"When misguided public opinion honors what is despicable and despises what is honorable, punishes virtue and rewards vice, encourages what is harmful and discourages what is useful, applauds falsehood and smothers truth under indifference or insult, a nation turns its back on progress and can be restored only by the terrible lessons of catastrophe." … Frederic Bastiat

Evil talks about tolerance only when it’s weak. When it gains the upper hand, its vanity always requires the destruction of the good and the innocent, because the example of good and innocent lives is an ongoing witness against it. So it always has been. So it always will be. And America has no special immunity to becoming an enemy of its own founding beliefs about human freedom, human dignity, the limited power of the state, and the sovereignty of God. – Archbishop Chaput


Saturday, October 11, 2014

Deflation Fears Gaining Ground in Europe

The following article in the London Telegraph is definitely worth a read. It confirms what I have been thinking for a while now that the primary fear facing the markets and thus the Central Banks as far as the Western economies go, is NOT inflation, but rather deflation. Try as they can, the ECB and the BOJ in particular, cannot seem to get the kind of growth they are hoping for, and more particularly, an inflation rate of 2% annually.

Dam breaks in Europe as deflation fears wash over ECB rhetoric

'We are reaching the end game in Europe. If they don’t launch real QE soon, the consequences are too awful to contemplate,' warns RBS


We have been following the Euro here in detail ever since ECB head Draghi first began attempts to talk the currency down when it reached the 1.400 level in May of this year. Quite frankly, with the problems that the Eurozone was having economically, the last thing desired in those quarters was a strong currency.

This was accomplished primarily by first raising the specter of additional monetary easing by lowering rates. Secondly it was then further reinforced by successive steps taken by the ECB which were seen as stimulative in nature by investors. I will not go into detail here as those have been covered previously here on this site.

Let me make one additional point here to refute the idea that the Euro fell primarily as a result of the sanctions imposed by the West on Russia. There is no doubt that those sanctions might have shaved some potential growth off of the Eurozone but frankly, the Eurozone has been in trouble long before those sanctions were announced or implemented.

There seem to be some who are so intent on preaching the demise of the US Dollar that they are blinded to the severe economic problems affecting the other major Western industrialized nations. The Dollar certainly has its own set of woes to contend with, but let's face it, right now the US is certainly more attractive of foreign capital flows than is the Eurozone or Japan for that matter.

Also, consider the fact that with global economic growth slowing and not rising, those nations whose currencies we have dubbed, "Commodity currencies", are having their own difficulties as well.

The Canadian Dollar, for example has fallen from 1.06 to its current .89 over the last three years. That is a decline of some 15.5%.

The Australian Dollar has declined nearly 22% in value against the US Dollar over that same three period with the currency being especially hit hard over the last month as it has plummeted some 8.5% alone!

I view the Aussie as a "Growth Currency" meaning that I look at it to try to get a sense of how the world at large sees the potential for commodity usage and thus, as a byproduct, overall world growth. Australia's close proximity to China, and its large trade in raw materials that are used in industrialized nations, infers that it is particularly vulnerable to any slowdown in growth from that corner of Asia.

Here is the currency chart:

That does not look like a currency chart showing a strong, vibrant, commodity-based economy now does it? It reflects what I and many others have been saying for a while now, that growth is slowing and deflationary headwinds are building. Those who keep with their incessant, inflation this and inflation that, are simply barking up the wrong tree.

Could we experience a currency crisis here in the US at some point? Sure we could. One never knows when the sentiment shifts in a market and suddenly something that was of seemingly little to no concern erupts into a full blown panic. Take the European Sovereign Debt crisis as an example.

It was no NEW news to the market that Greece or Spain or Portugal or even Italy had huge amounts of debt for the size of their overall GDP. The market knew that for a long time. Yet, something triggered a sudden shift in sentiment towards those nations' debt one day and on came the crisis.

What I am trying to say here is that one must deal with the present realities in the market to be successful as a trader or even an investor. Those who are handling real money and placing real trades or making real investments do not have the LUXURY of postulating theory after theory, many or even most of which will not turn out to be true. Instead they must understand the thinking or sentiment of the market. If it worries the market; it worries the trader. If the market could care less; the trader could care less. That sounds blasé but it is axiomatic due to the nature of money flows.

Standing in front of a tidal wave of money moving against you is a surefire method to be financially destroyed and left as "road pizza" ( one of my favorite analogies ) on the floor of the trading pits.

Let me shift gears here slightly and note the chart of gold priced in terms of the Euro. Eurogold has been holding much better than US Dollar priced gold on the chart, which is of course due to the sharp fall in the Euro.

Some have asked me what the repercussions to the Euro might be were the ECB to actually engage in their own version of QE to try reversing the deflationary pressures that are relentless in the Eurozone. I honestly do not know. I can make a case for a move higher and make one for a move lower.

The case for the lower Euro would be simple - the ECB creates more supply of the currency which tends to undercut the unit and thus knocks its lower. I am sure that is what they would hope the currency would do as they would thus bank on the weaker currency stimulating exports and serving to help generate some inflationary pressures.

The reverse could happen however. What if the market views the QE as sufficiently large enough in size to actually make a big impact on the economy and thus decides that the Eurozone will actually begin to grow? Could they decide that the Euro is now low enough and will move higher as the economy improves?

