What Difference Does ‘Some’ Make?

By Alhambra Investment Partners

At This Point, What Difference Does ‘Some’ Make?

Despite being the last FOMC meeting before the ever-expected rate hike in September , there was a whole bunch of nothing in markets before and even after the policy statement. Even the typical knee-jerk was less than on prior meetings. Maybe traders have come to expect so very little from the policy statement, focusing more on the inanities and silliness of the broader minutes. Whatever the policy thinking, markets were not much moved.

If anything, there was the familiar “dollar” bias of the past few weeks, which is not a positive sign. Copper remained slightly higher throughout the session, with August futures picking up a penny to stay above $2.40, unmatched to the 13:00 CT statement issuance. WTI futures, on the other hand, gave back half the gains accrued at the open (likely more so on production cuts) without really much volatility – a negative drift rather than a forceful execution of any change in policy expectations.

ABOOK July 2015 WTIAug15 Continue reading What Difference Does ‘Some’ Make?

Some Stock Market Leaders Wobbling

By Biiwii

As the bid shifts back to the venerable likes of the S&P 500, certain momo leaders like the Biotechs and the Internets are hiccuping and others, like the Semi’s and Small Caps, are downright on the verge of breaking down.

SOX-SPX

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RUT-SPX

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While BKX-SPX flounders around trying to get its leadership back in alignment with interest rates, which we knew it would do eventually after going the wrong way the previous 2 weeks as yields dropped.

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More Ritholtz on Gold, and Another Response

By Biiwii

Anyone who has been bearish on gold for the last 4 years has been right.  They have been right in Euros and though the trend appears to have been gently changing over the last year or two, they have been right in Canada & Aussie (i.e. commodity currencies) dollars as well.  Certainly, they have been right that gold as measured in most global stock markets has been (and remains) bearish.

They have also been right in that gold as a hedge against the kind of inflation that global policy makers have promoted non-stop for years now, has utterly failed.  And for gold as an insurance and value asset, a small phase like 4 years is like a blip.  Yet still, so many people throw their hats into the ring on gold, constantly micro-managing its every twist and turn.

In 2011 it was what we used to call the “Gold Generals” touting hyper inflation, even as the second to last arrow was about to be inserted on our ‘Continuum’ © chart, indicating that anyone taking an aggressive inflationary stance in their investments was also taking a big chance that it would be different this time and the Continuum would break the limiter AKA the 100 month EMA.  It wasn’t and it didn’t.

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This brings me to Barry Ritholtz again.  His piece at Bloomberg titled Good Luck Bargain Hunting for Gold Miners at Bloomberg is more about the valuations of the miners vs. the metal, but it is some of the wording that I want to address here.

The primary reason is straightforward: Gold is bought and sold based on a narrative that has turned out to be patently untrue. As we move further away from the great credit crisis of 2008-09, the global financial system has stabilized, undercutting the appeal of gold as a hedge against catastrophe. The U.S. economy is improving, as are those of many other countries. The wild inflation and collapse of the U.S. dollar that was going to lead to the demise of civilization and make gold an essential for investors? None of that has happened. Instead the world has low inflation or even deflation and the dollar, the world’s reserve currency, has risen to multiyear highs.

He is right to criticize the hyper inflationist ‘death of the dollar’ contingent of the gold bug “community”, itself a word that belies group-think and susceptibility to bias reinforcement by the group.  Did you catch the little ‘Overt Inflationary Effects’ planet in our handy Macrocosm graphic (don’t take its planetary guide literally, it was mostly for fun) from last weekend?  There is a reason that I assigned that gold input to the second tiniest planet in the Macrocosm; because it was a wrong headed thesis when Uranium, Crude Oil, Copper and Silver were proven to be bubbles (with relentless inflationist touting of the ‘resources’ and ‘hard assets’ sectors in each case) and it is obviously still wrong now.

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This is not to say that inflation cannot be a fundamental input for gold.  It has often been a major input.  But on this cycle the inflation is not manifesting in rising prices, at least not in relation to the stock market, investment in which can be seen as a ‘hedge’ against price inflation bubbling up in certain services sectors of the economy.

The commodity bubble is all done.  The inflation, with the aid of a persistent and powerful global deflationary force, is working in a ‘Goldilocks’ manner and flowing into risk ‘ON’ speculation in paper of all kinds and in some hard assets, just not the kinds that traditional commodity and resources gurus had foreseen.  Mainly, the public is doing just fine buying and selling appreciating homes.  Who needs several tons of Copper sitting in the garage?

Anyway, back to Barry Ritholtz…

“Gold is bought and sold based on a narrative that has turned out to be patently untrue”

Agreed; the majority of gold bugs have believed the wrong narrative.  It was wrong in 2008 and it was wrong again in 2011, and you are using an incorrect narrative as the foundation of your stance in these mainstream media articles that are so cartoonish even the public can understand it.

