Stocks struggled valiantly to sell off on Thursday, but the Dow was never down more than about 150 points. Permabears shouldn’t despair, however, since it’s always lightest before the dusk. Gold got support late in the day when Trump took a shot at the Fed for tightening, but don’t expect the ebullience in precious metals to last. He’ll have to pull out all the stops to tank the economy sufficiently to bring quantitative easing back into style. Is that perhaps what he is trying to do by socking auto importers with a 25% surcharge? In any case, he’s definitely got a knack for helping us forget whatever popped out of his mouth last. Something having to do with Putin, wasn’t it?
Trump Takes Gold for a Little RidePosted Thursday, July 19 0 comments
$AMZN – Amazon (Last:1812.97)Posted July 19, 2018, 6:04 pm
AMZN seems destined to hit $2000, but today’s chart (see inset) provides a ‘Hidden Pivot’ target at 2007.92 to precisely inform our expectations. From a technical standpoint it’s not quite a done deal, however, since the stock struggled for more than a month to escape the gravitational pull of the 1680.40 ‘midpoint resistance’ shown. This is not necessarily a sign of weakness, but merely of hesitancy. AMZN doesn’t spend much time flailing around, but the chart makes clear that it did in fact stumble several times since early April. These are normal and necessary adjustments that have invariably produce the bullish wilding sprees that are AMZN’s trademark. Shares are up 56% since January, but we’ll need to take any stalls seriously because of the way buyers hesitated at the midpoint resistance. That means that even the so far moderate selloff from Wednesday’s 1859 high could be the start of a more significant correction. Set a screen alert at 1797.37, since that’s where it would become mildly worrisome.
DXY – NYBOT Dollar Index (Last:95.08)Posted July 18, 2018, 4:54 pm
The Dollar Index, currently trading for around 95, is poised for a breakout that seems likely to hit the century mark within the next 12-24 months if not sooner. This is going to put added pressure on foreign earnings of U.S. multinationals as well as increasing the already ponderous weight on bullion. My long-term forecast for the Dollar Index calls for a test of highs near 120 that were made more than 17 years ago. If so, the implication is that February’s 88.25 low marked the beginning of a monster rally like the one that took DXY from 79 to 100 in 2014-15. There’s no way the dollar could reach 120 in a normal economy. The forecast implies that at some point, the U.S. will experience a catastrophic deflation that makes dollars scarce. A wave of bankruptcies could cause this, and the most logical place for it to start would be in the collapse of a public-employee pension system that is already a sinkhole waiting to happen. This is a liability that cannot be monetized — at least not without touching off hyperinflation. For reasons that I have written about for more than a decade, it is all but certain to occur. For further discussion of this, click here to access an interview I did on Wednesday with Cory Fleck of Korelin Economics Report and National Investors‘ Chris Temple.
$ESU18 – Sep E-Mini S&P (Last:2807.25)Posted July 16, 2018, 5:41 pm
$CLQ18 – August Crude (Last:67.94)Posted July 16, 2018, 4:50 pm
Energy consumers shouldn’t get their hopes too high that the steep decline in crude oil prices over the last several days will continue. One reason I say this is that, after two sharp breaks in price during that time period, the selloff has exceeded only a single ‘external’ low on the intraday charts (see inset). This suggests the move is still merely corrective relative to late June’s big run-up, which saw the August contract rally from $64 to $75 in less than three weeks. A second reason I don’t put much store in the downtrend is this unpersuasive attempt by the Wall Street Journal to explain it: ‘Attacks on Libyan ports, U.S. sanctions against Iran and supply disruptions have underpinned the recent oil rally even as protectionist trade policies are raising fears of a global economic slowdown and lower consumption of materials. But analysts said higher output from Libya and the possibility that Russia could agree to further increase supply to fill possible production gaps were hurting prices Monday.’ Has anything really changed? It doesn’t sound like it. I will revisit my bullish logic if the weakness continues, exceeding mid-June 63.40 low. But until such time as that happens, my outlook still favors a move above $80/barrel. This forecast is purely technical, by the way, and goes against my gut feeling that the global economy is not strong enough to push crude above $80, nor will it be any time soon. Regardless, I’ll let my charts do the talking. Right now, they are saying quotes are bound for a minimum 78.98 this summer.
NGD – New Gold (Last: 1.95)Posted July 16, 2018, 4:49 pm
$TNX.X – Ten-Year Note Rate (Last:2.831%)Posted July 15, 2018, 5:08 pm
Because mid-May’s multiyear high at 3.11% precisely matched a target I’d sent out to subscribers five months earlier when rates were around 2.35%, I was open to the possibility that yields had made a major top. This seemed even more likely when the Ten-Year Note plunged to 2.76% over the next 12 days. Now, however, a strong recovery rally has shortened the odds of a move to new highs. is a If it is coming, it would generate headwinds above 3.25% sufficient to slow the U.S. economy or even suffocate it, since rates for mortgages and car leases would rise as well. At the very least, based on the chart shown, Ten-Year Note yields look very likely to challenge the May high, since the target is actually 0.04 points above it. The rally could turn out to be a bull trap, either by forming a double top or, less likely, an upthrust to new heights that reverses precipitously. A third possibility is that, once above May’s highs, rates will continue to rise. Whatever the case, I will be monitoring this vehicle closely, since a move into the 3.25%-3.50% range would significantly reduce the flow of oxygen to the U.S. economy’s heart and lungs — i.e., housing and autos. ______ UPDATE (June 14, 9:14 p.m. EDT): Check out the $TYX.X tout above, since it recalibrates my thinking about where long-term rates may be headed. ______ UPDATE (June 17, 5:10 p.m.): Rates on the Ten-Year now look primed for a fall to at least 2.831, a compelling midpoint Hidden Pivot support shown in this chart. However, if the support is breached decisively (i.e. 28.00 or lower), look for yields to fall to as low as 2.653 over the near term. _______ UPDATE (July 15): Rates on the Ten-Year have been flirting with the 2.831 support for nearly three weeks, trading as low as 2.811. The breach is sufficient that I expect rates to move sideways-to-lower this summer, and for the price of T-Notes to rise.
