• Category Archives Trading Strategies
  • Quants Dominate The Market; Unexpectedly They Are Also Badly Underperforming It

    Two days ago, JPM’s head quant made a striking observation: “Passive and Quantitative investors now account for ~60% of equity assets (vs. less than 30% a decade ago). We estimate that only ~10% of trading volumes originates from fundamental discretionary traders.” In short, markets are now “a quant’s world“, with carbon-based traders looking like a slow anachronism from a bygone era.
    Bloomberg confirmed as much today, when looking at another divergence between quant funds and traditional, discretionary managers: “systematic strategies have barely budged from near-record participation in U. S. stocks. Meanwhile, fundamental equity long-short managers can’t afford to be anything but picky, considering the market’s narrow leadership. The result: the largest gap on record between humans’ and computers’ gross exposure to U. S. equities, data compiled by Credit Suisse Group AG show.”

    This post was published at Zero Hedge on Jun 15, 2017.


  • The Dollar Bull Case

    I see just about everyone has their own theory or trading discipline on where the US dollar is headed next. It’s all these different ideas that make the markets work. Everyone can’t be bullish at the bottom or bearish at the top, it’s just the way it has to be.
    For my 2 cents worth I’m still looking at the possible fractal, bullish rising wedge as a halfway pattern to the upside. I did an in depth report on currencies and the US dollar several months ago in which I showed how it could play out. Since that report the US dollar has declined down to the point, where if the fractal is going to work, now is the time for the US dollar to put in its bottom.
    If you recall earlier this year the US dollar began building out a falling wedge while gold was building out a rising wedge. At the time I thought the US dollar would breakout topside and gold would breakout to the downside, but the markets never make it easy for you. A month or so ago when it became apparent that the US dollar was breaking down, I posted this daily chart looking for a measured move down to the 96.20 using the impulse method as shown by the blue arrows. The breakout to breakout method was a little lower at 95.45. So far the US dollar has reached a low of 96.45 were it has been chopping sideways for the last 2 weeks. If this is going to be an important low then we will most likely see some type of reversal pattern building out such as a double bottom or H&S bottom. So far we don’t have a recognizable reversal pattern in place. All the indicators are suggesting a potential low in here, but I want to see a reversal pattern before I get too excited.

    This post was published at GoldSeek on 14 June 2017.


  • JUNE 13 B/GOLD DOWN $0.80/SILVER DOWN 17 CENTS/AGAIN FOR THE 9TH CONSECUTIVE TIME, THE AMOUNT OF SILVER STANDING AT THE COMEX INCREASES IN QUANTITY/SHALE OIL PRODUCTION WILL HIT RECORD LEVELS BY …

    GOLD: $1265.30 down $0.80
    Silver: $16.74 down 17 cent(s)
    Closing access prices:
    Gold $1266.50
    silver: $16.84
    SHANGHAI GOLD FIX: FIRST FIX 10 15 PM EST (2:15 SHANGHAI LOCAL TIME)
    SECOND FIX: 2:15 AM EST (6:15 SHANGHAI LOCAL TIME)
    SHANGHAI FIRST GOLD FIX: $1274.99 DOLLARS PER OZ
    NY PRICE OF GOLD AT EXACT SAME TIME: $1265.80
    PREMIUM FIRST FIX: $9.19
    xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
    SECOND SHANGHAI GOLD FIX: $1273.50
    NY GOLD PRICE AT THE EXACT SAME TIME: $1265.90
    Premium of Shanghai 2nd fix/NY:$7.60
    xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
    LONDON FIRST GOLD FIX: 5:30 am est $1261.30
    NY PRICING AT THE EXACT SAME TIME: $1261.90
    LONDON SECOND GOLD FIX 10 AM: $1262.00
    NY PRICING AT THE EXACT SAME TIME. $1262.00
    For comex gold:
    JUNE/
    NOTICES FILINGS TODAY FOR APRIL CONTRACT MONTH: 11 NOTICE(S) FOR 1100 OZ.
    TOTAL NOTICES SO FAR: 2191 FOR 219,100 OZ (6.8149 TONNES)
    For silver:
    For silver: JUNE
    4 NOTICES FILED TODAY FOR 20,000 OZ/
    Total number of notices filed so far this month: 816 for 4,080,000 oz

    This post was published at Harvey Organ Blog on June 13, 2017.


