SD Midweek Update: The question is, will gold & silver be able to maintain the momentum and finish the week strong? Here’s more…
Overnight, gold & silver slightly gapped-up into the news of ex-Vampire Squid Gary Cohn resigning from the Trump Administration.
Good riddance to that swamp creature.
The gap-up came under pressure, however, and gold & silver faded all night and into the morning:
Is it really any surprise that as we sit here on Wednesday morning that gold & silver are lower than their closes yesterday?
The outlook overall, however, is mixed, with possibly the slightest of advantage going to gold & silver possibly beginning the rally everybody is looking for.
The gold to silver ratio is finally below 80:
Time will tell if it’s finally the start of the move down.
Silver put in a nice, bullish candle yesterday:
And this is literally where there seems to be a stalemate right now.
The technicals are looking good. The MACD is bullish and silver is about to put in a golden cross. The problem is that silver is right there up against the cartel’s line in the sand, which is right at the convergence of the 50-day and 200-day moving averages.
So we need to get above those averages, and then we still have to deal with $17.
So we will not catch any breaks. It will only be done with the blood, sweat and tears of silver’s hard work. As I stated before, we really need to get to $17.50 in a hurry to leave the 16-handle and $17 line in the sand behind us.
The move could happen quick. The COT Report is uber-bullish in silver with a large spec net short position, so once it’s obvious that silver is breaking-out, we could be above $18 in a hurry.
Gold is back above its 50-day moving average:
We really don’t want the yellow metal to drop down below there.
Among the various mathematical algorithmic inputs, the high-frequency trading algos probably have the full blessing of the cartel to just sell, sell, sell as soon as the 50-day is broken, so staying above it is of the utmost importance.
Palladium is at a make-it or break-it point as well:
On the chart, $955 really needs to hold or we will see a bearish trend of two lower highs and two lower-lows.
And platinum is not out of the woods either:
Platinum could be set to paint a nice bullish candle, but it could just as easily turn out to be a “bearish engulfing” candle, and we already have the bearish trend painted on the chart.
So yes, the outlook is mixed.
There’s a point about that outlook, however.
On Monday I stated that gold & silver needed to make it through Monday and Tuesday unscathed to then begin their rallies.
That is still the case. Overnight pressure on the metals is like waking up with morning breath and bed hair, so it’s not the nicest thing to look at, but the fundamentals are still in place, and while the technicals aren’t downright bearish, they aren’t screaming $50 move in gold and $.75 move in silver either. What the technicals are showing is a challenge and a cartel that’s not willing to back down that easily.
So with the other commodities, the picture is also mixed.
Copper is still stuck below its 50-day for over a week now:
I took the chart back the entire year to show just how copper has been straddling the moving average.
And crude, well, “hello, is this thing on?”:
Trading ranges have been tight over the last several trading days and crude is not to either side of the average but literally towing the line.
Remember, there’s a lot of analysis as to whether crude was going to crash down to the lows of a couple years ago or not. Your’s truly think crude will not, but the point I want to bring up is that it’s not just price that can be corrective but also time. So while crude had a mild correction, the more time it spends in this sideways channel, the more it is self-correcting over time.
Let’s talk about those tariffs now and we incorporate the next several charts into this Midweek Update.
The dollar dropped, what, 30% over the course of the Bush steel tariffs of 2002 through 2003.
And as of now, the tariffs don’t appear to be priced in:
Now that Cohn is gone, and with President Trump unrelenting, if we do see the tariffs implemented, that could weaken the dollar, and remember, it’s not shown on the chart above but there’s literally an air pocket under the dollar where major support won’t be hit until falling down to 80.
Here’s another thought about the dollar and tariffs. President Trump said, well, he’s flip-flopped several times, but the latest time he said it was in Davos where he said he wants a strong dollar. Well, he can in effect do a back door weakening of the dollar by implementing those tariffs, which is what all indications are that he want anyway, especially if we are to gain any type of export advantage.
the VIX seems oblivious to the tariffs:
The VIX is also oblivious to all of the other geo-political tensions around the world, such as renewed talk on additional sanctions on North Korea, just after there was “progress” announced. Talk about a mood disorder.
Then there’s increasing talk about China crashing just as Xi Jinping essentially becomes “Emperor for Life”.
Then there’s Russia’s show of military and nuclear force.
And the VIX sat by, idling, as if nothing was going on in the world.
But notice the slight gap-up into today. If the tariffs and all the other geo-political tensions are not priced in as described above, then the VIX could spike again.
Speaking of spiking, the yield on the 10-Year Note is at the point where it could break-out of its range:
The test will be if there is a bid on U.S. Treasuries amidst all the developing turmoil, or if the rest of the world steps up efforts to move away from the dollar and away from U.S. Debt.
Then we would need to see what we can glean from ESF nad Fed market interventions into the bond market. Regardless, everybody seems to have forgotten all of the factors that sent yields higher at the beginning of the year, and not there is bond market complacency. Complacency kills.
Finally, the stock market is not price in for tariffs and chaos with the Trump Administration’s economic woes:
And between the tariffs & Cohn, that may be just the catalyst for the next leg-down.
Bottom Line: Today sets the tone for the rest of the week with regards to finishing very strong, strong, or unchanged (hard to see finishing down).
Just don’t get too complacent because come Friday we get the Bureau of
Lies Labor Statistics Jobs Report, and as we know, the cartel loves smashing gold & silver on Jobs Friday just as much as the government loves compiling the lies statistics.
– Half Dollar