SP 500 and NDX Futures Daily Charts - The Death of Volatility

The US equity markets ended the week on a dull note, barely able to bounce after a lower open to end the week on a correcting note.

The question will be if this is just a consolidation after a widely noted great leap upwards, or will we see a bit more action to the downside before this is over.

The FOMC will be meeting next week, and as is their wont, they may be pouring more of their oily liquidity over the troubled waters of the mispricings of risk.

As the Financial Times most recently notes in this headline, the Central Banks have used their mighty power to eradicate risk.  All gain and no pain, a world without consequences (especially for the benevolent and enlightened rulers of finance).

 As if.

This is the pinnacle of moral hazards, the triumph of the will to print money, and an impermanent plateau of illusory prosperity.

Have a pleasant evening.

Anat Admati: Seeing Through the Bankers' New Clothes - The Bullet or the Bribe

"Looking at the world as a whole, the drift for many decades has been not towards anarchy but towards the reimposition of slavery. We may be heading not for general breakdown but for an epoch as horribly stable as the slave empires of antiquity...few people have yet considered the kind of world-view, the kind of beliefs, and the social structure that would probably prevail in a state which was at once unconquerable and in a permanent state of cold war with its neighbors."

George Orwell

The reign of the Banks was reintroduced on the back of, and is sustained by, a major campaign of corruption of the political processes and the public discourse. The decisive moment was the repeal of Glass-Steagall, and the further withdrawal of the watchers on the wall by both political parties who have gone along to get along.

The difference in the analogy offered in this talk is that the monied interests are not some semi-benign doddering old emperor who has fallen victim to the flattery of courtiers and the schemes of conmen.  They are a monstrous construction of reckless pride and greed who will work their schemes until the exhaustion and collapse of their prey.

One is foolish to expect them to be ruled by self-control and appeals to reason, given the nature of their pathology.  These are the very types that cause people to organize themselves for their protection.  This is the highest responsibility of government: the promotion of justice, and the defense of all people, including the foolish and the weak, for the common good against thieves, conmen, bandit, foreign armies, and domestic predators.

"There are no necessary evils in government. Its evils exist only in its abuses. If it would confine itself to equal protection, and, as Heaven does its rains, shower its favors alike on the high and the low, the rich and the poor, it would be an unqualified blessing."

Andrew Jackson, Veto of the Second Bank of the United States

The Banks and their associated Corporations continue to extract usurious fees, misprice risk, rig markets, and engage in a variety of soft bribery and extortion.  And it will not end well.  I would like to be more optimistic, but it is discouraging to see how easily the financially powerful have co-opted some sincere reform movements into their willing tools, spouting utopian nonsense.  The shepherds have been struck down, by the bullet and the bribe, and the sheep have been scattered.

The Anglo-American financial system is an accident waiting to happen.  And you can be sure that they are expecting, once again, to dip their beaks deeply into the public pockets when they do. 



h/t Bill Moyers



We are surely not the first generation to face this sort of trial, since it is in the very nature of this fallen world, and the burden of every generation to rise to their particular trials and temptations. If anything we may be notable for our weakness, our lack of faithfulness, our foolish pride, a perverted perspective unworthy of our many gifts, and the stubborn hardness of our hearts too often in the name of our just and loving Lord.

"...He prompts you what to say, and then listens to you, and praises you, and encourages you. He bids you mount aloft. He shows you how to become as gods. Then he laughs and jokes with you, and gets intimate with you; he takes your hand, and gets his fingers between yours, and grasps them, and then you are his."

J. H. Newman

Gold Daily and Silver Weekly Charts - Feeling the Pressure

"Truth is truth, to the end of reckoning."

William Shakespeare, Measure for Measure

What goes down must generally go up, at least once in a while, especially when going down is fighting against the prevailing fundamental trend.

There was intraday commentary here about gold and silver that is worth reading if you have not done so already. 

The downtrend is not yet over, but I am providing some clues as to those things that are worth watching.  These include the gold/silver ratio, and the dow/gold ratio. 

