The S&P’s 200-DMA: Why It Ain’t No Maginot Line

By David Stockman

For the last five years the S&P 500 has been dancing up its ascending 200-day moving average (200-DMA), bouncing higher repeatedly whenever the dip-buyers did their thing. Only twice did the index actually break below this seeming Maginot Line: In August 2015, after the China stock crash, and in February 2016, when the shale patch/energy sector hit the wall.

As is evident below, since the frenzied peak of 2873 on January 26, the index has fallen hard twice—on February 8 (2581) and March 23 (2588). Self-evidently, both times the momo traders and robo-machines came roaring back with a stick-save which was smack upon the 200-DMA.

But here’s the thing. The blue line below ain’t no Maginot Line; it’s just the place where the Pavlovian dogs of Bubble Finance have “marked” the charts. And something is starting to smell.

Continue reading The S&P’s 200-DMA: Why It Ain’t No Maginot Line

Phone Call from a Bank Manipulator, Special Report 1 April

By Keith Weiner

This topic is so timely and so important, that we publish this special report in lieu of our normal weekly Supply and Demand Report.

After our recent article debunking manipulation, we got a phone call from a man whom we will call Jim Bailey (all names have been changed to protect the innocent and the guilty). Jim worked on the London gold desk at a major financial institution. He told us that a lot of what we said was spot on. However, he said in no uncertain terms that manipulation does occur. Here is Jim’s story, as related to us by phone on Friday.

It was seven years ago, today. Lord Horace Abernathy came into our office. I knew of Abernathy, of course, he was my boss’ boss’ boss. A power broker, his value to the bank was not so much in his managerial skills, but his connections in government. His seat in the House of Lords was invaluable.

He did not ask after the traders’ health, or make any other small talk. He is a Lord and traders are mere peasants. He just said, “Chancellor Osborne needs you to make silver go down.”

There was a long silence, as nearly a score of traders gaped at each other.

“Gold too, of course.”
Continue reading Phone Call from a Bank Manipulator, Special Report 1 April

Asia Rally Dies As China’s Tariffs On U.S. Imports Take Effect – All Eyes On Trump

By Heisenberg

April (and Q2) got off to a less than inspiring start on Monday as an early Asian rally shriveled up and died on the vine as the market tries to figure out how to digest myriad uncertainties around the burgeoning trade spat between Washington and Beijing.

China officially retaliated against U.S. steel and aluminum tariffs on Monday as previously announced moves against 128 imported goods went into effect. The  Commerce Ministry claims Washington did not respond to a a trade compensation consultation submitted on March 26 and so, “in view of the lack of agreement between the two sides, on March 29, China informed the WTO of the suspension of the concession list and decided to impose tariffs on certain products imported from the United States in order to balance the benefits of the US 232 measures against the Chinese,” a Ministry statement reads. Here’s the full statement from the Customs Tariff Commission:

Continue reading Asia Rally Dies As China’s Tariffs On U.S. Imports Take Effect – All Eyes On Trump

Credit Managers’ Index

By Callum Thomas

The NACM “Credit Managers’ Index” or CMI is the often forgotten indicator which, similar to its cousin the PMI (Purchasing Managers’ Index), tracks credit conditions based on a survey of credit managers.  Its definitely an indicator to keep an eye on because it can provide critical and timely insights on credit conditions as well as broader economic conditions.  It also comes out slightly earlier than the PMIs.

The March data showed a slight down-tick, with the headline combined manufacturing & services index off -0.9pts to 55.6 with the “unfavorable” index only off -0.3pts to 50.6 and the “favorable” index down -1.7pts to 63.2. The manufacturing CMI was down -1pt to 55.2 and the services CMI was down -0.7pts to 56.1. Clearly these are all fairly decent levels, albeit the tick down is something to watch if we get another tick down in April too.

Continue reading Credit Managers’ Index

What Really Drives the Arms Index

By Tom McClellan

NYSE Arms Index
March 30, 2018

Earlier this month, the technical analysis community mourned the passing of Richard Arms, the creator of the eponymous Arms Index.  You can read an obituary by Jonathan Arter here.  I met him a few years ago and had corresponded with him, and I can tell you that he was not only a brilliant chartist, he was also a really nice guy.  He was happy to share his insights with others.

The Arms Index is sometimes referred to as “TRIN”, short for TRading INdex.  TRIN was the old Reuters screen code, and it is the symbol many quote systems use to this day.  But professional technical analysts like to give credit where it is due, and so we call it the Arms Index.

Continue reading What Really Drives the Arms Index

Money Matters

By Steve Saville

[This blog post is an excerpt from a recent TSI commentary]

The year-over-year rate of growth in the US True Money Supply (TMS) was around 11.5% in October of 2016 (the month before the US Presidential election) and is now only 2.4%, which is near a 20-year low. Refer to the following monthly chart for details. In terms of effects on the financial markets and the economy, up until recently the US monetary inflation slowdown was largely offset by continuing rapid monetary inflation elsewhere, most notably in Europe. However, the tightening of US monetary conditions has started to have noticeable effects and these effects should become more pronounced as the year progresses.

The tightening of monetary conditions eventually will expose the mal-investments of the last several years, which, in turn, will result in a severe recession, but the most obvious effect to date is the increase in interest rates across the entire curve. The upward acceleration in interest rates over the past six months has more than one driver, but it probably wouldn’t have happened if money had remained as plentiful as it was two years ago.

