SD Midweek Update: The markets are mispriced right now with some assets moving in-step when they should not be doing so. Here’s an update…
We have a nice pop in the pre-market today, Wednesday Oct 25th:
There’s good volume on that price rise too.
Since opening on Sunday night, the silver price is down slightly:
As is the gold price:
Of course, we could see this coming from as early as Friday, so we have been in defensive posture anyway. But on the fundamental side of the equation, as the days go on, the fundamentals are going to become harder and harder to ignore.
The infamous “Trump Dossier” is back in the spotlight, and it has Hillary, the DNC, and the FBI’s fingerprints all over it. Then there’s Emperor XI and an oil for gold-backed yuan story that just won’t die. There’s continuing geo-political risk in Iraq, Syria, and North Korea, and Europe is still a basket case.
And that’s just politics.
As far as the stock market goes, well, that’s the Fed’s Frankenstein, and it’s not going to put it down if it doesn’t have to.
And so we have another record high just yesterday:
Of course, our President “Mr Big Fat Ugly Bubble Turned Pump-N-Dumper” Trump was right on cue:
Stock Market just hit another record high! Jobs looking very good.
— Donald J. Trump (@realDonaldTrump) October 24, 2017
Which may also give an explanation for this:
Although it doesn’t explain this:
The VIX (the “Fear” barometer) is slowly but surely waking up, which goes against a sell-off in bonds and a rise in the stock market. However, it is so low as it is, that it may take a lot more for than a couple points of action on the VIX to have an effect on the markets.
Furthermore, a rising VIX would also translate into higher gold and silver prices reacting on an increase in “fear”. It just goes to show how the central banks and governments around the world are in these markets 24/7, because when one takes all the individual components as a whole, it just doesn’t add up.
Though the dollar is not benefiting from the increase in fear:
Which goes to show that the dollar is not the safe haven it once was. Also, that’s a bearish engulfing candle forming on the daily. We had speculated that the dollar could get all the way up to 96 based on the chart patterns, but over the last few days, it looks to be running out of steam at 94. Once the dollar continues the move lower, that will also help to boost the prices of gold & silver.
But then again, neither is Bitcoin:
Which brings up the next point to this midweek update: Nearly the price of everything is mispriced. Granted, that’s why there have been titles about the “everything” bubble.
Crude is starting to look over-extended in the most recent price rise:
The ascent is getting steeper and steeper. Of particular interest is the rise in the price of oil alongside the rise in strength of the dollar. Generally, a higher dollar means lower crude prices, and a lower dollar means higher crude prices. Not over the last couple of weeks, however.
Although copper still looks healthy:
Copper built the multi-day base between $3.10 and $3.15 before retreating, although putting in a higher-low. The base metal now appears to be base-forming again from the next step up, between $3.15 and $3.20, although an argument could even be made that the base could be all the way up to $3.20 to $3.25. An increase in the copper price will raise the floor for silver as silver trades in it’s “industrial metal” role.
Platinum is not looking like it is has braced in a defensive posture, however:
If platinum can hold here, it will have put in the all important higher-low, but those down days are nasty. We’ll see by the end of the week if the set up was bullish or bearish.
Although it is looking bullish in palladium for two reasons:
Palladium has formed both a rounded bottom on the daily, and there is a nice symmetrical cup-n-handle forming, which would also be bullish.
There are a number of data releases coming out between now and the end of the week. there are several market moving releases left including:
- Durable Goods Orders
- New Home Sales
- EIA Petroleum Status Report
- Trade Balance (Deficit)
- Jobless Claims
- Pending Home Sales
And then the big one is released on Friday: First Estimate of Third Quarter GDP. As of the time of this Midweek Update, the Atlanta and NY Fed have not updated their forecasts, though those updates will be coming out later this morning.
We have been weathering the storm well. The question is this: Has the storm passed, or are we merely in the eye of the storm?
We’ll know by Friday, but sudden moves coming from pent-up energy should not be removed from the realm of possibility. All it takes is one match to the many barrels of fundamental news gunpowder and we could be thrown in the midst of another precious metals surge that catches everybody off guard.