 year yield, interest rates

[edit] By ‘breaking down’ I mean the 2015 up channel on the 2 year.  An actual down trend would not be indicated until it makes a lower low to April.

Deflation is Here!!!!

By Biiwii

In case you were not suitably moved by the post’s title…


I just wanted you to be sure to know that deflation is here.  Just like you used to know that…


You see, many of the same people who used to scare the crap out of us to prepare for the coming blow off in inflation (as in El Hyper) are now promoting deflation, just to make sure we are well up to speed with the current thinking.

Got to hand it to Prechter; he of the infinite patience promoted deflation through thick and thin.  But it is a sure sign that something is readying for change when those who made their bones schooling us on one thing, go whole hog to its opposite after never seriously entertaining its viability until well after it became obvious fact.

Deflation Warning: The Next Wave

It is just one tool, but I think a lot of answers reside in the Gold-Silver ratio, which continues in its uptrend during this deflationary phase.  But remember our big picture chart has its limits.  Registering the low-mid 80’s to 90 (which could still be many months out) will likely coincide with the next inflationary episode.  Meanwhile, Prechter is getting a lot of weight on his side of the boat.

gold-silver ratio, inflation and deflation

Spending Our Grandchildren’s Money

By Tom McClellan

Surpluses lead to rising unemployment, federal debt
October 1, 2015

The presidential debate schedules have been announced, with a total of 6 Democratic debates scheduled between October 2015 and March 2016 on CNN, CBS, ABC, NBC, Univision, and PBS (but not on Fox, what a surprise!).  The Republicans have 9 more debates scheduled, on top of the two already aired.

None of the networks has called me yet to ask what questions I would pose.  But if I were given the chance, I would like to ask all of the candidates a few questions about what I view as the most pressing problem facing the USA, which is the $18.1 trillion federal debt.  So here are my questions, starting with one about the chart above.

Continue reading Spending Our Grandchildren’s Money