I don't know. The truth is I am not sure if anyone really knows. The reasons is because of something I have said many times here - we are in an era in which a monetary experiment of this size and of this nature has never been previously attempted. No one has thus ever lived through or been familiar with its eventual outcome. We are all trying to use our experience and wisdom gained over the years in deciphering the enigma presently before us. That is why I caution my readers against those who confidently ( hubristically in my opinion) proclaim with absolute certainty that "this market has bottomed" or "this market has topped" or "this event will now follow as sure as the sun rises in the East"., etc.

Let me draw some on my Texan roots and say that is pure "Bullsh*t!". They no more know the outcome or path of events that is going to transpire that the proverbial man in the moon. My advice is to ignore the wild screamers and theorist over at websites that are constantly regaling us with one sensational, dogmatic prediction after another and try to maintain a sort of quiet calm while you study developments and price action as you try to get a sense of how the markets are going to respond.

Lastly - Compare the Eurogold chart above to the weekly chart pattern of gold priced in US Dollar terms.

As you can see, that is quite a difference! This one looks abysmal compared to Eurogold. I am noting however that this week's wild swings in price have produced a Bullish Engulfing pattern on the weekly chart. That pattern has appeared at the previous double bottom level near $1180. My view on triple bottoms is well known by now - they rarely hold. But "rarely" is the key word. This one just might hold. Again, I honestly do not know. A technical chart pattern like this tends to be fairly reliable but all it could mean this time around is a halt in the ongoing downtrend, a sort of pause while the market consolidates before beginning a new leg lower. The reason for the uncertainty in my mind is that I did not see anything similar in the gold mining shares as evidenced by the HUI or GDXJ, both of which produced lousy weekly closes this week.

With the GLD disgorging the metal and with the TIPS spread continuing to fall, and with the commodity indices all dropping lower, will gold be able to withstand the headwinds coming from those negative fundamentals? Will those holding the metal ( big speculative interests ) decide to sell their gold to meet margin calls in equity markets exactly as happened back in 2008 when the crash began across nearly all asset classes except bonds? Again, I do not know. I am watching and observing however so let's do that together and see what comes next.


  1. Thanks Dan, nice write up on a Saturday afternoon. :-)

    There's so many points above I agree with that I'll briefly mention two that you've previously mentioned at other times on here.

    The only fairly quick way I see the western economies getting out of the deflationary/stagflationary doldrums (other than a debt jubilee for everyone on the planet/not going to happen) is for a significant minimum wage hike to occur which would spur growth through consumption as well as spark inflation while also increasing the velocity of money through the system.

    A wage hike would eventually stimulate job creation as increased consumption would require companies to step up production of goods or services for a burgeoning customer base.

    A significant minimum wage is long overdue imho and it would/should have the effect of everyone else's wages eventually go up relative to the wage floor.
    The increased tax revenues from the additional consumer spending (and Corp. profits) should appeal to the Govt. as well.

    With Govts./CB's creating tens of trillions of new money or credit the past 5 years (that they then spent on toxic asset sterilizations or outright asset purchases of all types plus propping up the entire planet with enough USD liquidity) you'd think they'd eventually realize (if they did indeed actually care) that the next phase of any future monetary stimulus will need to happen from the ground up (significant wage hike) instead of any trickle down mumbo jumbo.

    In a world where it seems like there's no shortage of people with itchy pitchforks the solution (wage increase=wealth effect) would give people a reason to put down their metaphorical pitchforks of discontent.
    The Govts. of many countries at this point in time appear to be catering to (and by creating TRILLIONS to do so) big money interests first and foremost, while becoming increasingly authoritarian towards their own citizens.
    It appears they'd rather put down the people with the raised pitchforks instead of propping them up with some larger crumbs that would cause them instead to lower them.

    The deflationary solution is an easy one to solve when you're closer to the bottom of the economic food chain and looking for a few crumbs to fall everyone's way when the Govt./CB created TRILLIONS of loaves of bread for the relative few.

    1. DPH
      Yes but. While a minimum wage boost will immediately be spent on necessities there is a strong possibility of fewer of those jobs.
      Some West Coast jurisdictions have mandated significant minimum wage boosts. There are several reports of increasing automation, reduced hours and fewer McJobs. It quite similar to what happened when Obama Care was implemented. Let's see how these further social experiments work out. I am concerned.

      I do echo your concerns about the increasing authoritarian slant of government. Body armor, full auto weapons and MRAPS in school districts, what's that about. I you have them you will train with them and you will use them. What better way to stifle the protest over the last shooting than to have another one?

    2. This comment has been removed by the author.

    3. I will just say that the she down of Harvey Organ blog I find it excessive , I was a little more explicit in my prior comment , but it really does piss me off , that we all the outrageous websites that one can find out there , they give so much importance to this poor devil .

    4. Mike...totally agree that in the short term the effect on already existing minimum wage jobs could be negative at first until consumer demand eventually necessitates increased job hiring thereafter.
      I have a feeling that jobs that start out $5 higher then the previous minimum wage would re-energize the pool of people who are classified as non-participants in the labor statistics.

      I think what bothers me the most, and many others I presume, is the blind greed and arrogance of those who have been completely catered to while the vast majority were given little consideration about their financial welfare.
      I'm not advocating for a hand out of any type but instead a respectable living wage increase for everyone that they'll have to earn the good old fashioned way....work!

      Is it too much for any of us to ask or demand of them that we get some type of consideration while TRILLION$ UPON TRILLION$ of new capital was almost instantly created when they needed it?

