SD Midweek: All eyes are on Fed Head Powell today, and as customary, gold & silver look downright terrible going into the FOMC Meeting. Here’s an update…
The broader stock markets aren’t playing ball to the Fed’s liking:
The Nasdaq looks ready to test the support of the 50-day moving average, and the MACD is giving off sell signals.
Of course, this is exactly what we should expect in a rising rate environment. The Fed can try, because in theory they can, but the reality is the Fed can’t have it both ways. Financial paper asset prices are coming down in a rising rate environment.
Other catalysts have contributed to the stock market weakness over the last couple of days, especially the Facebook debacle, but that’s the thing – the fundamentals are in place, all the markets need is a push to get moving.
Volatility is about as unsuspecting as the Fed would want:
How convenient, right? Sitting right there at the 50-day.
There’s still the majority of the sheep who believe, or are rather brainwashed into thinking, that these markets are ‘au-natural’. Since that’s the case, it’s going to be hard to get volatility back to 10 or even single digits again, because that could cause the herd to sense that something is odd about the markets. You know, it’s like that uneasy feeling you get when all the kids disappear from the streets as you’re rolling through Mosul and you know you’re about to get hit or ambushed?
But I digress.
I’ve been thinking the ESF and the Fed would take the VIX back down to ten, but now I’ve come unto different thinking. I now think the attempt is to slowly percolate rising volatility into the markets. That way, the markets look normal and the herd doesn’t get spooked.
Trade Wars, budget deficits, the national debt and tax cuts be danged, the dollar has been rising in the face of all of this:
Notice the slow churn up in the dollar. Kinda like the slow burn on the metals, huh?
I point your attention to yesterday’s action in the dollar index. That’s called a “bullish engulfing” candle. On the daily chart, one candle represents one day of trading. Generally, when the body of the candle is the opposite of the one before it, the new candle indicates the direction – in this instance, a rising dollar index.
But that’s the thing. I would argue that this is as good as it gets with the dollar. The markets have yet to come to terms with the weak fundamentals for the dollar because everybody is convinced America is great again.
America is not.
But as the hour draws near, the yield on the 10-year looks to be rising towards the inevitable break-out towards 3.0%:
For now, everybody assumes the rate hike is a lock today. I assume it is as well. If the illusion is to be kept alive, the rate on the benchmark 10-year will start rising again.
With all of this “change is in the air”, the commodities are sending mixed signals.
Dr Copper has the flu:
Copper has been testing its 200-day moving average overnight/this morning. Additionally, the MACD is giving off a sell signal. If copper loses the 200-day to the downside, I wouldn’t expect whole number support of $3 to hold. I would be looking for the robust support at $2.95.
Of course, this is all in the “everything is awesome” mainstream narrative, so we’ll see.
Crude, on the other hand, isn’t waiting for anything else including a weakening dollar:
Last Friday and again on Monday, I said crude was looking primed to test the resistance of the 50-day moving average. Wow, it not only tested the moving average, it plowed right through it, and today looks to be opening with a gap-up.
Moving on to the metals, let’s start with the good news first.
Palladium has remained above its 200-day moving average:
Other than the bullish Large Spec Net Short position on COMEX silver, saying palladium has stayed above it’s 200-day is really all the good news I have to say about the metals today.
Well, except for this:
The ongoing gift-horse: A chance to make a sweet arbitrage profit by focusing purchases on silver instead of gold because it is taking over 80 ounces of silver to buy one single ounce of gold, which is an extreme that can’t last.
But before we move on to gold & silver, let’s look at some more bad news.
Platinum fell and closed below its 200-day moving average yesterday:
Platinum looks to open with a gap-down today. We would expect support of $940 to hold, but there is major support at $920 in case it doesn’t.
But here’s the thing – my working assumption is that we’re on the cusp of a trend change. That means reversals in the metals and commodities, bullish reversals that is.
It would also mean bearish reversals in the stock market and with the dollar.
So as Clark said, “look around Ellen, we’re on the threshold of hell”, why yes we are.
Starting with gold:
On the impostor dollar, the Federal Reserve Note, I showed what a “bullish engulfing” candle looked like. It stands to reason that for real money, gold, there would be an equal and opposite reaction, and there was. Notice the “bearish engulfing” candle from yesterday.
Also of concern is that with the slow burn since late January, the 50-day moving average looks to be rolling over. Not a good sign.
But the working assumption remains the same: We’re right there at the point of the reversal.
If we’re not and I am wrong, there’s going to be one heck of a buying opportunity.
However, for the last three years, we’ve seen good price action coming off of the rate hikes. So we’ll see. If not at exactly 2:00 p.m. EST when the FOMC Statement hits the tape, then this week.
That’s still my call. The rally in gold & silver begins this week.
The cartel has succeeded in doing something I thought they could not:
They have been successful in moving the 50-day farther away from the 200-day. It just goes without saying that the cartel should never be underestimated in their ability to paint the chart.
The 50-day and the 200-day have been right on top of each other for weeks, and with the latest smashings over the last several weeks to really bring on the pain, the cartel sure did paint that chart downright bearish.
The price action has been so terrible that it has only resulted in ‘lower-lows’. Forget about ‘lower-highs’ because there hasn’t been any short-term tops for nearly two full months.
In addition to the nasty price action, direct your attention to the moving averages convergence – divergence (MACD). Yup, sell signal for silver.
However, this needs repeating because it is important: The working assumption remains, and because the working assumption is still in tact, we are at the point of the reversal. The bullish reversal that is. And as with gold, my call for silver remains the same: I’m expecting the rally to start this week.
So the big question is what if it doesn’t? Or worse yet, what if we start another down-leg in the metals?
Don’t get discouraged. That’s exactly what the cartel wants you to do. Instead, do some spring cleaning, have a garage sale, and get ready to back up the truck.
I don’t think another major down-leg is the plan of the cartel, however, because if they smash too much, they will spark a short squeeze of the large specs. Sure, they could just feed the paper, which they will, but it would still set the stage for a bull rally.
I think the cartel would most likely want the metals to keep on trading sideways to slightly down. That way the large specs can cover slowly, and no squeeze is shown on the charts.
So the next question is, does the cartel have that much control?
Today is one of those days where we see how much control they actually have. We can rest assured they’re all jacked up on caffeine and who knows what else, ready to hit that sell button on the metals.
Except the markets are much more complex than just hitting the sell button.
And one day, that complexity will get the best of them.
– Half Dollar
About the Author
U.S. Army Iraq War Combat Veteran Paul “Half Dollar” Eberhart has an AS in Information Systems and Security from Western Technical College and a BA in Spanish from The University of North Carolina at Chapel Hill. Paul dived into gold & silver in 2009 as a natural progression from the prepper community. He is self-studied in the field of economics, an active amateur trader, and a Silver Bug at heart.