Stocks and Precious Metals Charts - Winter Is Coming

The markets paused today to consolidate their gains.

The economic news is not all that good if you look at it closely. But since most mainstream media talking heads just parrot talking points everything is just great.

I adjusted and synched up the two equity charts with respect to levels and terminology.

Both have hit their 2nd level of retracements after the recent sell off. What the means is that the 'bounce' that often comes after a big drop is over, and the shorts are squeezed, and the hot money has poured back in for the short term trade.

Now we will see what the markets are made of, as we see how traders position themselves into the close into a weekend.

Geopolitical risks are still rather imposing, even if most of the domestic concerns are being swept under a rug of optimism and happy talk from the gated community types.

Deutsche Bank is in trouble again with regulators. Since the big banks often tend to resemble serial felons, this is no surprise. One way to get rid of crime is to deregulate so much and prosecute and investigate so little that nothing is a crime anymore. Innovation!

The 'economic donkeys', as Simon Johnson calls them, are setting us up for another whopper of a financial crisis. It is important to remember that they do not care, as long as they are able to avoid any blame for it.

The latest long range weather forecasts seem to be arriving at a colder and snowier outlook for the northeastern US.  Something about a 'weak el nino' and a jet stream that barrels down from the arctic. Great.

I took Dolly to the groomers yesterday for a hair cut and a wash, and she spent the rest of the day pouting. But she did like it when I put her little snowflake sweater on this afternoon and took her for a walk. I washed all of her blankets, sweaters, pillowcases and so forth, and so they all smell very good and are nice and clean.

Today was, I hope, the last day for clearing leaves with the JD lawn tractor. I gave it a thorough cleaning and parked it for the winter. I'll probably give it an end of year tune up this weekend. I already changed the cutting blades and had the old ones sharpened. I keep two pairs and just keep rotating them.

I was a little surprised at how few birds and squirrels and chipmunks were around the bird feeder after the very early morning. When I took Dolly for her walk I saw that one of the big red-tailed hawks is back in the neighborhood.

The Raptor Trust is nearby.  They released three big hawks which they had rehabilitated a couple years ago. When one of those silent predators start cruising the skies overhead, most of the wildlife takes cover.  The blue jays always start sounding an alarm as they do for snakes and other predators.

We live near the Great Swamp Wildlife Refuge.   There is a large assortment of wildlife that forages out from there, especially during the winter.  They tend to come up the waterways and wooded areas. There are black bears to bobcats and everything in between.

The bird population variety is impressive up in these foothills.   We even have the orange plumed tweeter, which is often seen on weekends at the nearby Trump National Golf Club in Bedminster.

Have a pleasant evening.

Stocks and Precious Metals Charts - Economic Donkeys - Market Cheers the 'Powell Put'

"The real problem with our financial system is that our economic and political system work together to encourage excessive risk, and this risk in turn leads to cycles of prosperity and collapse. In 1998, a much smaller Lehman Brothers was placed in financial peril by the aftermath of the Asian financial crisis and failure of Long Term Capital Management, a major hedge fund. The Federal Reserve responded by lowering interest rates and other central banks followed suit. This reduced the cost of obtaining funds, effectively bailing out Lehman and other institutions in trouble.

As markets have grown to recognize how quick the Federal Reserve is to bail out institutions (and executives) in trouble, they naturally respond. In the 1990s, people talked about the “Greenspan Put” a term which derisively suggests that it is always safe to invest in risky assets, because the Federal Reserve is ready to bail out investors (a put is effectively a promise to buy an asset at a fixed price if you are unable to sell it to someone else at a higher price – this is a way to lock-in profits or limit losses on investments). However, in months following the collapse of Lehman, we learned that the “Bernanke Put” is even more valuable since Chairman Bernanke, alongside the Bank of England, the European Central Bank, and central banks in much of the rest of the world, is prepared to take drastic measures to prevent asset prices from falling when there are risks of global collapse."

Simon Johnson and Peter Boone, Economic Donkeys


"I have marked my estimates of the quality of the bounce by levels it achieves.   Given that this market is running on hot money and adrenaline, I would not tend to underestimate it."