$TYX.X – 30-Year T-Bond Rate (Last:2.933%)Posted July 15, 2018, 5:04 pm
In the tout above, I wax mildly bullish on $TNX.X, a vehicle that tracks interest rates on the U.S. Ten-Year Note. This implies that I am bullish on rates and believe they will rise, but bearish on the Note itself, because its price would fall. Now, with an insightful nudge from my friend Doug Behnfield, a Boulder-based financial adviser whose thoughts have been featured here many times, I am persuaded to take a closer look at both vehicles. Lo, the chart of $TYX.X, which tracks rates on the U.S. 30-Year Bond, reinforces a somewhat different conclusion — i.e., that long-term rates are headed lower, perhaps significantly so. (To embrace this point of view would make me a bond bull, since bond prices would rise rise as yields fell.) From a technical standpoint, the crucial number here is 2.994%. Rates look very likely to fall at least to this level. But if they easily trounce that ‘Hidden Pivot’ support, trading 2.970% or lower intraday, or if rates close for two consecutive days beneath the pivot, I’d infer that they are headed down to at least 2.847%. At that level, the same observations would obtain: a quick and decisive breach would portend still-lower rates. I’ve set an alert and will keep you closely apprised, so stay tuned to this tout if you care. _______ UPDATE (July 15): I’ve adjusted my downside target to 2.874%, which is where I now expect rates on the 30-year to fall over the near term. The revision uses a one-off ‘A’ and yields a 3.007% midpoint support that precisely caught an interim low low. (It also offered a fine ‘mechanical’ short on the June 22 rally back up to the green line). Here’s the new chart.
$JYU18 – September Yen (Last:0.89240)Posted July 12, 2018, 5:36 pm
$GCQ18 – August Gold (Last:1223.10)Posted July 10, 2018, 6:25 pm
The August futures set up such an appealing buying opportunity for bulls Monday that several subscribers jumped on it when a timely ‘mechanical’ entry strategy was posted in the chat room. Alas, anyone who got long toward the end of the day watched the trade sink precipitously overnight, stopping out the position for a loss of around $600 per contract. As a rule, when a juicy Hidden Pivot trade set-up flops so miserably, it can pay to quickly reverse the position and do the opposite. In this case, however, going short seems no more appealing than going long, since bullion has been treating bears almost as badly as bulls.
‘Too Much Hopefulness’
My gut feeling is that the seemingly perfect ‘mechanical’ entry failed because there are still too many hopeful bulls out there. It would appear that they view each and every $20 rally as the first stage of a move to $2000, and that’s why gold has acted so leaden. Disrupting this familiar pattern and setting the stage for a sustained rally will likely require one last, brutal shakeout. That would logically imply a dive below the key low at 1230.70 recorded almost exactly a year ago. If and when this happens, tune to the chat room for a possible ‘counterintuitive’ entry plan.
In the meantime, I plan to ratchet up my skepticism and tune out the “Any-day-now!” bullishness of some of my guru colleagues. I’ll let the charts speak for themselves. This might have saved us some pain, since I green-lighted Monday’s trade even though gold had yet to exceed a 1274.40 benchmark flagged in my last update. For now, I will raise the bar to 1286.90. A rally over the next 2-3 days that hits that price would not likely be a fake. _______ UPDATE (July 17, 9:22 p.m.): The futures sank beneath 1230.70, hitting a low of 1226.30 without a blip. A print at 1263.10 would still trip a ‘counterintuitive’ buy signal, although not a very appealing one. As such, we should plan on using a ‘camouflage’ trigger to get long on a chart of lesser degree if the CI trade triggers._______ UPDATE (July 18, 7:21 a.m.): August Gold’s relentless weakness threatens to continue down to 1170.70 if it takes out the secondary pivot at 1219.40 shown in this chart. The pattern is a ‘reverse ABC’, or rABC as it is called in the chat room, and although I seldom use them to project swing highs and lows, in this case the pattern’s visual appeal is sufficiently compelling to warrant our attention. For gold bulls who are at or near the point of despair, notice that gold’s dive in late 2016 was even steeper than this one. My gut feeling is that bullion still needs a nasty washout to clear the air. If so, I would regard a move soon to the 1170.70 target as incipiently bullish. ______ UPDATE (July 19, 6:30 p.m.): The end-of-day spurt would become microscopically meaningful if the futures can push above 1245.80 on Friday.
$AG – First Majestic Silver (Last:7.34)Posted June 14, 2018, 2:45 am
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