  • Felix Zulauf: “Today Feels Like Late 1999; I Expect FANG Stocks To Fall 30% Or 40%”

    In his last interview as part of the Barron’s Roundtable, from which he is retiring at the end of the year after three decades of participation, Felix Zulauf, owner of Zug-based Zulauf Asset Management had some parting words of caution.
    First, in his discussion of stocks, Zulauf said “markets exhibit the signs we usually see going into a peak. My trend and momentum indicators are still bullish, but excesses are building up as stocks and sectors move too far above their moving averages. Investor-sentiment readings are getting excessive. July or August could bring an important peak in stocks.”
    Comparing to previous episodes of market exuberance, Zulauf said that “today seems like late 1999. We haven’t seen the peak yet. Much depends, as noted, on whether China continues its current policies. Either way, there is a window of vulnerability in the markets. I’m not talking about a 5% setback. It could be 20% from August to November.”
    As a reminder, this is what late 1999 looked like, and how it is oddly similar to the S&P tech sector currently.

    This post was published at Zero Hedge on Jun 13, 2017.


  • Another Day of Salami Slicing in Silver and Gold

    YESTERDAY in GOLD, SILVER, PLATINUM and PALLADIUM The gold price was sold lower by about five bucks or so going into the London open. From there it inched higher into the noon silver fix — and from that point the sell-off into Friday’s low price tick commenced. That came about ten minutes before the equity markets opened in New York. From there the gold price chopped quietly higher until around 2:45 p.m. in after-hours trading. Then about an hour after that, some kind soul peeled about five bucks off the price into 5:00 p.m. EDT close.
    The high and low ticks were reported as $1,284.60 and $1,266.70 in the August contract.
    Gold was closed on Friday afternoon at $1,266.40 spot, down another $11.20 on the day, but still above its crucial 200 and 50-day moving averages, but a slice off the salami nonetheless. Net volume was monstrous once again at 207,000 contracts.

    This post was published at GoldSeek on Sunday, 11 June 2017.


  • Goldman: “The Last Time The Market Acted Like This Was At The Tech Bubble Peak”

    Yesterday’s dramatic “rotational” divergence between tech stocks and the rest of the market, which as Sentiment Trader pointed out the only time in history when the Dow Jones closed at a new all time high while the Nasdaq dropped 2% was on April 14, 1999, stunned many and prompted Bloomberg to write that “a crack has finally formed in the foundation of the U. S. bull market. Now investors must decide if any structural damage has been done.”
    This year’s hottest stocks, companies from Facebook Inc. and Apple Inc. to Netflix Inc. and Nvidia Corp., buckled Friday, spurring losses that sent the Nasdaq 100 to its biggest drop relative to the Dow Jones Industrial Average since 2008. An alternative explanation is that the purge in tech stocks, responsible for half the market’s gains in 2017…

    This post was published at Zero Hedge on Jun 10, 2017.


  • Ralph Acampora: Dow Theory Divergence Signals Caution

    Divergence in Sectors Says Be Aware
    We’ve seen Dow Industrials heading higher recently, while Transports have been struggling. From Acampora’s Dow Theorist perspective, he sees indications that the move higher may be wearing thin.
    ‘For those who follow the theory, in any kind of rally from current levels, you want both indicators to make new highs,’ he said. ‘If they don’t, then this divergence … suggests that maybe we’re in the latter innings of this move.’
    When he looks at current charts, particularly in the tech sector, for example, he’s starting to get a nosebleed, he stated.
    ‘It’s starting to go parabolic,’ Ralph said. ‘I don’t know how greedy one wants to be. If you want to hang in there and try to get every nickel out of the run, God bless you, go ahead. But you better have some stops in there somewhere along the line because you can’t continue at that rate.’
    Still a Secular Bull, But Watch out Short-Term
    Despite divergences, Acampora is still a secular bull. A secular move can last for a couple of decades, he noted, and with this current move higher beginning from the low of March 2009, he believes we still have room to go. But that doesn’t mean we won’t see problems develop in the short-term.

