Flattened Out

By Biiwii

The Stock market is at do or die support

[edit] I just realized that if this chart were in text form instead of graphical form it would say “okay Janet, here I sit… so what was it you were planning on saying tomorrow?  Hmmm?”

With the S&P 500 right at do-or-die support per this chart (absolutely critical, but not particularly strong support), I have done more flattening out after yesterday’s post noting a short cover of GS and a sale of TLT, each very profitable positions.  I just don’t think it’s a market to be caught gazing at your successes in, unless you want to get your eyeballs ripped out.

s&p 500 weekly chart

So shorts on the Pigs (KBE) and the Emerging Markets (via EEV) were also covered today, leaving two moderate and un-leveraged short positions open.

As for the gold sector, I have gotten too many emails from people getting nervous about whether or not to pile in.  ‘No, please have patience on taking new positions, the sector is over bought’ was the gist of my replies.  We covered the sector extensively in an NFTRH update last night.  I took some profits there and hedged the rest.

Cash is my favorite thing right at the moment, after noting in NFTRH 381 that I considered my own cash position to be too low.  Now I am more comfy.

We also covered the stock market and a bit more on gold in an update today.  We talked about remaining calm, patient and realizing that 2016 is going to be a year filled with opportunity both long and short across multiple markets.  There will also be opportunities to preserve gains along the way, and that is what this week is shaping up to be.

As for the chart above, that is one ugly mess and it must not make and hold a lower low to January; and that is exactly the point.

The Scariest Stock Market Chart in the World

By Biiwii

As posted at NFTRH.com

Short-term volatility implies anything can happen; long-term the implication of this chart is very bearish unless bond market dynamics are err, addressed

The title is a paraphrase of “the scariest gold chart in the world” (target below $400) someone sent me in 2009, just before the gold price began its $900 per ounce upward journey. So that’s the contrarian caveat and indeed, I hesitate to write bearish things at a time when small speculators are way too short the market and everybody already seems to know how bearish things are.

But the chart is the chart and without further ado, meet the scariest US stock market chart in the world. I was ready to try a long on the SPY yesterday, but decided to wait because of this (being posted here because it never made it into NFTRH 381’s already bloated 42 pages) chart and some others in the face of which I just could not rationalize a bullish stance. Capital preservation is job 1 now, not bullish speculation. I’ll let the bulls prove something first.

Continue reading The Scariest Stock Market Chart in the World

They Broke the Silver Fix

By Monetary Metals

Tactical manipulations can occur in the silver price

Part I

Last Thursday, January 28, there was a flash crash on the price chart for silver. Here is a graph of the price action.

Silver Fix Price
The Price of Silver, Jan 28 (All times GMT)

If you read more about it, you will see that there was an irregularity around the silver fix. At the time, the spot price was around $14.40. The fix was set at $13.58. This is a major deviation.

Continue reading They Broke the Silver Fix

Covering the Squid

By Biiwii

I am covering the short on Goldman Sachs not because I don’t think it’s going lower (I do), but because I am all about balance and I was out of balance and today just felt like a time to take profit.  I am up nicely over the last week and now it is about getting back into equilibrium (and raising cash).  I don’t want to be heavy short.  I want cash, risk ‘off’ vehicles (like T bonds*), gold mining (now with partial hedging) and a ‘rest easy’ mindset as things play out.

GS had done a turn as a successful NFTRH+ long and then was highlighted as a bear position in the NFTRH+ notes segment of weekly reports.  The measurement on the chart is around 135.

* [edit] Long-term T bond position too good to pass up profit.  Fellow NFTRH+’er TLT is sold for a good profit and a month’s worth of dividend income to boot.  Still holding TIP for reasons illustrated by Michael Ashton, the ‘inflation guy’ in a post a while back.

gs weekly chart

Macro Changes

By Biiwii

As posted at NFTRH

The following is the opening segment of this week’s edition of Notes From the Rabbit Hole, NFTRH 381…

A picture is worth 4-plus years and thousands of words, and the picture below has a lot to say. I’ll say some words as well, since I have kept them bottled up for years in an effort to make sure we operate with discipline as opposed to gold bug style emotion.

The bear market and subsequent inflation-fueled credit bubble early last decade was when I first started paying close attention to macro markets (as opposed to stock trading, which I had done for a few years prior) and how they operate. Having seen well paid professionals lose half of my IRA in 2002, I took over all of our finances and never looked back. But I needed to understand how markets worked and that has been a challenging and rewarding endeavor, not to mention an ongoing learning experience.