“the global financial system has stabilized, undercutting the appeal of gold as a hedge against catastrophe”

Again, agreed.  The system has stabilized but how many times do we have to review this chart before we can all agree that it has taken extraordinary (and incredibly, ongoing) measures with the implication being that neither you Barry, nor I, know how the fallout is going to go based on embedded distortions that no one can fully understand?  You call gold a “hedge against catastrophe”.  I have never called it that because I don’t see it that way.  I have always called it monetary value (which can fluctuate depending on market sentiment) and insurance.  Period.

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“The wild inflation and collapse of the U.S. dollar that was going to lead to the demise of civilization and make gold an essential for investors? None of that has happened.”

Barry (not that you read this little out of the mainstream website, but work with me here), do you see the larger planets in the Macrocosm above?  They represent the kinds of things that drive people to liquidity and a risk ‘OFF’ stance.  What is the ultimate risk ‘OFF’ hard asset in a monetary world that while still working fine, has gone utterly mad in its pushing of traditional policy boundaries?  Why, it’s gold.  But what is the first and most intense repository of that liquidity?  It is none other than dear old Uncle Buck, for US citizens and the way things are currently structured, much of the rest of the world as well.

I have criticized the ‘death of the dollar’ and ‘hard assets/resources’ promotions every which way from Sunday for years now and it is due to a view that before the US dollar falls apart it is likely to totally annihilate hyperinflationists first (per Prechter and Hoye to name two).  Hence the big planets above are economic contraction, gold rising vs. stock markets, confidence declining and yield spreads indicating systemic stress (inflationary or deflationary).  This is why I have remained completely out of the way of the gold sector destruction for 4 years now, with my market report well in tune with that stance.

So yes Barry, “none of that has happened”; thankfully, or I’d have been wrong in my own thinking (always a possibility).  But I have seen nothing to dissuade me yet that I am, as a once and future gold bull (and constant valuer of gold as insurance), on the right course.  Several macro fundamental aspects need to come into line and we need to find a bottom technically, sure.  But your article adds another input to the bullish camp because you are teaching people who should not be in the gold market (mainstream public) at a real bottom lessons based on the same incorrect assumptions made by the Gold Bug “community” that you seem to provoke.

Maybe you even enjoy stirring the pot and getting the hate mail.  I can relate to that.  While he did not give me permission to reprint his email, a long-term gold bull emailed me the other day noting my “subjective, gold bashing rhetoric” and my “delusional, fiat money bliss” (ha ha ha).  This despite the fact that he and I are of the same long-term orientation.  It’s just that our inputs are different and so he sees me as basically one step above Satan (what does that make you Barry?  Just kidding, but  you get my point).

Misconceptions are everywhere and the stuff you base your articles on do not help that situation.  I write that as the other side of the coin that gives much critique to misconceived pro-gold promotions.

Crude Oil: Will the Decline Continue?

By Elliott Wave International

Elliott Wave International’s Chief Energy Analyst tells you what he sees next for crude

In this new interview, Steve Craig, editor of Elliott Wave International’s Energy Pro Service, shows you what extreme readings in some of his market indicators mean for crude from here.

Watch this interview now for a unique take on this key energy market.


Free Report: “Peak Oil” — And Other Ways Crude Oil Fooled Almost Everyone

These excerpts from Robert Prechter’s Elliott Wave Theorist highlight the flaws in the conventional approach to forecasting oil prices — and show you why oil fooled almost everyone.

Complete your free Club EWI profile and get instant access to this resource >>

This article was syndicated by Elliott Wave International and was originally published under the headline (Interview, 4:58 min.) Crude Oil: Will the Decline Continue?. 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.

China 50 vs. SPX

By Biiwii

I had imagined a situation in the China 25 (now 50) vs. the S&P 500 that called for China to either rise more than the US or decline less.  It was based on this weekly chart and its moving average ‘up’ signal which, while still in effect has turned out to be a load of crap.  You know, fair disclosure and all… got to put the bad calls up along with the good ones.  So there’s a bad one for you.

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SPX Big Picture

By Biiwii

It would be best if you’ll click the chart and blow it up to its full size.  It’s fairly huge and it’s fun to look at.

This chart was produced last year in NFTRH as MACD was rounding into a topping situation.  What I found interesting was that in the last two instances (Humps 1 & 2) a down-triggered monthly MACD served to drop SPX to the EMA 20, providing the refreshment that gave fuel to the dynamic final upside for the stock market as the ultimate down-trigger and liquidation came well over a year later and from a much higher price.