    This post was published at FinancialSense on 06/07/2017.


  • Gold Miners Weak but not Oversold

    If looking at Gold only in a vacuum, it looks good. Its uptrend since the start of the year remains intact and it has pushed above its 50 and 200-day moving averages. It closed the week at $1280/oz and could test $1300 next week. But looks can be deceiving. Considering the US Dollar index closed at a 7-month low today, Gold is lagging a bit. Moreover, both Silver and the gold miners have not confirmed Gold’s recent rise. In fact, the miners are lagging the metals ‘bigly.’ At the moment the miners are not so oversold but a reversal in Gold could be the catalyst that pushes miners to oversold extremes.
    Both gold and silver miners are sporting another bearish divergence. The early April divergence (new highs in metals but not in the stocks) preceded a selloff into May and now we must be on guard for the May divergence causing a selloff in June. Since the middle of May both Gold and Silver have climbed higher while the shares (GDX, SIL) have not. The shares are again lagging the metals while Silver is again lagging Gold. These divergences are an obvious warning sign.

    This post was published at GoldSeek on 4 June 2017.


  • Ted Butler Quote of the Day 06-02-17

    The biggest question remains that when silver does decisively penetrate its key moving averages, will the near-certain rush by technical funds to buy cause the price to move in the manner I have suggested recently, namely, explosively? That, of course, depends on how aggressive the commercials and, particularly, JP Morgan respond to the technical fund buying. I don’t mean to repeat myself, but somethings must be repeated.

    This is a process as mechanical as any motor engine. If JP Morgan and the other big commercials add aggressively to short positions on the next moving average upside penetration, they would appear to be quite capable of eventually snuffing out any silver rally caused by technical fund buying; and the exact same thing that has occurred on countless occasions over the years – snuffed out silver rallies – will occur again. And I completely empathize with those (in the majority) who hold that to expect otherwise would be on the insane side of the ledger, you know, expecting different results from the same circumstances.

    I would stipulate further that if JPM and the other big commercials short aggressively, then silver prices would likely fall eventually and we go back to the very beginning of the wash, spin, repeat cycle. But there’s not much to be gained for assuming JP Morgan will load up on the short side again, until it does load up. That’s because as long as JP Morgan is not heavily short COMEX silver futures, there is little reason to expect significantly lower silver prices. A large concentrated short position in COMEX silver futures is always the prime (sole) reason to expect lower silver prices. The lack thereof should not be feared.

    If it does turn out that the market crooks at JP Morgan again short silver futures aggressively, that will only come on higher prices and with generally fair warning. Specifically, if JP Morgan adds back much of the 16,000 short contracts it bought back over the past five reporting weeks (including last week’s increase), then my ‘big one’ premise goes out the window. Look, I’m just the analyst/piano player, not a principle participant in the ongoing COMEX silver scam. If JP Morgan does end up adding aggressively to its price-controlling silver short position, that’s beyond my control in any event.

    A small excerpt from Ted Butler’s subscription letter on 31 May 2017.

      More precious metals news & information available at
    Ed Steer’s Gold & Silver Digest.


  • Ted Butler Quote of the Day 05-31-17

    But what about the increase in short selling by JPMorgan this past reporting week? Assuming it was JPM selling short around 3,000 contracts, there may be an explanation that I just can’t shake. The explanation is quite speculative, but very much in keeping with recent price action. The biggest difference between gold and silver at this point is that gold has decisively broken above its key moving averages amid clear indications of heavy technical fund buying and commercial selling, while silver has yet to do so. That setup won’t last for long. Sooner or later, silver will penetrate its key moving averages as well and the technical funds will buy or try to buy aggressively, same as they’ve just done in gold and on countless past occasions in silver.

