Whose Tightening is it Anyway?

By Jeffrey Snider

I suppose it’s only fair. After all, they started it. Earlier in the year, Federal Reserve officials including Chairman Jay Powell suggested it was all Trump’s fault. The abrupt difficulties presented by the dollar were, they said, the result of tax cuts swelling the deficit and thereby threatening capital markets with a “deluge” of Treasury bills to digest.

This past weekend, apparently, the shoe was on the other foot. The President was, it seems, under the impression, according to the Wall Street Journal, that Powell was in favor of “cheap money” which is something any President would like. This now “hawkish” stance under the new Chairman is not to Trump’s taste.

President Trump told donors he is unhappy with the Federal Reserve’s recent moves to raise interest rates and raised doubts about the man he placed in charge of the institution, Jerome Powell, people in attendance at a fundraising event said.

It seems quite obvious that the dollar is starting to grab everyone’s attention again. The President has been up to now quite firm about his own economic performance; just look at that sparkling unemployment rate! Suddenly, it’s all Powell’s fault?

Continue reading Whose Tightening is it Anyway?

Momentum Paints A Clear Picture For Stocks

By Chris Ciovacco

BULL MARKETS BEND BUT DON’T BREAK

Bull markets are ultimately about the ability to sustain long-term momentum during inevitable corrections and pullbacks.  Stockcharts.com describes MACD as “one of the simplest and most effective momentum indicators available”.  Monthly MACD helps us monitor long-term bullish momentum.  In the 2007-2008 case, after the market’s bullish momentum had been bending for some time, it eventually broke after the S&P 500 peaked in October 2007.  Notice how price made a series of lower monthly lows and MACD experienced a bearish cross (red arrow below).  The chart below is what the early stages of a bear market looks like; the S&P 500 did not find a bottom until March 2009.

short-takes-chris-ciovacco-spx-2008-macd.png

1995-1996 CASE

The bend but don’t break concept applied to the pullback and consolidation that occurred in 1996 following a strong rally in 1995.   The monthly chart stayed inside the orange box for seven months (consolidation) and eventually made a new monthly closing high.  Notice how monthly MACD stumbled a bit, but never experienced a bearish cross (green arrow below).  The 1996 case was cited in March of this year in an effort to make the try to be patient case.

Continue reading Momentum Paints A Clear Picture For Stocks

Dumbass Biz Wires on Copper and La Escondida

By Otto Rock

It takes a special sort of ignorance to call the effects of a strike at La Escondida (BHP et al, world’s biggest copper mine) wrong all the way down. Then switch and get it wrong all the way back up. But fear not, you too can find that brand of dumbassery any time you open the mining trade papers.

Facts: The 2017 strike didn’t affect copper prices, the 2018 threatened strike did not affect copper prices, the end of the threat is not affecting copper prices. And if you don’t understand why, perhaps you too should stop reading the morons who pretend to be thought leaders in the industry.

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Creep

By Tim Knight

Before I begin, I want to mention we’ve substantially improved the quality and speed of our real-time index data, so you SlopeCharts users will immediately start enjoying the improvement.

I promise to only mention it a few thousand more times, but please note my new book has out (which just got its first review!) so please check it out.

As for the markets, it’s pretty much what I predicted/dreaded last Friday, which is a continuation of the “melt up”. Barring some shock event (e.g. China announces the U.S. can go screw itself, and the trade war is back on) it seems the natural path of the market is simply going to be higher – – – which, let’s face it, makes sense, since it has only been going continuously up for the past nine years. Volatility is, once again, completely dead, which makes for a market more boring than words can describe:

The Dow Jones Composite shows, via that green tint, how swiftly the Turkish debacle was dispatched. We are just one decent day to new LIFETIME highs.

Continue reading Creep

10-Yr US Treasury Notes Net Non-Commercial Futures Positions Hit All-time Negative

By Anthony B. Sanders

10Y-2Y Slope Flattens To Lowest Since 2007

The 10-Yr US Treasury Notes Net Non-Commercial Futures Positions just hit the all-time negative.

netshortss.png

And the 10Y-2Y Treasury yield curve slope just flattened to the lowest level since 2007.

Continue reading 10-Yr US Treasury Notes Net Non-Commercial Futures Positions Hit All-time Negative

Weekly S&P 500 #ChartStorm

By Callum Thomas

Those that follow my personal account on Twitter will be familiar with my weekly S&P 500 #ChartStorm in which I pick out 10 charts on the S&P 500 to tweet. Typically I’ll pick a couple of themes and hammer them home with the charts, but sometimes it’s just a selection of charts that will add to your perspective and help inform your own view – whether its bearish, bullish, or something else!

The purpose of this note is to add some extra context beyond the 140 characters of Twitter. It’s worth noting that the aim of the #ChartStorm isn’t necessarily to arrive at a certain view but to highlight charts and themes worth paying attention to.

So here’s the another S&P 500 #ChartStorm write-up!

1. S&P500 Long Term Earnings Growth Estimates: First up is a look at a peculiar yet astonishing indicator, the Thomson Reuters IBES consensus estimate of long term earnings growth for the S&P500.  The main point here is that it’s at the highest level since the dot com boom.  Back then it was euphoria about the new economy, now it’s the tax cut extension from the previous reflation turnaround.  I would say it shows a certain element of euphoria on the earnings outlook, and the question is how long this higher level of expected growth can hold up? (and how much higher can it get from here?).

Bottom line: Long term earnings growth estimates are at the highest point since the dot com bubble.