The short interest and market structure in silver provide a backdrop for some explosive upside movement IF the price can break out of the steady selling pattern which may have already gone to an extreme.

If there is a break in the market, you will not see it coming from anything on the Comex, which has become an extended infomercial for quite a bit of what is wrong in the US markets and economy: lack of transparency, captured regulators, weak enforcement, unequal protections, insider trading, and institutionalized frauds and inefficiencies.

It is difficult to draw any conclusions from the historic defeat of a major House of Representatives player in a primary, because of the exceptionally low voter turnout of less than 14%.  And the overconfidence of the incumbent, Eric Cantor, going into the election certainly did not help to motivate his workers to get their base out to vote.

But having said that, it looks like this might be a reaction against an establishment politician who was widely perceived as a willing enabler of the financial corporations.  We would have to see more elections like this to draw any meaningful conclusions however.  As it is, people can use this one example to support just about any bias that they may wish to support.

It would be interesting to see a coalition of the dissatisfied start ousting incumbents, but there are many cultural divides to be breached for that to happen.  Both sides, at their extremes, really cannot 'see' the other without scorn, stereotype, and derision.   The center is a quiet place these days.  But that is where the healing will begin.

Let's see what happens.

Have a pleasant evening.

SP 500 and NDX Futures Daily Charts - The Elephant In the Room

Stocks had a bit of a correction today from what were clearly overextended levels.

The economic news this morning was weak, but tends to reinforce the view that The Recovery™ is highly selective, based on a monetary and fiscal policy that favors a relatively powerful few and fortunate individuals with exceptional wealth and connections.

That is not to say that there are not ways to do better than average with hard work and smart thinking. Rather, it is that there are artificial headwinds, and both subsidies and impediments for some, that work against a more general prosperity that have not yet been reformed out of the system.

I really don't see this correction gaining much momentum to the downside yet, although one has to keep an eye out for those exogenous events such as we are seeing in Iraq, Syria, and the Ukraine.

Barring such an event, a correction of the SP futures to 1900 would still not break the uptrend channel.  It will let some of the air out of this market, which is plentiful, and provide the wash-rinse cycle that the pros use to extract their rents, in addition to HFT.

There is no sustainable recovery, just more talk about 'the new normal' and the need for patience to allow time and the market to work their cures, in an act of faith in those canards that brought us to where we are in the first place.

Have a pleasant evening.

NAV Premiums of Certain Precious Metal Trusts and Funds - Gold/Silver Ratio - Dow/Gold Ratio

I suspect we will know when this long decline in this precious metals market is over when the Gold/Silver ratio drops to something less lofty than 65.

Even with today's big move, the metals have not yet broken the downtrends, but are bouncing off the bottom of a declining channel, at least so far.

But as those who study the longer term charts know, the June-July timeframe often sees an end to a secular downtrend in this long bull market in precious metals.

I suspect today's rally in the metals is due to weakness in stocks, and a changed perception in risk given the deteriorating situation in the Mideast, as well as the very weak economic results this morning.

But I do not want to lose sight of the theme that gold is priced in the West, but it is largely bought and sold in the East. And I suspect much the same can be said about silver.

When silver takes off, and the gold / silver ratio drops back into the 50's at least, we will know that the bull is more likely back.

We may also wish to keep an eye on the Dow/Gold ratio as well.

Gold Daily and Silver Weekly Charts - Consumed In the East, But Priced In the West

"Foreign investors can use offshore yuan to trade gold directly on the SGE international board, which is promoting the internationalization of the renminbi. The international board will form a yuan-denominated gold price index system named 'Shanghai Gold.'

Shanghai Gold will change the current gold market with its 'consumed in the East but priced in the West' arrangement. When China has the right to speak in the international gold market, the true price of gold will be revealed."

Xu Luode, Chairman, Shanghai Gold Exchange, 15 May 2014

And so the price capping continues, in the ritual of confidence, and nothing really happens at the Comex warehouses.   Contracts are stopped, and the bullion gets pushed around the showroom window.

Have a pleasant evening.