      The wage structure in this country, and probably many others, needs realignment if deflation is indeed the Govts/CB primary concern because what they fail to realize is that by squeezing the working citizen they're essentially squeezing themselves at the same time.
      But then again when you can almost instantly create huge amounts of credit and capital to grease the big corporate/military gears you probably become tone deaf of (and resent) the squeeky ball-bearings of society that we the people represent.

      A large minimum wage increase is long overdue and all the platitudes and excuse making by the pols or corporate heads why it would be bad for the economy should be taken to task for their greed towards others.

      Ah...if only it was that simple and I were king!

    5. @ anon

      In expressing your concerns about Harvey Organ, who are you referring to as "they"?

    6. Ophelia , I couldn't care less about Harvey Organ and his web site ... but I find it amazing that some people find him so important as to shut him down , when I say they , I refer to whomever is responsible for shutting him down . Probably some goverment agency , watchdog , whomever ... . Funny that these people focus on this poor bastard , court orders , etc ... makes me curious ..

    7. "Some people"

      You mean Copyright holders, people like that? Why do you leap to the conclusion that the Government is involved? Why is it "funny" that anyone should seek Court enforcement of their legal rights, and how does that make Harvey a "poor bastard" rather than a transgressor?

    8. I didn't conclude anything ... I said probably , is not the point who did it but the fact they did it .. i don't think that guy had any sensitive data but public information available to all , like Jesse says his site was quite bening

    9. No sense speculating when no reason was given. But I will say I highly doubt any gov't agency was involved.........probably some legality that pissed somebody off.

    10. I said probably

      - probably the World is flat and the Moon is made of Cheese

      - probably the COMEX warehouses are empty

      - probably the "true" value of Gold is $50,000 / oz

      - probably there are Fairies at the bottom of the garden

      you have to PROVE I am wrong, or its all true (probably)

  2. Dan
    Thanks for the great analysis as always.

    Given the use of the term "Endgame" in the Reuters headline and the relatively strong performance of Eurogold I expect the usual sites to spin this as eminent currency and economic collapse in Europe. This bullish for gold.
    Glad I left their world.

  3. "I am watching and observing however so let's do that together and see what comes next." Yes!

  4. While all the world's central bankers share common tendencies, it is a mistake to think they are all the same i.e. do not confuse Draghi with Bernanke.

    Mario Draghi has had multiple opportunities to save the incipient European collapse--and he has not. He is not Bernanke, who was essentially a political tool. My feeling is that Draghi will temporize long past the point where a more accommodative CB might have acted, and the main reason is that he understands the downside of unbridled QE, and I believe he feels it is basically a policy failure.

    By refusing to quickly "save" the hides of the EU political clowns, I believe he is hoping to force at least some positive policy changes, which is the only long-term solution. He has as much as said so.

    Will he succeed? Almost surely not, but I think he will be very sanguine in the face of the coming meltdown in the European bourses if he does not act. He will inflict pain on the markets with much more equanimity than our Mr. Bernanke. I would be VERY careful of buying European dips right now, and the best place to be is on the sidelines, until much more is known.

  5. Laughter is the best medicine....

    Eric Sprott, April 2013....when gold was $1400+ and silver $25+

    “If gold goes to a new high this year, I think silver is going to a new high, which means above $50. Where is it ultimately going to go? I think it will be in the hundreds of dollars. If gold goes to $3,000, silver is (already) going to be (trading) $150 to $250."

    "That’s a big, big gain from here. You are not going to get those kinds of gains in other instruments. You are not going to get that owning bonds or (general) stocks. The metals are the place to be. It’s so unfortunate that we’ve had this ridiculous selldown here in the face of all things that are great for gold. But there are reasons that people, the central planners, may have wanted to have it down."

    "If it was the central planners that knocked it down, man did they lose that game because it just ignited the interest in (physical) gold and silver. I just think we are going to be many times higher than we are today. It’s going to be a long-run, we are going to have this bull market go on for another 5 to 7 years."


    That last paragraph would be comedic if it weren't so tragic for all those who ended up being scalped in part by it or the similar refrains from all the other hucksters out there who parrot Sprott and others like him.

    1. Reinforces the folly of making price predictions, but remember Sprott made an awful lot of money for a lot of people with his vision before things went sour. Whether they still have that money is another matter.

    2. Exactly
      I'm sure there are all kinds of billionaires here speaking there wisdom. Lol

    3. This comment has been removed by the author.

  6. Geopolitics Quiz

    1. Why has media attention shifted away from Ukraine?

    2. How come all the bombing hasn't stopped ISIS advancing in either Syria or Iraq?

    3. What has caused Ebola to spread around the World this time, but never before? Isn't it lucky that thus coincided with the discovery of a new Government-sponsored vaccine

    4. Why are all the leaders behind the Hong Kong "Occupy Central" protests funded by the NED and why are they occupying numerous locations but NOT Central (which is where the Banks are located)?

    5. Why is Saudi Arabia pumping more oil when the price is dropping?

    6. Why are there protests across Europe this weekend against TTIP, and why has this "free trade" agreement been negotiated in secret?

    7. Why have the US State Department and Amnesty International not made critical statements about recent Police use of tear gas in Naples (Italy) and
    Mexico, but they have in Hong Kong?

    8. How come India can put a spacecraft in orbit around Mars, but 85% of its population do not have access to domestuc sanitation and toilet facilities?

    9. Why has China just slapped import duties on coal from Australia, but exempted Indonesia from simikar tariffs?

    10. What items represent a) the biggest US export to China and b) China's biggest export to the USA?

    Answers in a postcard please, accompanied by your answer to the following tie-breaker: "This is relevant in an investment and trading context because .,.,,," (in not more than 5 easy words, excluding abbreviations such as COMEX, TPTB & QE)

    1. Cheat Sheet: http://www.huffingtonpost.com/clyde-prestowitz/america-needs-a-new-globa_b_557131.html

    2. This comment has been removed by the author.

    3. 11. Why hasn't the US Govt or it's military interceded into the narco-terrorist state that Mexico is and why hasn't there been any type of MSM or public outcry about the DOZENS of college students and teachers that were recently kidnapped (and probably murdered) allegedly by Mexican law enforcement and the drug cartels?

      ISIS in Iraq poses a threat to THAT region and all it took were some gruesome beheading videos to grab everyone's attention and military action.
      Mexican narco-terrorism has beheaded hundreds of victims, sometimes dozens at a time, while hanging and displaying tortured victims on public highways as warnings yet the US doesn't do anything truly meaningful to protect and stabilize THIS regions borders.

    4. Are you guys so serious to ask those question ? Be advised not to ask and attempt to answer any question like these.It can make you insane. Dan quoted here Bible for a reason. The world must be mad before HIS COMING. I stopped thinking and reasoning about this world when McNamara walked out and said Tokin incident was a lie. Since then numbness is my attitude to approach this world. Say good morning from Vietnam !

    5. All it takes for Evil to succeed is for a few Good Men to do nothing, and a Man who doesn't stand for something will fall for anything

    6. #11 - Think of it this way, just as JPM & Co own congress / Fed, so the Narcos are intertwined at every level of Mexican Society. No large capital project (esp. real estate) is untouched by cartel/TCO money.

      Take for instance the capture of drug lord in San Miguel de Allende. His financier, German Goyenechea was a PAN party politico, real estate & investor, and very involved in local economy.

    7. #2


    8. #3 Army Times 1st August 2014

      Filoviruses like Ebola have been of interest to the Pentagon since the late 1970s, mainly because Ebola and its fellow viruses have high mortality rates — in the current outbreak, roughly 60 percent to 72 percent of those who have contracted the disease have died — and its stable nature in aerosol make it attractive as a potential biological weapon.

      Since the late 1970s and early 1980s, researchers at the U.S. Army Medical Research Institute of Infectious Diseases have sought to develop a vaccine or treatment for the disease.

      Last year, USAMRIID scientists used a treatment, MB-003, on primates infected with Ebola after they became symptomatic; the treatment fully protected the animals when given one hour after exposure.

      In March, the Food and Drug Administration granted fast-track status to the development of another Ebola treatment, TKM-Ebola, developed under a $140 million contract with DoD, although earlier this month, the FDA placed a human clinical study of TKM-Ebola on hold, requesting more information on the protocol before allowing it to proceed.


      Conveniently, the US Government also owns a registered Patent in the Ebola Virus itself ( U.S. patent numbers 20120251502 and CA2741523A1 )


      How very reassuring this must be; and how very coincidental

    9. Some if the possible methods of weaponizing Ebola have been thoroughly covered in the fiction world over the years.

  7. Dan - thanks for the insightful post today. On your point of the direction of the Euro if additional stimulus comes, back in July 2012 the Euro rallied from the 1.20 level to 1.36 in about 6 months after Draghi announced the OMT rescue plans. But as the article points out,

    "The current circumstances are very different from July 2012, when Mr Draghi had the full political backing of the German finance ministry for his OMT rescue plans. This time he must battle critics across the whole political spectrum in Germany. "

    Without Germany on board any significant QE, the Euro could very likely continue its downslide...

    DPH- Agree the US needs to stimulate growth to get the economy moving but raising the minimum wage is akin to wage price controls. Normal supply/demand effects show raising the price of anything (in this case an entry level job) will reduce the demand for entry level jobs. If the government were to reduce the minimum wage and even implement a two tiered system for minors where the minimum wage was even LOWER, it would increase the demand for entry level jobs (and get more young people working and off the video games), allow businesses to hire more people and allow those newly hired people to be less dependent on the government for their survival. raising the min wage in hopes of getting more people to spend money? The government might as well increase subsidies to people to accomplish the same purpose. The government needs to "get the hell" out of the way by cutting the minimum wage, cut taxes for everyone, cut wasteful spending, reduce and eliminate some subsidies, eliminate regulations that waste valuable time and money, so that small business can flourish and more people can go to work. Do this with the relatively low energy prices we have today and the US economy would be unleashed! Basically create a more business friendly environment and encourage more people who are dependent on the government to do for themselves. But that would be a problem for those politicians who were elected promising a free lunch to their voting base...

  8. Speaking of deflation. I keep hearing how we are on a deflationary trend with no inflation to speak of. So here is some signs of deflation I have noticed of late.
    What was a pint of ice cream is now 14 ounces and half gallons are now 1.5 quarts.
    24 and 12 ounce beverages are now 23 and 11.15 ounces. Yep things are surely deflating! lol.
    I also love to hear how America is becoming energy independent and will export energy, blah, blah. Wonder what $80 oil is going to do the frackin' boyz? Also a $USDX of 90 something should do wonders for our export business and all those factories that the are going to built in the USA. The Fed will raise interest rate soon, lol.

