ECB Statement Recap and Choppy Markets Leave Investors With Many Questions At Year End
Chris Temple joins me today to first recap the ECB statement. While no longer openly buying bonds the central bank did lower growth forecasts. The overall Eurozone picture remains weak and as much as the ECB wants to be hawkish it’s hard to look at the data and markets and believe them. As for US markets the picture also remain foggy. It’s impossible to pick one area and have full confidence. We discuss why.
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right on. gld backtesting its 200 week Simple MA which currently sits at 117.56
The way this is being set up, it looks like we will go lower post FOMC in the metals and miners. Conversely, the dollar is coiling up super tight, and bullishly so. So it wouldn’t surprise me in the least bit to see a breakout to the upside in USD that hopefully gets quickly reversed.
I hope I am wrong and we just blast upwards in the miners, but that is what I see. If we were to sellof into the FOMC, that would change my view, but metals and miners are just hanging up here in overbought territory just waiting to correct. It’s hard to see the current picture change not that we are so close to the 19th.
Meant to type “now” that we are so close to the FOMC.
It’s possible that some of the weaker silver miners that have been absolutely smashed over the last 6 months will make lower lows in the next couple of weeks (GPL for example). I do think today’s levels should be regained relatively quickly though.
Basically, any of the miners that held up relatively well over the last 2 years, like GPL, are finally catching down to silver and their cohorts on every opportunity. GPL’s daily chart doesn’t look good at all right now. Could I be wrong? I hope so, given the bludgeoning these stocks have taken, but given that GDX is overbought and needs to correct, I can only imagine what happens to the weak miners during that corrective phase.
GPL’s daily chart is almost surely going to break down. I mean bearish consolidations don’t get any better. after a 30-40% drop, it just flatlined over the last month. Not even a respectable bounce to keep bears honest. The bollinger bands are super super tight and the bears are salivating. I think a breakdown totally jibes with my call that GDX is set to correct too.
I do think the coming drop in GPL will be a fakeout/bear trap, however. But if you have been suffering in silver miners to date, you may have to endure a but more in the very near term, which is not fun.
My near term calls are less accurate and there is more guesswork the shorter the time frame IMO. Could GPL break up from today’s level without having to make a lower low? Sure. Anything is possible in this sector.
So don’t buy or sell GPL here. If you have been holding, keep holding at this point IMO. I think 95% of the damage is done.
On the flip side, the GDX:SIL weekly chart is just coming out over massive overbought conditions in terms of 5 week RSI and there should be more room to correct lower in the near term (the next 2-3 weeks). This at least suggests to me that even if GDX goes lower in the near term, silver miners should relatively outperform. If the ratio were to just ramp higher here it would be pretty unbelievable to me.
Right now AXU putting an outside day down–an ugly reversal. Again, like GPL, it has super tight bollinger bands and has already been rejected by the constricting upper bollinger band on the daily chart.
THE MILKSHAKE TRADE IS FINISHED
2018-12-12 – Kevin Muir – the MacroTourist
“The world’s financial landscape inspires little confidence. Brexit, French riots, slumping German banks, Chinese slowdown, emerging market carnage – none of these things scream it’s time to venture out the risk curve.”
“When I tell people I am bearish on US dollars, after they stop laughing, they often ask me – against what? When I tell them against everything, they proceed to lecture me on why those countries are awful places to invest. Yeah, they are probably correct. Europe is a disaster. Japan seems intent on printing their currency into oblivion. Britain can’t seem to do anything right these days. It’s difficult to put your foot down and say, “you should sell US dollar against XYZ currency.” But that’s precisely why everyone is stuffed full of US assets.”
“If I am correct, then we don’t need these other countries to be terrific investments. All we need is asset allocators to return closer to their benchmark weighting and the US dollar will decline. And in fact, if all this move ends up being is a return from overweight to benchmark, then the currencies that were hated the most – the ones that investors were most eager to sell in exchange for dollars – will be the ones that rise the most.”
“Raising rates from this point will not cause a positive feedback loop, but rather only exacerbate the problems. Capital no longer rushes in to America chasing stocks because everyone is already long.”
“And the real problem is that these flows over the past year have caused the Federal Reserve to be tighter than would otherwise be the case. Don’t forget that the real reason Powell was so hawkish in that October 3rd speech was because markets were loosening financial conditions regardless of the Fed’s actions.”
“Well, what if the economy proves more resilient to the recent rate hikes? Then Powell might indeed raise rates and cause the US dollar to rally. This argument I will accept, but let me ask you something – what do you think that a stronger economy (with corresponding tighter monetary policy) does to both the yield curve and stocks? My guess is that the yield curve inverts, stocks sag, and sure, the US dollar rises, but it’s no longer a virtuous rise.”
“Here is my prediction; US stocks might rise, but only if the greenback falls. The US dollar might rally, but it will snuff out the stock market rally. The days of them both going up together are over. The milkshake glass is empty.”
Hello Al, this is a long shot.. but I remember you had a guest a while back.. perhaps months ago.. that had written a book I believe about the deep state and or a pro trump in general book.. most likely deep state related.. I don’t suppose you can help me out and send me some potential books I may be speaking of? Or recommendations in general? Thanks!
The GLD:SLV ratio looks ripe for a big fall/major top–potentially. The set up is there.