"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


Wednesday, October 15, 2014

Three Strikes and You're Out

and no, I am not talking about the baseball playoffs but rather the triple whammy that completely obliterated both the US equity markets and the US Dollar this morning.

The New York Fed released its business conditions index and it was scary; spooky scary. The index fell to - hold onto your hat - from 27.54 in September to 6.17 in October. Most analysts had been expecting a decline but a more modest one to near 20. This index is a reading of manufacturing activity. If the reading comes in above zero, it indicates expansion but come on already, a plunge of that magnitude is hardly reassuring if one is trying to find a healthy economy!

That was strike one...

Strike two - falling retail sales. They dropped 0.3% in September. Retail sales have been rising since January - albeit not at a breakneck speed but this is the first drop since then. Again, analysts had been expecting a fall but only a meager 0.1%.

Strike three - a fall in the PPI or producer price index. It fell 0.1% in September. That was the first fall in a year!

STocks plunged and so did the Dollar but what is breathtaking is the action in the long bond. The thing SOARED and was up over 4 points in early action. It has subsequently settled down to being up a mere 2 points ( note - this is sarcasm). Yields on the Ten Year just now fell BELOW 2% hitting a low, thus far, of 1.868%.

Can anyone say DEFLATION!

If that were not enough bad news for one day, yet another hospital worker has sadly contracted the Ebola virus. People are getting scared as they know full well that Mr. Happy Face, the current propaganda in chief from the CDC, has been lying to them about the mode of transmission.

Let's see - we have a deadly disease in Africa that is threatening to become a world-wide epidemic, a group of grotesquely barbaric terrorists on the rampage through Mesopotamia and an economy that is looking more and more like it is running out of juice to sustain it - and NO, I am not talking about the bubonic plague, the Ottoman empire Turks and the mess in Europe during the Middle Ages but rather the 21th century. The more things change, the more they become the same.

"That which has been is that which will be so that there is nothing new under the sun, " echoed the wisest man of a former age, one named Solomon in the book of Ecclesiastes.

I will try to get some charts up a bit later. The long bond chart is breathtaking.

By the way, the sinking Dollar is having a profound impact on gold as it moved strongly higher. However, there are two schools of thought out there right now impacting the yellow metal. The first is gold is a safe haven. The second is that it is liquid and can be sold to cover losses in equities ( margin related) and could very well sink along with the crude oil and rest of the commodity complex.

IT looks as if the former is winning at the moment.

Soybeans are still being squeezed by whomever it is that has decided to go after the shorts. The excuse this time around is the falling Dollar will make US beans more competitive on the global export markets. I am very concerned however about almost all of the commodities because if indeed this market selloff is the start of something more serious on the economic front, it is hardly going to be conducive to higher grain and bean prices.

Even cattle, that stalwart of the commodity sector is succumbing. That has me sitting up and taking serious notice. Can beans be far behind? We'll see.

Traders - be so very careful in these markets right now. They can run you over in mere seconds.


  1. most xlnt Dan!

    so from non-farm frdiay this makes the 9th straight session with volatility. VIX for one thing when it's up it parlays into everything else, like commodities.

    soybeans red -8... looking for the stop sell in corn dec ZC under 200-dma.

    Feb #Hogs LIMIT DOWN!

    wouldn't buy any gold stocks yet, HUI needs to break and hold above the 20-day MA.


  2. Don't worry, Rico's right. Our productive corporations will just borrow some more free money and amp up the share buybacks. S&P FTW!

  3. Thanks Dan ,

    Dan , I dont understand , you say that gold as a safe heaven is loosing against gold as a liquid instrument being used to cover loses in equities ... yet gold is up 60 basis points ... what do you mean ?

    1. Anon;

      Sorry if I did not make myself clear there buddy... I am writing in the heat of the trading session... Gold as a safe haven is winning the battle against gold being sold to cover losses in margined equity positions...

    2. you put it right though its me i didn't read it correctly , sorry ! english is not my first language ... the former , is the first one you mentioned ... my fault ! thanks for taking the time though .

  4. eur/usd wow high o day about 1.2890.
    euro has some impt former lows from 2013 mar into july 1.2746 then 1.2755. euro looks like it could be a buy this time on a test and hold of the 20-day MA.

    Dec14 live cattle achieves recent Sep-Oct 61.8% retrace at 162.1,,, if ebola hits no restaurant patrons will be seen.

    tons of bullish blurbs were seen when wheat and corn 10dma crossed above 20dma's and they were correct!.. could say weekly chart was still downtrending but daily charts made a little uptrend. now gold is there, will the 10dma cross above the 20dma!

    the the weekly chart downtrend in gold, every fed pronouncement day was bad, but on the little daily uptrend last weds fed minutes was good for gold!

    NYSE Adv: 909.. Dec: 2122
    ...still weak lotsa 'ebola'

    on deck:
    14:00ET Fed's Beige Book

    cheerio pip pip!

  5. The second worker contracting ebola traveled by air two days ago on Frontier Airlines. Shit has just hit the fan.

  6. NOPA crush 99.97M bu of #soybeans...est 107.5... second smallest monthly crush on record.. lowest since Aug 2004

    NOPA #soyoil stocks 936.88M lbs... est 1.05B lbs...smallest since Nov 2004

    nobody but Dan can trade cattle :)

    ZW chicago wheat over it's upper bollinger band, Dan's chart showed alot of resistance 520.
    wheat blurbs are brazil buying usa wheat, russia winter wheat problems, australia poor crop too much heat and lack of rain.

  7. Selling pressure in the SOW is relentless. Armstrong, with his computing power, uses 15,970 as a daily close target, below that if you haven't gotten out you should so to avoid further near term downward action (days). Or for the weekly close targets:

    "...The weekly support lies at 16170 and a weekly closing beneath this level warns we should certainly move into that 14470-15560 area. A weekly closing below 15960 will warn of a move down to 15284..."

    As with most charting, targets are not confirmed turn dates only benchmarks to keep you aware. Picking trend changing price targets is a bit more elusive and relies on confirmation of hitting the next target, or not.

  8. If Ebola starts spreading in the US it could have a devastating effect on the market. The market is now very sensitive to downward pressure, and even a limited number of cases would be very bad news. It does seem that the authorities have misrepresented how contagious this disease is, and can actually be caught quite easily. We sincerely hope that this is not the case, and this dreadful disease can be contained.

  9. With threats of Ebola, Isis gaining ground rapidly, Putin saber rattling, the market crashing, a weak economy, the dollar down very sharply - somehow the pathetic HUI manages to fall. This is rather ominous. Gold also should be doing much better, but it isn't. Quo Vadis POG?

  10. Lots of volatility in beans. Seems the shorts gained back the upper hand late morning today and the big crop ahead will come back into focus.

    The hit in feeders over the last couple days seemed to coincide with the bounce in corn. Maybe some reality/sanity is now finally beginning to settle in for the cattle market...

  11. Terrible news everywhere. It must be time to go long equities. Good is bad, up is down, right is wrong. Welcome to our broken world.


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