Wednesday, October 23, 2013
China back in the News
China, China and more China... that pretty much sums up what the big mover was in today's session. Talk out of that region was that the Chinese officials were moving to drain liquidity from their system in order to combat what they view as rising inflation concerns. Then again, perhaps a better way of phrasing this is that the Chinese officials would not be acting to add liquidity and maybe adopting some modest measures to deal with monetary aggregates.
The big deal is evidently about housing prices which continue to soar.
Traders interpreted this as bearish for commodities in general, especially copper as well as silver. They also seemed to be in a mood to further sell down crude oil but that tied more to the release of the crude stocks data.
What is interesting is to see the equity markets actually finally finding something to use as a reason to sell. It just goes to further prove the theory that what is lifting equity markets globally is not fundamentals but rather liquidity pools being created by the world's Central Banks. Take that away or even dare to breathe the words that it might be slowed or withdrawn and today's move lower in equities is what we get.
This is why I believe those analysts and pundits who continue to pound the table on buying equities based on their quaint notion that "the economy continues to improve" are full of it. Take away this giant tidal wave of Central Bank supplied liquidity and the world equity markets will fall so low that they could play handball with a snake!
Either way, it got gold. Traders who had been long decided to book profits after the nice pop higher while some of the macro traders moved back in on the short side. Further aiding the bearish mood today was the sharp drop lower in the gold shares once again. I am looking at the screen as I type this and the HUI is down over 3%. It certainly makes one think twice about staying long the metal when they see this as it usually presages a drop lower in the gold price the following day. We'll see if that is the case this time once again.
Silver is actually not doing too bad considering the big move lower in copper (down over 2%) but once again if failed to extend past $23. It is managing thus far to hold above a chart resistance level near $22.50 but just barely. It needs to clear $23 with some gusto to get the momentum crowd interested in buying it. If traders start coming around to the view that China is deliberately attempting to slow things down over there, it is going to add another headwind to silver and copper which will make it tough for gold to extend higher as well, especially as crude oil continues on the weak side.
The standout exception to the general wave of commodity selling today was in the grains which are trading in their own little world right now as hedge funds and other large traders jerk those markets all over the place due to the enormity of the spread trades they are currently employing.
I will get a chart up later on today as I am dealing with a lot of time constraints right now... thanks for your patience.
The big deal is evidently about housing prices which continue to soar.
Traders interpreted this as bearish for commodities in general, especially copper as well as silver. They also seemed to be in a mood to further sell down crude oil but that tied more to the release of the crude stocks data.
What is interesting is to see the equity markets actually finally finding something to use as a reason to sell. It just goes to further prove the theory that what is lifting equity markets globally is not fundamentals but rather liquidity pools being created by the world's Central Banks. Take that away or even dare to breathe the words that it might be slowed or withdrawn and today's move lower in equities is what we get.
This is why I believe those analysts and pundits who continue to pound the table on buying equities based on their quaint notion that "the economy continues to improve" are full of it. Take away this giant tidal wave of Central Bank supplied liquidity and the world equity markets will fall so low that they could play handball with a snake!
Either way, it got gold. Traders who had been long decided to book profits after the nice pop higher while some of the macro traders moved back in on the short side. Further aiding the bearish mood today was the sharp drop lower in the gold shares once again. I am looking at the screen as I type this and the HUI is down over 3%. It certainly makes one think twice about staying long the metal when they see this as it usually presages a drop lower in the gold price the following day. We'll see if that is the case this time once again.
Silver is actually not doing too bad considering the big move lower in copper (down over 2%) but once again if failed to extend past $23. It is managing thus far to hold above a chart resistance level near $22.50 but just barely. It needs to clear $23 with some gusto to get the momentum crowd interested in buying it. If traders start coming around to the view that China is deliberately attempting to slow things down over there, it is going to add another headwind to silver and copper which will make it tough for gold to extend higher as well, especially as crude oil continues on the weak side.
The standout exception to the general wave of commodity selling today was in the grains which are trading in their own little world right now as hedge funds and other large traders jerk those markets all over the place due to the enormity of the spread trades they are currently employing.
I will get a chart up later on today as I am dealing with a lot of time constraints right now... thanks for your patience.
Tuesday, October 22, 2013
Are we Beginning to see a loss of Confidence in the US Dollar?
Based on the price action, the answer to that question is it is certainly looking like that. The Dollar is within a hair's breadth of a strong region of support. If it does not hold, we will know the answer to this question is "YES".
I have also noticed that in conjunction with this move lower in the Dollar, interest rates at the long end of the yield curve are also beginning to drop once again. That is not good for the Dollar.
The catalyst for this was today's stunningly poor payrolls number for the month of September. Forecasts were for 180,000 jobs being created. Instead we got a pathetic 148,000! With that, it was a big "KERPLUNK" for the US Dollar and that sent gold careening higher as once again any notion of a slowdown or "taper" in the Fed bond buying program was immediately shelved.
It has been my opinion for some time now that gold will not mount any sort of SUSTAINED move higher unless there is a loss of CONFIDENCE in the US Dollar, which is in effect the same thing as a loss of confidence in the US political leadership and to a certain degree, monetary authorities. Trying to maintain an objective view of this when it comes to my own beloved nation is difficult at times to do but after watching the President's 1-800 INFOMERCIAL on the failed rollout of his healthcare law, it does not take a big stretch of the imagination to say that he looks like a cheap carnival barker pedaling a batch of snake oil instead of the responsible and serious leader of the free World which global investors expect.
Global investors are not stupid nor are they reckless with their capital. One shudders to think what would be happening to the US equity markets were it not for the fact that most of the $85 billion being created each month by the Fed is being stuffed into them. That is the only reason that they have not plummeted along with the Dollar.
All I can add to this is to say "Watch Out" if the US Dollar Index cracks chart support. That is far more important than any public opinion poll citing favorability numbers because it is a poll in which investors are voting and telling you exactly what they think about the current leadership of the nation.
I have also noticed that in conjunction with this move lower in the Dollar, interest rates at the long end of the yield curve are also beginning to drop once again. That is not good for the Dollar.
The catalyst for this was today's stunningly poor payrolls number for the month of September. Forecasts were for 180,000 jobs being created. Instead we got a pathetic 148,000! With that, it was a big "KERPLUNK" for the US Dollar and that sent gold careening higher as once again any notion of a slowdown or "taper" in the Fed bond buying program was immediately shelved.
It has been my opinion for some time now that gold will not mount any sort of SUSTAINED move higher unless there is a loss of CONFIDENCE in the US Dollar, which is in effect the same thing as a loss of confidence in the US political leadership and to a certain degree, monetary authorities. Trying to maintain an objective view of this when it comes to my own beloved nation is difficult at times to do but after watching the President's 1-800 INFOMERCIAL on the failed rollout of his healthcare law, it does not take a big stretch of the imagination to say that he looks like a cheap carnival barker pedaling a batch of snake oil instead of the responsible and serious leader of the free World which global investors expect.
Global investors are not stupid nor are they reckless with their capital. One shudders to think what would be happening to the US equity markets were it not for the fact that most of the $85 billion being created each month by the Fed is being stuffed into them. That is the only reason that they have not plummeted along with the Dollar.
All I can add to this is to say "Watch Out" if the US Dollar Index cracks chart support. That is far more important than any public opinion poll citing favorability numbers because it is a poll in which investors are voting and telling you exactly what they think about the current leadership of the nation.
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