    1. a propos US exports, please refer to the Cheat Sheet above

      (you are talking about a load of rubbish)

  9. Hi all,

    I have a little time now, so here is my point of view about the SP500.
    I don't know if Dan will have a similar analysis :)

    First, I'd like to show once more an example of how T.A can be useful in a "manipulated market" to spot potential reversal areas in which to enter as a contrarian in the market.
    Andrew's pitchforks are one of my tools, and they have been useful on several occasions, so here is a very nice example on the SP500. Look at this chart, monthly time unit, and see where prices made a top and started to reverse down. Only fools will ignore T.A in their analysis of a market today.


    Now about weekly and daily time units :

    Weekly :

    We broke the support of the steepest upwards channel, near 1950.
    Once more in T.A, we use (I don't know the name in english) the symetrical report of a range or a channel to identify a potential next target. Using the support of the previous green channel as a central axis of symetry, and doing the mirror image of the resistance, i.e reporting the channel down once, a parallel line to the channel appears, as a new target and support, and it is now at 1800. It is my intermediate target for now.
    For such examples as reporting a range or a channel's support, see what Silver has been doing as well, this time inside of a downwards channel. Or Copper not long ago on the daily time unit. Examples are multiple. Once more, T.A is used to identify potential reversal areas and exploit them.

    Daily time unit : this is why I am very caution short term about the continuation of the downwards move. We are in an area of multiple supports. The bol100 support is here at 1900 (see also the inf bollinger band on the weekly time unit). Plus 1900 was the last low where prices bounced. Therefore there might be a temporary bounce here at these levels.
    But also quite important, look at the MACD : it is meeting right now the area of its propagation axis, long term. Usually it bounces there, and prices as well. But if it doesn't, and breaks through the axis, it would be bearish for prices as well.
    So we are now at a key price and timing for SP to choose between continuation of downtrend towards 1800 or a short term bounce.


    1. Let me interrupt. I am a day trader so TA is an absolute tool and FA ignored totally. However I want to move to swing and trending arena. The move higher the less TA necessary. For swing you need extrinsic factors rather than price action and indicators from prices such as seasonal, cyclical, commercials COT and sentiment. Into trending, using of P/E ratio, bond yield forward, insider selling, buy back program or even the moving of sun and moon to predict stock. The most important things is choosing which one fit to your personality.Based on such external factors rather than price, may I conclude that SP could be ATH soon

    2. Your welcome.That is all time high

    3. HDH
      Re Monthly. For teaching purposes one could draw pitchforks on the previous high to show how it was a successful indicator.

      Additionally from a cycle stand point we are at the peak of the seven year cycle.

      I personally am looking to your bounce peaks as places to short near term and reduce my long term holdings.

  10. This comment has been removed by the author.

  11. Second Ebola case in Dallas Texas. But remember folks it's all safe.

    Recent publications have forecast fractional percent impact on GDP from Ebola. I would expect some revisions.

    1. If all commercial flights from West Africa to the US were stopped and health care workers exposed to the virus were supervised when removing a contaminated suit, would help matters tremendously...

    2. Yes but highly unlikely under the current administration because they have already taken a stand saying it would be ineffective to quarintene west Affrica.

      With this mornings emphasis on how hard it is to properly remove PPE buddy system would be a good start. Adding and actual disinfectantion step would be also a positive.

      It would be very easy to conclude that this disease is easier to catch than we have been told.

  12. As things deflate away again as QE ends again, the choice seems quite obvious.

    Its keep printing money or deflate and risk a 2008 style asset price collapse again.

    If the stock markets keep falling the rest of the month will the Fed still try to end QE at the end of the month,
    or will they fear a 2008 style asset price collapse is starting to happen again and try to make up a reason to halt the taper?

  13. barneyb6, I would think sadly that a lot of us are asking that question.

    1. Yes Steve, and this is one of the main themes the KWN guys are starting to look very correct on in that QE has been hiding the deflation and recession all along. There has been no real recovery.

      The F-Tv guys have been trying to say there was a real economic global recovery going on and that its not QE related.

      Seems one is wrong on gold and the other is starting to look wrong on an economic recovery that they have been selling for years to the public.

  14. http://armstrongeconomics.com/2014/10/12/imf-admits-they-are-clueless-to-solve-world-economic-crisis/

    Mr. Spellcheck is not the world's greatest writer, but he does make some very good points here about the ongoing European mess.

  15. Afraid the Fed may have no choice but to take on a more dovish tone if the market does not bounce back, if the housing market starts to erode or if the dollar continues to rise. Reaching their 2% inflation mandate looks like a long ways off in the current market conditions. They would eventually like to start reducing the massive balance sheet and inflate their way out of it, but the circumstances may not allow that. The equities and housing markets are most likely an unspoken "data dependent" factor for the Fed because they register more of a "wealth effect" on the general population. The Fed is stuck between a rock and hard spot.

    1. The Fed looks to have been doves all along that try to look hawkish at times to make this look like it is not a one way trip of endless easy money to prop up the markets.

    2. Boo-hoo-hoo, the mkt's down 5%, we're all gonna diiiiieeee...

    3. Suddenly the picture is changing. Feds are going to delay interest rate rises because of worldwide slowdown, and skepticism about US figures. Looks like a golden bounce, just when we were about to throw the baby out with the bath water.

    4. Don't worry Rico, you will be okay. Feds and PPT are on standby, with lots of soothing talk about delayed interest rate rises. Usual Santa Claus rally virtually guaranteed after just a little more token pain - to keep up appearances, you understand.

  16. all right less than 1.5 hours and we get the futs reopened, ES NQ GC SI HG CL EC et al!

    nice volatility for the 6th straight session friday, tomorrow canada off for their thanksgiving and usa columbus day bank holiday.

    gold was very narrow range friday, so one trade setup is to go with a break of the narrow range. gold needs to 'regain the range' over 1240 and silver a much poorer look as it needs above 18.615 to 'regain' and it closed below last week's open.

  17. For the week – corn up 11.75 cents/bu, beans up 10.25 cents/bu and wheat up
    12.75 cents/bu. Trade looking for bean harvest (after close on Tuesday) in low 30% area vs. 57% normal and corn harvest in 25-26% area vs. 38% normal.

    Managed fund corn long reported after
    close Friday clocks in lower than expected while managed funds added another 21K to their soybean short. wheat managed money covering just 4,200 contracts of their short.

    volume was heavy on the downside after usda friday, so ags reopen will be tough on longs technically-ditto for ES NQ that ended so poorly as well on heavy volume.

  18. ZB ZN strong on the reopen.. the world is parking their money in usa treasuries.. this supports DX as well.

    the usd/ypy made new low for the move, yen crosses showing flight into the yen safety.

    aud/usd interesting so low as Dan's chart showed, china trade balance due out tonite!

    ES NQ new lows of move, CL HG fairly red.

    a turn around tuesday for SPX is possible, op-ex week, 200-dma, weekly chart lower bollinger, VIX, put call.. etc


  19. not bad on the nr7 and gold: so the buy was at 1225.9 off the narrow range day.
    ..silver that comment above was from scotia, so that was last monday pit open.


    usd/jpy new low 107.25 .. ebola also helping the bonds.

    one thing on ebola and gold stocks from africa: wouldn't want to be in rangold (GOLD) as africa mining is based on many laborers.

    great dip buying opportunities, gotta love it! ...commodities at 3 yr lows and now stocks join in!

  20. This pullback has almost run its course. Monday, or more likely Tuesday, we'll get the outside reversal, and that'll be that.

    1. What makes you sure of this?
      And what if this was the black swan we were waiting for?
      If market is anticipation, and anticipation is the risk of a widespread panic and epidemy of Ebola, do you think your outside reversal will occur?


      But anyhow, I myself just bought back my short position on the Dax at 8700. I'm hoping for a quick pullback up before a resuming of the downtrend. Not the opposite.

    2. Yes, Rico, you're right, but for all the wrong reasons. The Fed is afraid because of the weakness of the world economy, and actually knows its own economy is weak too. It will step in next week to prop the markets, intimating that rate rises may be delayed for more than a considerable time. If the market did fall hard the PPT would act by buying shares. We had the Greenspan Put, then the Bernanke Put, and what we have now is the Yellen Put. The Fed cannot heal the economy, nor can it act independently of all the other economies, but is only there to "put lipstick on that pig".

    3. It is interesting to see everyone now believes that as soon as SP500 loses more than 5%, Fed will immediately intervene to prop it up. This is exactly the kind of situation which may start a krach.
      We'll see.

    4. What is even more interesting Hubert is that its starting to look like the Fed can no longer bluff about raising interest rates without tanking the stock markets now that the QE market backstop is ending.

      They almost have to just level with the markets and say there will be no rate hikes until a clear economic recovery happens. Forget about next year.

      Perhaps the Fed is starting to lose control of the markets.

      Wonder why Bernanke got out?

      Perhaps he knew there was no recovery, just central bank interventions into the markets.

    5. @dykes,
      I can't understand how someone can spend so much time on this site, and still not get: the market doesn't CARE what the reason is! It's just the market.

      All you're doing is projecting your own desires and biases on it, in an endless attempt to discover some artificial "order" to a random system.

    6. The market is a random system? I think not. Roulette appears to be a random system - though actually is not, being subject to the laws of probability - but the 'market' is influenced by all sorts of extraneous events, some of them predictable, and some not. You talk as if the market is inexorable, ineluctable, and has a mind of its own, as if it was predestined, and completely immune to outside events!

      Let me ask you this, if Janet Yellen announced tomorrow that the Fed was a complete fraud, and could no more fix the economy than fly to the moon, do you think that such an event would cause the market to plummet?

    7. Market is not random. Why Tuesday usually bullish for oil ? Why Thursday is good for gold ? Why buying SP500 1 week before OptExp often makes a good return ? Market definitely not random at least for a short term of 3-10 days. There is a market manipulation and the my task is following their footsteps as soon as possible.

  21. Can't wait for next week guys !!!!

  22. Where is that douchebag Mark? He has a glass jaw.....

  23. God put him into a deep sleep til QE4

  24. Interesting developments in crude oil this morning. Saudi's boosting production to maintain marketshare. Venezuela calling for an emergency meeting to consider production cut.

    Looks like a nice tax break for American drivers. Motor while however remains quite high.

    1. Cheapest retail price I can find for a 55 gallon drum works out to $3.66 a quart for cheap single weight motor oil.

    2. Cheap oil could help miners stay afloat longer. 20%+ costs are fuel.
      (See link).

    3. Who knows what the blowback will be on the Saudi price cut gambit. But on a simplistic level, its smart because it affects North American producers far less than 'the bad guys' as North American oil is largely landlocked (Brent-WTI spread has been steadily declining & we might see par). It's also a wild hare to stimulate the global economy.

