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The fundamental news last week was overwhelming. All week long tensions escalated, and on Friday, things eased back to a manageable level of “fear”. As forecast, VIX was set for a decline, and while the moves were vast, decline we did. See the post in which we argued the move in VIX was done. Here is what VIX looked like when the dust settled at 15.51:
As predicted, the move in the VIX ran out of steam. The Power higher peaked in the wee hours of the morning on Friday, at 17.28. Looking at the RSI as it relaxes on Sunday, we see the pull back from the extreme levels from last Thursday. Could we see a surge higher on Monday? Sure we could. Friday was more of a market pause, and over the weekend, we can be certain of one thing, and that is that traders, investors, hedge fund managers, and everybody else interested in the markets has re-assessed their position and course of action. It would not be surprising at all if we see a big move on Monday, and the move could go either way.
It will be hard to gauge how the markets will take the fundamental cues going into the week. It all depends on how the MSM is trying to push and spin one story over another. If North Korea and a trade war with China are the financial MSM focus, perhaps we will see a spike up. If the focus is on Virginia and Steve Bannon, perhaps we could see a move down in the VIX as that would indicate uncertainty nationally as opposed to globally. And before the comments of “uncertainty nationally to push VIX lower this guy has no clue on markets” comments, I’m looking from a sure, we have problems and events here in he United States, and hopefully events that started and ended with Charlottesville, but thermo-nuclear war? Well, that’s ongoing heightened risk with the end point either being peace or Armageddon.
One thing about the VIX, however, is that on Friday, the VIX and the US Dollar seemed to be moving in lock-step. Here is a 15-minute chart showing the VIX and the DXY since the super-duper premium everything is awesome JOLTs Report:
During Friday’s trading action, we had VIX down, Dollar down, then VIX up, Dollar up. Are we going to see the dollar and VIX re-couple before the markets make a decision, or are they going to start moving opposite each other right from the get-go? As we will see in gold and silver, the Dollar action on Friday puts all those dollar bulls in a pickle.
If the talk of the financial “press” is indeed Virginia and Bannon, this most likely would be bearish for the dollar. It would be bearish because we would be under stress as a nation, and when nations are tested and stressed, there is not a flight into that. Doesn’t matter if it just happens to be the nation that prints the dollars. Nobody wants to walk into a house a when the married couple is screaming at each other and plates are whizzing across the dining room. To that end, look for a move lower in the dollar and signs the bounce is over. The bottom line is there are more fundamental problems in the United States right now than we have time to deal with.
Globally, however, Russia would be a wildcard here. Furthermore, with US Soldiers once again being killed in Iraq, a Middle-east/Russia Black Swan could fly over as nobody is expecting Iraq, Syria, or Russia anything. At least not in the last week anyway, as seen in the dominating news headlines. There was talk of Russia, but it was the same-old same-old, and I’m not sure how it went, but if is safe to say there were millions if not billions of fiat dollars spent, in addition to time killed and energy burned in Washington, all in order to prove that Trump and Putin are BFF’s ready to tie the knot as soon as he dumps the First Lady. MSM was happy to play along. Except I’m not quite sure this would be bullish for the dollar. The US is looking more and more like a basket-case, and who wants money in that type of crazy?
Moving on to gold and silver, we notice that the metals were, generally speaking, lock-step with the dollar as well from late morning/early afternoon and through the close and into after-hours trading. Look at this chart and see that not only is the Friday chart pattern the same for all three, but the afternoon rallies followed significant drops of similar peak-to-trough.
The late day dollar, gold and silver moves are not tic-for-tic in step, but something has to give here. In the last hour of trading on Friday, gold was the oddball out, but the dollar and silver both had a crunch-time surge higher at the end of the day (during after-hours trading). We can’t have a dollar break-out and a metals break-out again on Monday, because they behaved so similarly on Friday. So we must exercise caution. However, looking at the daily chart of the dollar, sure does look like a dead cat, so we’ll just have to wait and see:
And for that weird discrepancy with gold selling off in in after-hours trading? Is gold trying to re-couple lower to join the party at silver’s house? We should all be rooting for silver. I’m pretty sure we would rather have the party at gold’s house:
Fundamentally, there are many, many ways the markets could move tonight and at the official open on Monday with all that is going on in not just the United States, but also the world. Technically, the dollar, gold, and silver are all at the gates, and as soon as the gate is swung open, we will see where they take-off to from where they are now.
Bitcoin may be trying to tell us something as it surges above $4000. Perhaps the price action in the crypto is telling us that gold and silver are set to break-out again as early as tonight. This would add further water to the dollar bulls fire, but goldbugs and silverbugs are standing at the ready, once the euphoria in the cryptoshpere comes down to reality a little, and Bitcoin
traders investors realize that crypto is not the be-all and end-all for everything that ails currency in the 21st Century.
We have, however, obtained a photograph leak of still footage obtained through hidden video in which Mr. Satoshi Nakamoto was extrapolating on the “iPhone 8 BTC Plus” Out-Of-The-Box Mining Capabilities: