Stocks and Precious Metals Charts - Mind the Gap

"Starting around 1980, American society began to undergo a series of deep shifts. Deregulation, weakened antitrust enforcement, and technological changes led to increasing concentration of industry and finance. Money began to play a larger and more corrupting role in politics. America fell behind other nations in education, in infrastructure, and in the performance of many of its major industries. Inequality increased.

As a result of these and other changes, America was turning into a rigged game—a society that denies opportunity to those who are not born into wealthy families, one that resembles a third-world dictatorship more than an advanced democracy."

Charles H. Ferguson, Predator Nation


“When the system is rigged, when ordinary citizens are powerless, and when whistle-blowers are pariahs at best, three things happen:

First, the worst people rise to the top. They behave appallingly, and they wreak havoc.

Second, people who could make productive contributions to society are incented to become destructive, because corruption is far more lucrative than honest work.

And third, everyone else pays, both economically and emotionally; people become cynical, selfish, and fatalistic. Often they go along with the system, but they hate themselves for it. They play the game to survive and feed their families, but both they and society suffer.”

Charles H. Ferguson, Inside Job

It was a risk off day in the markets.  No doubt about it.

The purported reason was the disclosure by the ex-FBI Director Comey that President Trump apparently asked him to forego the investigation of the ex-Security Advisor Flynn.

Personally I am stunned that the markets were able to overextend as far as they had gone.  This Trump drama is just the trigger event.   The more extended the market becomes, the less significant of a trigger event is required to begin the reversal.

If Trump were impeached, then the Tea Party Conservative Mike Pence would assume the presidency.  He is a GOP old boy and friend to Paul Ryan.   It would almost be better for the GOP if he did become president because he doesn't use twitter.

In other words, the problems are far more substantial than the egos and personal power trips of a few Washington plutocrats and pundits.   Without a serious overhaul, the financial system is going to go off the rails again.

There was late day commentary here about the action in stocks and metals.

Have a pleasant evening.

SP 500 Futures - Gap Filled Intraday - The Gathering Storm

"Sometimes I wonder whether the world is being run by smart people who are putting us on, or by imbeciles who really mean it."

Mark Twain

The gap in the SP 500 futures continuous chart that we left behind a few weeks ago has just been filled intraday.

As a reminder this is a stock option expiration week, although as I recall May is not a particularly significant month.

I imagine a lot of enthusiastic call buyers have just been smoked out of their seats and their June positions.

The tension on the tape the last few days was palpable.  It just took some small event to trigger it giving its overlong duration and extent out of balance.

I don't think impeachment is on the table for President Trump, except in overheated Democratic rhetoric.   Although I would not rule anything out while The Donald has access to twitter.

The NDX has a quite a way to go to close its gap, but that is another matter. For my purposes the SP 500 futures are the bellwether.

I have pulled in my short positions, and just left some other risk off positions run, mostly in gold. No silver at this time for a trade.  It just doesn't work as well in a panic because of its precious/practical nature.

My cynical side says that this market pullback is just a long overdue correction in the Trump rally. But we will have to wait and see where the stock markets finds a footing, or if contagion of selling starts to trigger liquidations and some sort of selling feedback.

As I noted the other day, this is a concern for me because the nature of this rally has been narrow and price driven.  People were throwing money into passive index funds, which were rising steadily thanks to speculation in about ten stocks.

The 'big one' for the markets, as opposed to a major correction, will gain the most damaging momentum from the erosion in quality of private debt loads which are once again back to record levels, along with the extreme leverage in financial derivatives exposure held by just a few financial institutions.  That is the real nitro in this chemical mix.

If any financial breakdown spreads to the $222 trillion dollars in derivative exposure then it is time to hit the exits.   There is no way to bail out that sort of malfeasance gracefully without imploding the currency, theories about the ability to print money without limit notwithstanding.

Speaking of rotten fundamentals, the average growth in loans exceeds the average growth in hourly wages.  Thanks to Tony Sanders at Confounded Interest for that chart below.

Let's deregulate The Banks even more and hand out tax breaks to the one percent!  And spend all our time looking for Russians hiding in the shrubbery so we can blame them.

Sleep well.

Net Asset Value Premiums Of Certain Precious Metal Trusts and Funds - Smokin'

"Here Homer with his nervous arms
Strikes the twanging harp of war,
And even the western splendour warms,
While the trumpets sound afar:
But, what creates the most intense surprise,
His soul looks out through renovated eyes."

John Keats, Ode to Apollo

There is an obvious safe haven trade in precious metals, notably gold, and US Treasuries this morning as the accumulation of political and geopolitical risks have finally penetrated the consciousness of the denizens of the markets.

The stock indices I track have not yet violated any major trendlines to the downside.   I am watching this carefully.

I have a largish short position on stocks and long gold in my trading account.  But so far this looks like just a trade and not yet a trend.  And so I have peeled that short back a bit this morning and taken the profit.

Note the subdued variance to NAV exhibited by these funds and trusts below.