      I would guess the people who were so emboldened by the success of central bank omnipotence are now thinking they can pull more levers.

    4. to maintain market share or to bother Russia? :)

    5. bloomberg saying the Saudis may want to see oil prices drop to see impact on nascent US shale production. Says OPEC may slip into effective irrelevancey.

      US oil production has really had a huge impact here. Wow... If the share prices of the P&Es keep slipping like this perhaps the Saudis can just buy the drillers out.

    6. Over 50% increase in oil output since 2008 and counting. North Dakota now produces as much oil as the UK (1 million bbl/day). Texas 3 million bbl/day! Next year Texas is projected to top 4 million bbl/day--that would be more than Iraq & Canada & closing in on Iran.

    7. Eph 6:7. Do you have a link to the Bloomberg article? My assumption was that the Saudis and Americans were complicit (talk about being in bed with the devil) in the price cut. Obviously I've been reading ZH.

  25. And one for Mark…GPRO discovers its black swan, as Michael Schumacher's head injury cause by helmet mounted camera…obviously, no one tested how a n object protruding from a helmet would affect the helmet's protective power. Engineering 101.

  26. Forecasts less confident in late-month rains for coffee/sugar in Brazil, but still look good for corn/soybeans

  27. sugar is a low cost market to trade, not the widow maker like coffee and cattle.

    the same sell numbers from last week in the ags still look ok: ZS 950 stop above gap fill, ZC 350 stop above 50-dma, and ZW 510-15 stop above Dan's chart 520.

  28. ZW chicago wheat held the 10-dma touch, bulls had been happy for the 10dma crossing above the 20dma last week, and they like a big fund short to squeeze.

    for a fundamental wheat bulls are talking supply concerns: south america crop 'too wet', australia 'too hot', france was poor quality their crop, 'can't count on russia/ukraine'.. and all the water in the usa isn't good.

    1. 77; I am wondering if you have ever reported on a weather fundamental that could be bearish? Also, are you long grains and beans and coffee?

  29. Funds have been net buyers: 7,500 soybeans, 3,000 soymeal, 2,000 soyoil, 8,000 corn and 2,000 wheat.

    soybeans don't like 'wet feet' and lack of hedge pressure has emboldened the fund buyers today.

    harvest data tomorrow will be behind and is getting further behind as we speak!


    1. 77;

      there is good harvest weather beginning later tomorrow and continuing across the corn belt from West to East through the weekend. Combines will be rolling in that direction as the soil will need a couple of days to dry out from the heavy rains.

      Wet feet for soybeans does not matter when the crop is mature only when the crop is actively growing. The wetness is affecting the combines not the plants. which are either shutting down or already are shut down and awaiting harvest.

      Today is another "squeeze day" just like what happened exactly one week ago last Monday. It seems as if some funds are playing games going after the shorts in the grain markets now on a regular, weekly basis.

      Beans at $9.50 are a gift as the S. American crop is going to be a big one. More normal rains are coming down that way next week.

      Farmers are going to be big sellers if corn were to reach $3.50. They are large numbers of them who still have not priced grain for this year hoping for some sort of rally.

    2. 77;

      Also, on the corn, the corn/wheat spreads are getting violently ripped apart from day to day forcing big covering in that spread as players get shredded. Today, it was the guys who placed long wheat/short corn spreads getting out which forced corn even higher.

    3. 77, have you ever been in the American Midwest, or traded anything or are you just a guy that reads different wires and then clogs up this post? You are a real Monday Morning Quarterback, and congratulations on never having an original thought of your own, but keep up the good reporting and maybe TWC will give you a trainee position.

  30. What are people's views of the Swiss gold initiative? It could be a major turning point in the gold market if it goes though.

    Not only would the Swiss be forced to buy huge quantities of gold on the open market but other country's may copy the idea.

    What a wonderful way of securing foreign investment in one's country - have a relatively strong currency and sound money policy. The Swiss authorities will be desperately hoping this doesn't go through. Not sure how they would save their banks in future if money printing was needed in a hurry.

    I think it's unlikely to get voted in but would certainly be very interesting if it did.

    And they would be telegraphing the market they are purchasing x hundreds tons of gold over the following several years. Gold shorts may get a little twitch come end of November!

    1. In your gold bug dreams buddy

    2. Not in anyone's dreams, it's a real vote happening on the 30th November. A yes vote would potentially be a game changer but then we thought that when Germany decided to repatriate their gold.

      What is it they've had after over a year? Something like 5 tons? Of course the Fed have it :-)

    3. This comment has been removed by the author.

    4. I'm not so sure the U.S. has any intention of ever giving Germany their gold back or any other large depositor.
      Anyone claiming the US has no gold on deposit has the burden of proof to prove it besides just their suspicions.

      I don't believe a "Yes" vote on Swiss gold repatriation will make a difference. It'll just end up being another one of those hyped and hoped for non-events that were supposed to make a difference but then never materialized as such.

      Several scenario's over the last few years were highly hyped by the barkers out there such as....JPM/CFTC Lawsuit, opening of Shanghai gold/silver markets, German gold repatriation, the Libor Fix and the Gold Fix etc.
      None of them made a difference.

      If the German request, as well as the Venezuelan gold repatriation, didn't trigger some type of epic gold market upheaval then why would a relatively small Swiss repatriation make a difference?

      I guess we'll have to wait and see what happens when the vote occurs. Otherwise it just looks like another hyped non-story that some shills have attached themselves to until something new comes along that's the next big thing.