Continue reading Money Matters

Asanko (AKG)

By Otto Rock

It’s important* to understand what just happened in this NR today that announced Gold Fields are buying 50% of Asanko Gold’s (AKG) stuff in Africa, (we quote, “…the Asanko Gold Mine (the “AGM”) and all associated properties in Ghana.”). And because your humble scribe is an inveterate nerd and numberfreak, we’ll do it this way:

Back when AKG was a U$4 stock, even when it was a U$3.50 stock at the start of 2017, the company was running a price/book of over 1X which, speaking roughly, meant that the market believed it would create wealth from its overall business. That bit works like this:

  • You decide to do capitalism
  • You invest one hundred dollars and buy stuff (your assets). Let’s say you buy a thousand pencils.
  • You then work hard and turn that one hundred dollars of assets into two hundred dollars of cash. Let’s say you sell each pencil for 20c.

Now that doesn’t mean you get a price/book ratio of 2X, but when you start the business with a thousand pencils and a business plan, somebody else will recognize that you’re onto a winner and mark you up at over 1X (depends on how long you need to sell the pencils….let’s spitball 1.5X). That’s what the P/Bv ratio does and it’s why it matters when you’re checking a companies fundies.

Therefore, in simple but very accurate terms, what the management at AKG has done to today is say to the world “We are shit at capitalism. We bought something for $299m and sold it for $165m and now we want you to congratulate us for the deal with Gold Fields.” Of course, they use different words to present the same concept, their choice being this:

“This transaction presents a unique opportunity for Asanko to de-risk its future production targets whilst at the same time eliminating corporate debt. With a healthy balance sheet and robust operational cash flows, together with a strong technical endorsement, our Life of Mine plan is assured,” said Asanko President and CEO, Peter Breese.

And that, ladies and gentlemen, covers a lot of the things that are so wrong with the mining business today and it’s why the real world of money avoids these clownshow stocks like the plague. Asanko is run by complete idiots.

*Well, not quite as important as world peace, looking after your health, etc. But you know what I mean.

CBI Returning To Neutral & What That Suggests

By Rob Hanna

The Quantifiable Edges Capitulative Breadth Indicator (CBI) has been in play lately, but todays Holy Thursday rally is taking it down from 7 yesterday to likely 0 at the close this afternoon.

After alerting followers of the move to zero, I received a few questions asking about SPX performance following such drops in the CBI. I looked at it a number of ways. Results are pretty much what I expected, but some of you might find them disappointing. Below is an example of one test I ran looking for an edge.

2018-03-29

I don’t find the numbers here to be compelling for either the bulls or the bears. This is not terribly surprising, since 0 is considered “neutral”. This does not mean that there is no edge to be found in the market at the moment. It does mean that traders will need to use tools other than the CBI to identify an edge. Capitulative selling that was evident a few days ago has been exhausted. We’ll need to wait a while until the CBI comes back into focus.  In the meantime, I’m sure we will find hints elsewhere.

To learn more about the CBI, check out the CBI Research Paper.

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Metals Update

By Ino.com

June gold was lower overnight as it consolidates some of the rally off March’s low. Stochastics and the RSI are overbought and are turning neutral to bearish signaling that a short-term top might be in or is near. Closes below the 20-day moving average crossing at 1333.20 would confirm that a short-term top has been posted. If June extends the aforementioned rally, February’s high crossing at 1369.60 is the next upside target. First resistance is February’s high crossing at 1369.60. Second resistance is January’s high crossing at 1375.50. First support is the 50% retracement level of the December-January-rally crossing at 1311.50. Second support is the 62% retracement level of the December-January-rally crossing at 1296.30.

Continue reading Metals Update

Stock Prices to Eventually Ratio

By Jeffrey Snider

The Bureau of Economic Analysis (BEA) revised upward fourth quarter 2017 Real GDP. The second estimate had been revised lower to 2.50458% (continuously compounded annual rate of change) from the advanced estimate. The third and final calculation raises the quarterly increase to 2.84707%. None of the changes are substantial.

Accompanying these revisions are the BEA’s first assessments for Corporate Profits and Net Cash Flow during the quarter. The latter being one of the more descriptive and illuminating of data points over the past decade, Corporate Net Cash Flow plummeted 36% in Q4. From $2.2 trillion (SAAR) in Q3, the current estimate of $1.4 trillion indicated a radical departure.


Continue reading Stock Prices to Eventually Ratio

Institutional Investor Sentiment

By Callum Thomas

The March data for the State Street Investor Confidence was released this week and showed some very interesting patterns across institutional investors.  The global index was up +4.7pts to 111.9 (contrasts to a reading of 95.7 back in December 2017), Across the regions, the North America index was up the most +5.8pts to 109.8, followed by Europe up 1.6pts to 102.1 and Asia up +1.3pts to 109.6.  At a high level, basically what it appears to show is global institutional investors are “buying the dip”, or at least actively rebalancing into equities.

As a brief background on the indicator (from State Street):

“It measures investor confidence or risk appetite quantitatively by analyzing the actual buying and selling patterns of institutional investors. The index assigns a precise meaning to changes in investor risk appetite: the greater the percentage allocation to equities, the higher risk appetite or confidence. A reading of 100 is neutral; it is the level at which investors are neither increasing nor decreasing their long-term allocations to risky assets. The index differs from survey-based measures in that it is based on the actual trades, as opposed to opinions, of institutional investors.”

The key points on global institutional investor sentiment are:

-Global institutional investors appear to be buying the dip.

-Institutional investor confidence improved across regions, particularly in Asia and North America.

-It seems these investors are looking through the noise/news and taking the opportunity to build allocations to risky assets as the correction provides a reset of sorts

1. Global Institutional Investor Confidence Index: The latest reading of the global institutional investor confidence index reached the highest level since March 2016. My first impression of this chart (shows the indicator vs global equities) is that I can’t help but think of the phrase “buy the dip” (which sometimes includes an F in there). So the main interpretation would be that institutional investors are buying the dip, or certainly at least actively rebalancing into equities as the correction provides a reset of sorts.