It seems that the entire investing world has caught on to the "disinflation bias" theme as stocks are sagging and bonds and rallying. The metals have moved up smartly again this morning and are once again poised to achieve breakout closes. Will they? Can they??
In spite of the continued nonsensical "analysis" that Fed rates hikes are right around the corner, the economic news today was once again lousy. Check out these three headlines from ZH:
So, with Mother Fellen still so insistent that rates hikes are necessary, global markets are anticipating the attendant disinflation/deflation that rate hikes would bring. Eventually...perhaps by the conclusion of the next FOMC on September 17...the "markets" will finally realize just how entirely full of crap she and the rest of the world's central bankers are. Rate hikes aren't next, more easing is next! The only solution that central banks offer is liquidity/cash/money-printing/QE...whatever you want to call it. As this reality takes hold, expect a surging rally in all commodities as we head into Q4.
The only question is can be found in just how far stuff falls before this realization takes hold. Crude to $35? Copper to $2.20 or even $2.00? The S&P to 1850?
All I know is that it is very encouraging to see the metals rebounding so consistently. As we've been discussing, these rebounds are not in a straight line UP and both metals are certainly encountering stiff resistance along the way...BUT...their resilience in the face of all this other selling is something to behold and respect.
Overnight, gold surged through $1130 and $1140, eclipsing the 50-day MA ($1139) along the way. It is now pressed up against stout, important and critical resistance near $1150. As we've stated repeatedly over the past two weeks, the key now is two consecutive closes back above this important old support level. IF GOLD CAN ACCOMPLISH THIS, the Sunday Night Massacre of late July can be viewed as a false breakdown and reversal. This would...for good reason...put some real fear into the hearts of the smarty-pant, momo-chasing shorts that as of last week were still short a near-record amount of paper contracts on the Comex. I have a high in the Dec15 of $1151 and a last of $1149. Let's see what the rest of the day brings.
Again, IF we can continue to move forward from here, a move through the red downtrend arrow on the charts below would foreshadow a move to $1180 and $1200. Still not much to get excited about but at least back to even on the year and more than $100 off of the July lows.
In silver, we're pretty much right back to where we were last Friday, prior to the deliberate, manipulative raid that drive price back down almost 90¢ in two days. Earlier today, the Sep15 silver hit a high of $15.56. Not surprisingly, I have a last back below $15.50 at $15.47. Silver is back above its 50-day, however, which currently can be found near $15.28.
And now, too, silver is at a crossroads. IF it can accomplish two consecutive closes back above $15.50 (though, as you can see on the chart below, a case could be made for $15.40 instead), the false breakdown and reversal would be confirmed and silver could set its sights on $16.20 and even $17.00. But first, it needs a solid surge through $15.50. Can it do it??
The HUI has officially closed the gap on the chart near 128, left over from the open om July 20. With a last of nearly 131, the index is UP a remarkable 25% from the lows just two weeks ago! Do you now see why we keep such close track of the RSI and MACD levels? They were both so extremely "oversold" that a bounce was inevitable and now we've seen it. Again, the question is, what happens next? First and foremost, the index needs to hold above 130. We DO NOT want to see it fall back today or tomorrow and close back below 128. This would embolden the share bears who would likely resume their naked shorting into the neutralized technicals. So, just as in gold and silver, let's watch very closely to see what happens next.
Lastly, on Monday's podcast, we discussed the disinflation bias building for this week and the idea that S&P 2105 might be ripe for another fall. Well here it is, Thursday, and I have a last of 2054. Fifty S&P points is pretty sweet for anyone gambling! Now the question becomes, will we soon see "V"-reversal #19 since last October? Last Wednesday, when we predicted the most recent "V" #18, the intraday low was 2052. Who knows? Maybe this time, it's straight into the toilet? Maybe not. Those willing to gamble on "V" #19 might want to hold their noses, lay some chips on the table, cross their fingers and look away.
Amazingly, I have lasts of precisely $1150 and $15.50 so I think I'll stop here as the timing couldn't be more perfect. Stay safe out there and good luck!