Jesse, yesterday

Fed Chair Jay Powell gave the markets a fresh whiff of hot money in his statement today, which was widely interpreted as a dovish 'walking back' of the statement from October 3.

And the markets huffed up that blast of fresh bubble brew and took off to the upside.

Stocks were up sharply, bond yields fell, gold got a big reversal the day after option expiry, and the Dollar took a dive.

Not that the real world matters but it was interesting that a huge chunk of the physical gold inventory in the Comex Hong Kong warehouses took a hike last night.   296,000 troy ounces is about twice the gold that is ready for delivery at these prices in New York. 

As you can see from the charts below, the stock futures went through the first two retracement levels pretty handily.

It should be noted that they were stalling around the first retracement target until Chairman Jay spoke around noon.

I found it to be interesting that despite the massive and relentless bear market squeeze, which took off and never once seemed to hesitate, the VIX did not drop by a commensurate amount.

Was this a 'set piece', a contrivance of some sort?   A systemic entitlement for the insiders and financiers, another easy score for the informed among so many?   No way to tell.

We'll just have to sit in the shadow of these dark markets, and see where it all goes next.

I did notice that the spokesmodels on bubblevision used the terms 'Fed Put' and 'Powell Put' about eighty times this afternoon.

I got a chuckle when one said 'Why not buy APPL if the Fed is protecting it?'

You just can't make this stuff up.   We have learned nothing, absolutely nothing, over the past twenty years.  And it just gets worse, each time that we allow this, and forget.

And why should things change, when the current scheme of things pays off so well for a few?

Let's see where we go next.

Have a pleasant evening.

Stocks and Precious Metals Charts - Comex Option Expiration Antics - Smart Money Has Left the Building

The concept behind the Smart Money Flow Index is simple. The SMI states that:

1. The “dumb money” trades during the first half hour of each trading day (9:30 am to 10 am), while…
2. The “smart money” trades during the last hour of each trading day (3 pm – 4 pm).

 The index was invented by Don Hayes.

Stocks continued to extend the bounce today, going out on the highs after opening lower.

Below is the 'smart money' index.

I have marked my estimates of the quality of the bounce by levels it achieves.

Given that this market is running on hot money and adrenaline, I would not tend to underestimate it.

Today was an option expiration on the Comex, and the big contract was in December Gold.  This is the biggest gold futures contract of the year.

Wasn't it all too obvious?

We may see another gut check in gold tomorrow, as those who held calls in the money are now the proud owners of futures contracts if they held them into the close.

Geopolitical risk is elevated to say the least.

While the markets are cranking higher on greed and testosterone, that is the kind of market that can melt down in the blink of an eye, given the right kind of catalyst in the form of an exogenous event.

To that end I printed an update of my friend's Dow Crash Correlation Chart intraday.

Have a pleasant evening.

The Current Financial Asset Bubble in the DJIA - The Rake's Progress - 2001 Crash Metals Performance

My friend who has been creating this chart below seems rather exercised by the correlation. He has lots of charts showing the math behind it, and so forth.

What it says to me is that we are at a financial asset bubble top, which appears to have crested.

The old short seller in me knows that the resolution of this depends on what happens next.

While the 'signature' looks rather good, it must be confirmed by a market break, and then a failure of the powers of the financial system to rescue it.

I have been here many times before in the past forty years of trading.

A bull market makes everyone feel like a genius; a bear market crash brings them back down to their knees. Most investors and traders would do well to preserve what they have.

I have taken precautions for myself. You may wish to do the same.

But I am not yet actively shorting the market. This may say more about my current conservative stance towards trading.

In the early 2000's I would have been playing this to the downside, aggressively in-size and short term, in the futures markets.

But that is a younger man's game.

At some point we may see the safe havens come back into vogue. But it appears that is not yet the case.

In a general panic everything gets sold in a liquidation for the short term.

The only difference is the distribution of pain, and the speed at which some assets may rebound.

I include a relevant example from the 2001 crash below.

William Hogarth, The Rake in the Gambling Den Begging For God's Assistance