      It's always something...like empty western gold/silver vaults. Prove it, don't assume it.

  31. The market repeated the pattern yesterday. After 3PM, bond markets closed so bond guys jumping into the middle of market stocks do wild things

  32. Dominic, unfortunately the Swiss gold initiative has a very remote possibility of succeeding. The government, the Central Bank and the media are clobbering it at every opportunity. Like Scotland seceding from the UK, did anyone think there was the remotest chance, once the media got their fangs in?

    However, these frequent referenda that the Swiss have, and must have by law if there are 100000 votes setting up the initiative, is very impressive. They are much closer to a real democracy than any other country in the world.

    1. Peter, you are right; The Swiss are no factor; The SF Bay Area is about 10x more dynamic with about the same 8m populations;watches and chocolate bars won't feed the bulldog

    2. I agree it's unlikely but I don't agree it wouldn't impact the gold price. The German repatriation hasn't had an impact mainly becuase the gold hasn't been re-patriated! More than likely the Fed don't have the German's gold and if they were forced to go in to the market to obtain it, there would have been a price impact.

      Up till now the Germans have had only 5 tons and I think it is unlikely they will ever see their gold again.

      The Swiss situation is very differnt in that they would be forced by law to purchase approx 1500 tons of gold in the open market within 5 years if the there was a "yes" vote (and even more than that if they wanted to expand their balance sheet).

      The market knows this so a "yes" vote would have a hug impact on the gold price in my opinion as the market would price in the additional demand.

      I do find the likelihood of a yes vote very slim though.

    3. "I do find the likelihood of a yes vote very slim though."

      This is the media talking. Does anyone have the foggiest idea what the average Swiss citizen thinks....it is a referendum afterall.

  33. Wonder how all the geniuses on the 'bug sites that thought they had a slam-dunk retirement play with TBT are feeling now...

    That's the problem with certainty--in the mkts, it's an express elevator to Hell...

  34. Did the U.S. sell-out the Kurds in order to get Turkey's recent "co-operation"?
    The US hesitancy to "save Kurdish Khobani makes more sense if some type of Turkish deal was made otherwise I think the US would've had a big problem with Turkey putting down the Kurds on the level they've just begun to.
    When all is said and done Turkey's borders will probably expand a bit once Syria has been
    reconfigured post-Assad.
    "Mideast violence spreads as Turkey bombs Kurdish fighters"

    ISTANBUL/SURUC Turkey - War against Islamic State militants in Syria and Iraq threatened to spill into Turkey on Tuesday, where reports emerged that the air force had bombed Kurdish fighters furious at Ankara's refusal to help protect their kin in Syria....(cont.)

  35. Beans Beans, the magical fruit, the more it rains, the more we move!!

    swinging riverboat gamblers did a 'stop and reverse' on short nov ZS when it filled the gap about 957.5, so now are long.

    ZC dec corn still can't touch the 350 round number, 50-day MA some quotes say 349-6 now. 349 was a decent short earlier today, SRgamblers can try stop and reverse above 350.

    ZW dec wheat weak let's see what support the 5.00 round number provides.

    NYSE Adv: 2042 Dec: 834 so it's not a good day to try shorts after SPX had the 'worst 3 session streak since 2011'.

    from yest. the takeaway is remember holiday thinness. like eur/usd went up 70 pips from 4pm ET, and SPX after 2pm ET wasn't anybody there at the offices willing to provide a bid. in the ags the commercials didn't have banks open to loan them position money.

    starting the chant: Dan Dan Dan u b da man!

  36. soybeans volume yest. was higher than friday's for report day, so that's bullish.

    non commercials massively short in soybeans and no rain in mato grosso a couple more.
    ...crush and fsa usda numbers tomorrow

    blurb: gold is up about $47 from its low of October 6, however the HUI is up only 1.5 percent since that low.
    ..africa looks real risky the labor instensive miners like GFI HMY GOLD and ebola.

    or the other hand mining is energy intensive, so they've gotta be loving the oil price drop.


    blurbs: saudi arabia will let bubblin' crude go to 75 to destroy the usa fracking business.

    1. Cub Reporter, Sideline Pro, Bot 77; once again you are fos, as per the volume numbers in beans and corn. You musta got that info from a brand new wire service. And if you think the Saudis, who are 3 generations out of the desert have even the faintest clue of destroying the American fracking industry, like Peak Prosperity Chris Martenson and the donkeys at kwn, seem to think, I can only laugh.

  37. perfect hit of NVPOC for NQ at 3850.50 (51.25). Note the pullback. round number trading bought the break and hold at 3800, now the 3850 stalls.

    interesting the russell is up the most today or so what it was down the most coming in.. NDX the only one hasn't touched 200-dma, as compx did touch last week.

    VIX -10%... SLV high o day the 20-dma touch... UUP can't lose the 20-dma, so eur/usd been decent sells on it's 20-dma touch lately.

    1. @77
      I'm with SB on this one: what is the point of your posts? You often post 3 or 4 times in a row about nothing but a description of whatever's happening on the screen in front of you.

      Might want to think about cooling the empty commentary, or get ready for the summary execution...

    2. Thanks Rico, I thought maybe I was the only one fed up with this kid. Three times I told him how to do simple math and he did not respond, so my conclusion is that he is a bot only, one of Hubert's Indian or Pakistani friends. Simply lifts from wire services out of his mom's basement. Sad.


Note: Only a member of this blog may post a comment.