SD Midweek Update: The give and take has been brutal, but one of the sides is about to go over the bags and go on the offensive. Here’s an update…
The fundamental news is nothing short of complete and total uncertainty. A month after the worst mass shooting in U.S. history, we had the worst mass shooting in a church in U.S. history. On top of the worsening domestic situation, Saudi Arabia is in utter chaos right now with dead princes, frozen bank accounts, war and war threats, and a petro-dollar that behind closed doors most certainly undergoing spats of violent convulsions.
So coming into Monday it seems there would be a lot of fear and uncertainty in the markets.
And under normal circumstances it would, and it most likely does have a lot of fear and uncertainty in the markets right now.
Yet the “fear index”, the VIX, stayed under 10 all day long:
To anybody who does not understand how this is possible, let’s go over two things:
- Sell short “fear”
- Buy Index futures
Just like the cartel throws unlimited paper gold and paper silver a the markets, the cartel (as in the Fed representing the banking sector and the Exchange Stabilization Fund representing the government) can throw unlimited paper at the stock markets too.
And they do.
So it is not that there is no fear in the markets. Certainly there is more fear in the United States and globally right now than ever before. But it’s nothing a little debt based fiat currency can’t solve when there is both a printing press and networked market control at the speed of light. Literally.
So not only is is no surprise that the VIX is so low, but, well, this:
And since our President turned Market Cheerleader In Chief pumps every new high, one has to wonder if he is just waiting to give the signal to pull the plug, or if he has merely sold out? Because just yesterday, in the midst of his Asian tour, our President was all about some stock market:
Stock market hit yet another all-time record high yesterday. There is great confidence in the moves that my Administration….
— Donald J. Trump (@realDonaldTrump) November 7, 2017
Time will tell if he will overturn the apple cart or if he has given in to the Deep State, but a problem is developing either way.
The dollar has stalled for the last eight days:
If it’s going to get up to 96 to complete the inverse head-n-shoulders, it better get moving, otherwise, that could be argued as bullish consolidation, but recall that the dollar has been strong and on a tear since mid-2014. So in the long run, is it bullish consolidation or a bear rally?
Between June 2014 until March 2015, the dollar index rose from the 70’s to over 100:
To say it can’t drop from 95 to 80 would bring a ton of pain to anybody’s wallet that contains U.S. Federal Reserve Notes.
The yield on the 10-year is dropping:
In fact, it just dropped and closed below the 200-day moving average yesterday (Tuesday Nov. 7th).
Crude oil, on the other hand, recently put in a “golden cross”:
To anybody who has “skin in the game”, this is a good thing. In other words, people who work in the oil industry or people who trade the oil markets, well, they’re lovin’ it. For everybody else, get ready for higher prices. This should already be apparent at the pump, and really, it’s only just begun.
Furthermore, to reiterate, the cost of diesel is a major cost of production for gold and silver mining. If the price of crude keeps rising, the cost to mine gold and silver will become more expensive, and based that one single factor alone, gold and silver would have to experience what is called “cost-push” inflation. That is to say, if it costs more to produce, that cost will get passed (pushed) on to the consumer. To see a real world, direct result of this, think back to 2008 when the price of crude was approaching $150 per barrel. Airlines and many companies for that mater began to charge a “fuel surcharge” and just added a line item to the end consumer’s bill.
Copper, however, appears to be dropping below the 50-day moving average again:
At 2:53 a.m. EST Wednesday Nov 8th, the price for the base metal dropped below the 50-day. Looking back the last time this happened, recovery above the 50-day can take weeks.
Platinum had a “death cross” of it’s own in late October:
And it looks to be holding for now, but if the precious metal is to move higher in price, that blue line better turn up in a hurry.
Palladium continues to be our ray of hope for the entire precious metals sector:
Sure, it’s a hard case to but coming off of the latest move up, there are indeed upward sloping and downward sloping moves in price in what could be considered a bull wedge. If that is the case, the next move is likely higher. But even if it isn’t a true bull flag, it is still very healthy consolidation right at $1000.
Looking for a close above $1000 would be very, very bullish.
Gold has maintained above the 200-day:
We absolutely do not want the gold price to dip below the 200-day. The would be an omen that would just crush the spirits. For now, so far so good.
As far as silver, the difficulty the cartel is having in working the price is evidenced in the huge price swings of the last several days:
The convergences of the moving averages show the total desperation to keep the white metal from turning up on the charts. We know it is a losing battle. They know it is a losing battle, but it doesn’t make it any fun to watch. The wild swings began with last Wednesday’s huge intra-day swing higher, continued on Friday with the BLS Jobs Report and ISM smash, and have continued though this week so far.
This is the sign of very pent-up energy. Think about those buildings in Mexico that swayed violently before they collapsed. Well, right now, the silver price is acting like those buildings in the way they are swaying. In Mexico, it was hard to tell which way they would fall. With silver, what is hard to tell is which way the price will move.
Open interest, well:
Open interest will come down, one way or another, either through a massive price smash or an epic short squeeze. For one side of the trade, it will be a bloodbath, for the other side, well, let’s just hope it’s music to our ears.
While the GSR is still high overall, the wild price swings are evidenced by the moves in the gold to silver ratio:
Bouncing from under 73.50 to over 76, it really is amazing just how much these “market fluctuations” have been.
In the grand scheme of things, however, it’s not that bad looking this week:
Anybody trying to time their next purchase right now is going to be grinning from ear to ear with their savings, or crying for having to pay more.
– Half Dollar