Chart Update

     

 

 

Fun with Positioning and Sentiment

Last week we discussed the gold sector “conundrum” – the odd fact that there is apparently quite strong demand for gold despite a macroeconomic environment that would normally be considered quite bearish for the metal. Gold recently seems to have lost its last remaining inter-market “ally” if you will, as the dollar has begun to enter an uptrend as well. Positioning data in precious metals futures are nevertheless rather remarkable, given the relatively benign price action in gold and silver. The mood in the sector has turned quite gloomy for no obvious reason.

 

The Gloom Patrol is loose – the man with a plan (a certain Mr. Nobody) and his friend Agent ! only wanted to have some fun… but the gloom proved too strong. Take it from us, when someone says  “are we not proof that the universe is a drooling idiot with no fashion sense?”, then that person must have partaken of that pure, unadulterated gloom that is well-known to be the exclusive preserve of the genus gold bug.

 

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Moribund Meandering

Earlier this week, the USD gold price was pushed rather unceremoniously off its perch above the $1300 level, where it had been comfortably ensconced all year after its usual seasonal rally around the turn of the year. For a while it seemed as though the $1,300 level may actually hold, but persistent US dollar strength nixed that idea. Previously many observers (too many?) expected gold to finally break out from its lengthy consolidation pattern, but evidently the intense patience training session for gold bugs is set to continue for a while longer.

 

Luckless gold bug surrounded by false starts, with his only friend, a startled moose.

 

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In Other Global Markets the “Turn-of-the-Month” Effect Generates Even Bigger Returns than in the US

The “turn-of-the-month” effect is one of the most fascinating stock market phenomena. It describes the fact that price gains primarily tend to occur around the turn of the month. By contrast, the rest of the time around the middle of the month is typically far less profitable for investors.

 

Good vs. bad seasonal timing…   [PT]

 

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Shill Alarm

One well-known commentator this week opined about the US health care industry:

 

“…the system is designed the churn and burn… to push people through the clinics as quickly as possible.

The standard of care now is to prescribe some medication (usually antibiotics) and send people on their way without taking the time to conduct a comprehensive examination.”

 

From the annals of modern health care… [PT]

 

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“Literally On Fire”

This week brought forward more evidence that we are living in a fabricated world. The popular story-line presents a world of pure awesomeness. The common experience, however,  falls grossly short.

 

There are many degrees of awesomeness, up to total awesomeness – which is where we are these days, in the age of total awesomeness, just a short skip away from the Nirvana era. What is Nirvana, you may wonder? We only know for sure that Nirvana is what the stock market has priced in – other than that, we will have to wait and see. [PT]

 

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A Movie We Have Seen Before – Repatriation Effect?

There was a sizable increase in the year-on-year growth rate of the true US money supply TMS-2 between February and March. Note that you would not notice this when looking at the official broad monetary aggregate M2, because the component of TMS-2 responsible for the jump is not included in M2. Let us begin by looking at a chart of the TMS-2 growth rate and its 12-month moving average.

 

The y/y growth rate of TMS-2 increased from 2.68% in February to 4.85% in March. The 12-month moving average nevertheless continued to decline and stands now at 4.1%.

 

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Waiting for Permanent Backwardation 

The price of gold dropped 9 bucks, while that of silver rose 3 cents. Readers often ask us if permanent backwardation (when gold withdraws its bid on the dollar) is still coming. We say it is certain (unless we can avert it by offering interest on gold at large scale). They ask is it imminent, and we think this is with a mixture of fear and longing for a higher gold price.

 

Lettuce hope this treasure is not cursed… but it probably is. [PT]

 

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Unfulfilled Prophecies

The price of gold fell $12 last week, but that of silver dropped 63 cents. What’s up with silver?! A prominent analyst wrote on April 19 of the “breakout” in silver. Of course, without the benefit of the basis and the Monetary Metals fundamental price, he could only see the price chart, plus the regular Wall Street indicators such interest rates, oil, and inflation.

 

A somewhat unsightly silver bar of historical interest, found in 1985 in the holds of the wreck of the Spanish galleon Nuestra Senora de Atocha, which sank near the Florida Keys in 1622. It was laden with silver the conquistadores had reportedly just stolen fair and square from Potosi in Bolivia. One presumes the perennially teetering on the verge of bankruptcy Spanish Crown was not very amused (34 of the bars belonged to the King outright, and he would have collected a 20% tax on the rest to boot). Anyway, lumps like this one don’t do breakouts; they do brick-outs and will hurt your toes if you’re not careful. [PT]

 

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Battle Over Trendline Support Continues

Here is a brief update of our recent series of observations on the stock market. First of all, the SPX has just tested its major trendline for the third time after making yet another lower high – it is back below the 38% retracement level after a failed attempt to break through the 50% level. The same applies to NDX, DJIA and NYA as well, but the RUT (Russell 2000) continues to outperform all the big cap and broad-based indexes noticeably.

 

SPX, daily: another downturn from a lower high, but the major trendline – and incidentally the 200-dma, which is situated very close to it – continues to hold so far. This chart, as well as those of the other major indexes, continues to look dangerous. The danger is mitigated by the outperformance of the RUT, as funds slosh around from one corner of the market to another (there doesn’t seem to be enough liquidity to keep all the plates in the air concurrently).

 

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Goldfinger Strikes, Sort Of

This week, we saw a tweet from a prominent goldbug. He said, “Russia added another 9 tons of gold to its reserves in March. The hits just keep coming.” How many errors in this short quip? We count six, exactly one error for every two words.

 

This one’s got everything: Smersh, Spectre, Putler and Pussy Galore! [PT]

 

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The Lighthouse Moves

Picture, if you will, a brick slowly falling off a cliff. The brick is printed with green ink, and engraved on it are the words “Federal Reserve Note” (FRN). A camera is mounted to the brick.

The camera shows lots of things moving up. The cliff face is whizzing upwards at a blur. A black painted brick labeled “oil” is going up pretty fast, but not so fast as the cliff face. It is up 26% in a year.

A special brick, a government data brick of sorts, labeled “CPI-U” has been going up ever so slowly. At least according to the camera on the FRN brick.

 

US headline CPI y/y: slightly above the official “target” since September 2017. [PT]

 

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A “Typical” Correction? A Narrative Fail May Be in Store

Obviously, assorted crash analogs have by now gone out of the window – we already noted that the market was late if it was to continue to mimic them, as the decline would have had to accelerate in the last week of March to remain in compliance with the “official time table”. Of course crashes are always very low probability events – but there are occasions when they have a higher probability than otherwise, and we will certainly point those out when we see them. Anyway, something else is evidently happening. Here is a chart of the SPX that shows the important trend-line which was so far successfully defended:

 

According to the “keep it simple” chart, this was just a run-of the mill correction, very similar to every other correction seen since the 2009 low. But is that really the case?

 

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THE GOLD CARTEL: Government Intervention on Gold, the Mega Bubble in Paper and What This Means for Your Future

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