Continue reading Weekly S&P 500 #ChartStorm

Stuporman

By Tim Knight

It appears that the $420 “funding secured” taking-Tesla-private transaction is as real, genuine, and authentic as the hair on top of Elon Musk’s head.

Over the past couple of years, it’s been fairly clear that there’s been some sort of insane ADHD action going on. First there was Tesla. Then there was SpaceX. Then SolarCity. And then Tesla bought SolarCity. And then he decided to revolution transportation with the HyperLoop. And next he decided he needed tunnels to make this happen, so he created The Boring Company (I am not typing these off a sheet; this is strictly from memory).

Continue reading Stuporman

In Next Crisis, Gold Won’t Drop Like 2008, Report

By Keith Weiner

Last week, we discussed the tension between forces pushing the dollar up and down (measured in gold—you cannot measure the dollar in terms of its derivatives such as euro, pound, yen, and yuan). And we gave short shrift to the forces pushing the dollar down. We said only that to own a dollar is to be a creditor. And if the debtors seem in imminent danger of default, then creditors should want to escape this risk. The dollar is not redeemable so there is no way to be paid in full for the debt represented by the dollars. The only way to opt out of credit risk entirely is to trade one’s credit paper for gold. That is to buy gold. We said that Federal Reserve insolvency is not imminent.

And then we went on to the case for a rising dollar. It was good timing, as the dollar went up from 25.7 milligrams of gold to 26.5 by Thursday (that’s a drop from $1,210 to $1,175 for those of you who insist on measuring steel meter sticks with rubber bands, lighthouses from the decks of ships that are slowly sinking in stormy seas, and gold in dollars).

Traders’ Consensus

This week, Keith sat at a table with a hedge fund trader. The trader does not think of gold as money, is not into gold other than as a trade along with all other asset classes, and probably would not describe himself even as a libertarian or Austrian. He is, however, very smart and very good at what he does.

Continue reading In Next Crisis, Gold Won’t Drop Like 2008, Report

Sentiment Pitfalls, the Gold Edition

By Steve Saville

In a couple of blog posts last year I discussed the limitations of sentiment as a market timing tool. With the most reliable sentiment indicators now revealing extreme negativity towards gold, it’s timely to revisit this topic using the current gold market situation as an example.

There are two sentiment pitfalls that I mentioned in the earlier posts that are especially relevant to the current gold-market situation. The first is linked to the fact that sentiment generally follows price, making it a near certainty that the overall mood will be at an optimistic extreme near an important price top and a pessimistic extreme near an important price bottom. Putting it another way, there is nothing like a strongly-rising price to get the speculating community and the general public bullish and there is nothing like a steep price decline to get them bearish, so it’s perfectly natural that price-tops will be associated with optimism and price-bottoms will be associated with pessimism. The problem is that while an important price extreme will always be associated with a sentiment extreme, a sentiment extreme doesn’t necessarily imply an important price extreme.

Continue reading Sentiment Pitfalls, the Gold Edition

Instability

By Doug Noland

With the Turkish lira down another 6.6% in Monday trading, global “Risk Off” market Instability was turning acute. The U.S. dollar index jumped to an almost 14-month high Monday, as the Turkish lira, Argentine peso, Indian rupee and others traded to record lows versus the greenback. The South African rand “flash crashed” 10%, before recovering to a 2.3% decline. Brazil’s sovereign CDS jumped 14 bps Monday to a six-week high 252. Italian 10-year yields jumped 11 bps to 3.10%, near the high going back to June 2014, as the euro declined to one-year lows.

The Turkish lira surged 8.4% Tuesday, jumped another 6.8% Wednesday and then gained an additional 1.9% Thursday. Wild Instability then saw the Turkish lira drop 3.1% during Friday’s session, ending the week up 6.9%. Qatar’s $15 billion pledge, along with central bank measures, supported the tenuous lira recovery.

Continue reading Instability

You Can’t Fix Stupid: U.S. Treasury Will ‘Pressure’ China To Strengthen The Yuan

By Heisenberg Report

They say you can’t fix stupid, which I suppose means the world shouldn’t get its hopes about about the upcoming trade talks between China and the U.S.

On Wednesday, China’s Ministry of Commerce said the U.S. has invited a Chinese delegation to Washington later this month, ostensibly to try and break a stalemate on trade before the Trump administration moves ahead with tariffs on an additional $200 billion in Chinese goods. That escalation, if realized, would trigger a response from Beijing in the form of differentiated duties on $60 billion in U.S. imports, setting the stage for the Trump administration to “go to $500 billion” (as the President put it last month).

According to the New York Times (and there were similar reports out on Thursday), Steve Mnuchin will attempt to pressure China to strengthen the yuan when the two sides meet in Washington.

Continue reading You Can’t Fix Stupid: U.S. Treasury Will ‘Pressure’ China To Strengthen The Yuan

The Next Major Gold Rally

By Steve Saville

[This post is a brief excerpt from a recent TSI commentary]

During the first three quarters of 2016 we were open to the possibility that a new cyclical gold bull market got underway in December of 2015, but over the past 18 months we have been consistent in our opinion that the December-2015 upward reversal in the US$ gold price did NOT mark the start of a bull market. Since late-2016 there have been some interesting rallies in the gold price, but at no time has there been a good reason to believe that we were dealing with a bull market. That’s still the case. The question is: what will it take to set a new cyclical gold bull market in motion?

The simple answer is that it will take a US equity bear market. However, this is not a practical answer because in real time there often will be no way of differentiating the first 6-9 months of an equity bear market from an intermediate-term bull-market correction. The most practical answer we can come up with is that it will take an upward reversal in the yield curve.

Continue reading The Next Major Gold Rally