I use talky charts like the one below because I need to be talked to, or coached. But I need this coaching to be 100% honest and accurate, not the ranting of some biased lunatic who would have me buy in to his world view. The chart below honestly shows exactly what gold did vs. the S&P 500 during the 2007-2009 US crisis, the Euro crisis and subsequently, the aftermath of unprecedented policy interference in financial markets.

Continue reading Macro Changes

The Adjustment Cycle

By Doug Noland

Credit Bubble Bulletin: The Adjustment Cycle

Crude has rallied about 5% off of last month’s low. The Brazilian real closed Friday at 3.90, having posted a decent rally from the January closing low of 4.16 to the dollar. Brazilian equities have bounced about 10%. This week saw Brazil’s currency rally 2.4%. In general, EM currencies and equities have somewhat stabilized, notably outperforming this week. Stocks posted gains in Brazil, Turkey and China. From Bloomberg: “Yuan in Longest Weekly Rally Since 2014 as China Raises Rhetoric.” The dollar index this week dropped 2.6%, which most would have expected to lend some market support.

If crude, commodities, EM, the strong dollar and the weak yuan were weighing on global market confidence, why is it that global financial stocks have of late taken such a disconcerting turn for the worse?

Continue reading The Adjustment Cycle

Fed’s Debt is Interest Free

By Steve Saville

The US government debt held by the Fed is interest free

There are things that monetary enthusiasts* such as me take for granted that are not widely understood. In an email discussion with a friend and fellow monetary enthusiast it occurred to me that the treatment of interest paid on the debt held by the Fed might be one of those things. That’s the reason for this short post.

The Fed currently has about 4.2 trillion dollars of debt securities on its balance sheet, about 2.5 trillion dollars of which are US Treasury securities. The interest that the Fed earns on all of its debt securities — less a relatively small amount to cover the Fed’s own operating expenses — gets paid into the General Account of the US Treasury. In other words, the interest that the US government pays on the Treasury bonds, notes and bills held by the Fed gets returned to the government. This effectively means that any US government debt held by the Fed is interest free.

An implication is that if government debt is held by the Fed, the interest rate on the debt is irrelevant. An interest rate of 20% is essentially no different to an interest rate of 1%, since whatever is paid by the government returns to the government.

Another implication is that when considering what-if interest-rate scenarios and the ability of the US government to meet its financial obligations under the different scenarios, the assumption should be made that the portion of the debt held by the Fed has an effective interest rate of zero. For example, let’s say that at some point in the distant future the average interest rate on the US government’s debt has risen to 10% and the Fed owns 80% of the debt. In this hypothetical — but not completely farfetched — situation, the effective average interest rate on the US government’s debt would only be 2%.

The bottom line is that it’s not so much the Fed’s interest-rate suppression that benefits the US government, it’s the fact that the interest-rate suppression is conducted via the large-scale accumulation of the government’s debt.

  • People who spend significant time every week tabulating/charting monetary statistics and poring over reports published by the US Federal Reserve and other central banks.

Apple’s Trek to the Ordinary

By Tim Knight

TK takes us back to the future with Apple (AAPL)

Over the past ten months, in steps almost too small to be noticed by the mass media, Apple has shed over two hundred billion dollars in value. That’s nearly one quarter of a trillion dollars in wealth which would have fed shareholder dreams of new houses, new boats, new jewelry, and mink coats, but……….it’s gone.

The thing is, I think the slide is far, far from over. I wrote a piece earlier this year (which got picked up by some of the mainstream press) predicting that Apple would fall to the mid-70s. We’re already heading into the low 90s, so my goofy prediction is seeming a little less insane.

0126-gloomy, apple (AAPL)

Of course, it wasn’t that long ago that buying Apple was a “no brainer” – indeed, a “bargain.” God knows it wasn’t hungry for media attention. This is the unedited home page of MarketWatch a while back:

0910-aapl

So what’s behind this fall? Lots of things (not the least of which is a wildly-overvalued market which, ultimately, will pound the Dow back into 4-digit land), but for Apple specifically, I think it’s simple: the magic is gone again.

Continue reading Apple’s Trek to the Ordinary

NFTRH 381 Out Now

By Biiwii

I began the day fighting a glitch with Gmail’s contacts merge function for 3 hours and then finished up NFTRH 381.  So no promo today.  I am cooked, especially considering 42 pages of market stuff.  NFTRH 381 is out now, it’s good and I’m too pooped to explain why.

nftrh 381