"The received wisdom is mistaken on how recessions are made. They are not simply caused by shocks. They are caused by a window of vulnerability in the economic cycle where the cyclical drivers of the economy have weakened to the point where it’s susceptible to a negative shock. Within that window of vulnerability, virtually any reasonable shock becomes a recessionary shock. That’s how you get a recession."
Lakshman Achuthan, Economic Cycle Research Institute
In a similar manner one also gets a stock market crash. Or the collapse of a long running gold pool. What he calls a negative shock I call a 'trigger event.'
The more vulnerable and unstable a market structure may become, the less of a trigger event is required to initiate a sharp shift in valuations.
Today was definitely a 'risk off' day in the US markets.
Gold broke out and up out of the descending wedge, and with a relatively large about of energy.
As you know I had expected this to happen, but not until after the Non-Farm Payrolls report.
In contrast to May, June is an 'active' month for the gold trade, and there has been a remarkable withdrawal of gold marked as available for delivery at the NY Comex recently.
There are rumors that a bank was caught short with its pants down in gold, and it is now buying its way out, as sufficient bullion is not available in sufficient quantity, so that money must be thrown at the problem. Whoever they are, they must not be a member of the bullion bank club.
Well, in any event, it is difficult to contain a commodity market when it has been coiling with so much energy. And so much of it has been flowing to the Asian markets, not to return at anything near to these prices.
Silver followed gold up towards its fifteen handle, settling just below that.
This breakout may not be a clear runner, but may have to back and fill a bit. Let's watch its progress, and see if the big cup and handle bottom can be activated.
Stocks slumped, and badly at times during the day, led by big cap tech.
The Trump administration is leaning on Silicon Valley. There is no love lost between Trump and the tech giants, and this makes for strange bedfellows with the progressive Democrats who also consider the antitrust aspects of companies like Facebook, Google, and Apple et al.
Let's see how the rest of this week goes. The stock decline was 'orderly' and there was a bit of a cynical bounce into the close.
Yet is this is truly a risk awareness situation, one wonders if it can be stabilized and pushed to the upside for long.
Or if the quote at the top of this posting described it, stocks will remain vulnerable, and it will take only some trigger event, some tweet, to set them rolling downhill again.
Have a pleasant evening.