What is different this time is that price has not done squat (save for the hard stab down during last October’s flash correction and reversal), doing all it can do to touch the EMA 10 while MACD makes a stronger looking initial bearish signal than it did on the two previous cycles.

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The way I interpret it is that in resisting any price destruction while MACD continues to roll it is probably a good idea to view 2000 and 2007 as cool comps but to realize this thing, built by will of man (and woman) per the chart below, is its own animal fully capable of attaining its targets, which once seemed ridiculous, or imploding for a test of major support or worse.

Humps 1 & 2 were attended by at least some semblance of monetary stewardship.  Hump #3?  Not so much.

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So our post concludes, hey SPX can either rise a long way or drop a long way.  Sounds about right because we are in uncharted territory.  But as it stands now, that is an ugly looking MACD.

Same Old Same Old

By Doug Noland

Credit Bubble Bulletin

A Friday Bloomberg headline is a good place to begin this week’s CBB: “Emerging Market Currencies Tumble to Record Low in ‘Violent’ Selloff.”

From Ye Xie’s Bloomberg article: “Emerging-market currencies are in free fall. An index of the major developing-nation currencies fell to an all-time low this week, extending its drop over the past year to 19%, according to data compiled by Bloomberg going back to 1999. The Russian ruble, Colombia’s peso and the Brazilian real have fallen more than 30% over the past year for some of the worst global selloffs.”

Other notable currency headlines this week: Thai “Baht Posts Worst Weekly Decline Since 2007…” “Indian Rupee Completes Biggest Weekly Decline in Three Months.” “Asia Currencies Decline as Chinese Data Compounds Growth Concern.” “Ringgit Forwards Extend Weekly Losses as Oil Enters Bear Market.” “Taiwan’s Dollar Posts Third Weekly Drop on Signs Growth Slowing.” “Commodity Currencies at Multiyear Lows.”

Continue reading Same Old Same Old

Commodities Beat Down Continues

By Michael Ashton

The recent commodities sell-off has been breathtaking. This is especially true since the most-recent downturn occurred from a level where the expected future returns from commodity index investment were reasonably good – and, as a spread above expected equity or bond returns, probably around the best levels ever.

But investors have a strong tendency to use the current level, rather than some esoteric measure of value, as the level from which expected market moves are evaluated. What I mean by that is this: in theory, if some event happens in the capital markets, the reaction in the market should depend on whether that event has already been “discounted” in the current price. That is, if we are all expecting Microsoft to raise its dividend, then the price of Microsoft should reflect that change already, and when it subsequently actually happens it should have no effect on price. Indeed, if the market has overestimated the change in fundamental value, then the price of Microsoft should retrace somewhat when the news is actually announced. From that, we get the old saw that one should “buy the rumor, sell the news.”

Continue reading Commodities Beat Down Continues

Around the Web

By Biiwii

Market Analysis, News & Opinion From Around the Web…

 

GDX: Steep Declines & Buying Go Together

By Steve Saville

Steep Price Declines and Increased Buying Often Go Together

In numerous TSI commentaries over the years I’ve written about the confusion in the minds of many analysts regarding what constitutes gold supply and the relationship between supply, demand and price in the gold market. I’ve also covered the issue several times at the TSI Blog, most recently on 24th June in the post titled “More confusion about gold demand“. I’m not going to delve into this subject matter again today other than to use the example of last Monday’s trading in GDX (Gold Miners ETF) shares to further explain a point made in the past.

On Monday 20th July the GDX price fell by about 10% on record volume of 170M shares. Since every transaction involves both a purchase and a sale, more GDX shares were bought last Monday than on any other single day in this ETF’s history. And yet, this massive increase in buying occurred in parallel with a large price decline. How could this be?

Obviously, the large price decline CAUSED the massive increase in buying. Many holders of GDX shares were eager to get out and the price had to fall as far as it did to attract sufficient new buying to restore the supply-demand balance.

It’s normal for large and fast price declines in the major financial markets to be accompanied by unusually-high trading volumes, meaning that it’s normal for large and fast price declines in the major financial markets to be accompanied by increased BUYING. Most people understand this. So why is it held up as evidence that something nefarious is happening whenever an increase in gold buying accompanies a large decline in the gold price?

I can only come up with two plausible explanations. One is that many analysts and commentators switch off their brains before pontificating about gold. The other is that the relationship between gold supply, demand and price is deliberately presented in a misleading way to promote an agenda. I suspect that the former explanation applies in most cases, meaning that in most cases there’s probably more ignorance than malice involved.

Macrocosmic NFTRH 353

By Biiwii

Friday was a microcosm of the macrocosmic alignment that would need to be in place for a long-term bullish view of the gold sector.  We update the precious metals and the rest of the kit and caboodle too.

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