    I can’t help but think that the apparent new short sales by JPMorgan were primarily intended to keep silver below its key 50 and 200-day moving averages. At yesterday’s close, silver prices are closer to the 50-day moving average ($17.45) and the 200 day moving average ($17.69) than at any time in the past month. But if I am correct about JPM’s short selling, it is a short term ploy at best, merely buying some time before silver does penetrate these moving averages. And that might be JPM’s intent, namely, temporarily delaying that penetration so that when the inevitable penetration does occur, it occurs more spectacularly than otherwise.

    Let’s face it – what will determine how dramatically (or not) silver penetrates its moving averages is a function of the degree of aggressiveness in commercial selling, not the aggressiveness of technical fund buying which is already baked into the cake. I think it possible that JPMorgan or whoever in the big 4 that sold may have been delaying the inevitable burst of technical fund buying in order to control the timing of the buying burst in order to make it more dramatic.

    A small excerpt from Ted Butler’s subscription letter on 27 May 2017.

      More precious metals news & information available at
    Ed Steer’s Gold & Silver Digest.


  • Ted Butler Quote of the Day 05-27-17

    The big (near) surprise in silver in the last reporting week is that the technical funds actually added aggressively to short positions despite an increase in prices because the moving averages weren’t penetrated. Even though that’s what occurred this week as well, the prior reporting week featured a large increase in total open interest, suggesting something unusual was up. This week, total silver open interest is down, so I feel it would be too much to hope for a repeat of last week’s results (although I’d love to be wrong).

    It seems to me that even though the key moving averages weren’t penetrated this reporting week, the one dollar increase in price over the past two weeks should have been enough to have persuaded some technical funds to buy back short positions on a loss-limiting basis. In fact, I think there might have been as many as 10,000 contracts of commercial selling and managed money short covering. I would guess that the commercial selling was mostly of the raptor long liquidation variety and I am not expecting that JP Morgan increased its short selling. Nor do I think many managed money longs were added, just shorts bought back.

    Even if the silver report indicates an expected deterioration of 10,000 net contracts or so, it’s important to remember that there was an improvement of nearly 80,000 net technical fund contracts over the prior four reporting weeks, so the market structure in silver should still be good to go (for an explosion). The wonder is that here we are, nestled just slightly below the major technical fund buy signal of upward moving average penetration,

    with a COT setup as good as I can remember. As The Wall Street Journal points out – it’s increasingly a quant investment world. What it doesn’t point out is that the quants are on the wrong side of COMEX silver in a very big way.

    A small excerpt from Ted Butler’s subscription letter on 24 May 2017.

    More precious metals news & information available at
    Ed Steer’s Gold & Silver Digest.
     


  • The Dollar’s Last Stand.

    There is no doubt that the US dollar looks bad right now after breaking below the bottom rail of its 5 point falling wedge last week. Before I give up totally on the US dollar there is one thing I’m going to look for first. When all else fails I like to go back to the initial pattern which was a sideways trading range or a rectangle pattern. I’ve seen in the past that when you have a nice tight rectangle with a breakout above the top rail, there can be one very big shakeout move where the price action will decline back to the center mid dashed line, where final support may reside. If the dashed mid line fails to hold support then there are bigger problems. Below is a weekly chart for the US dollar which shows the price action testing the mid dashed center line.
    The $US dollar daily line chart.
    The daily chart below shows a potential downtrend channel with 2 blue consolidation patterns. If the blue bearish falling wedge is a halfway pattern to the downside the blue arrows shows a price objective down to the 96.20 area, which is labeled impulse move. The breakout to breakout price objective is a littler lower at 95.45. Those 2 price objectives come in pretty close to the mid dashed center line on the rectangle pattern above.
    This weekly chart shows how the downtrend channel fits into the bigger horizontal trading range, which is now testing the dashed mid line. A break below the dashed mid line will most likely lead to a move down to the bottom of the rectangle.

    This post was published at GoldSeek on 25 May 2017.


  • Under Armour’s Stock Crashed… So CEO Built A Whiskey Distillery

    It’s no secret that Under Armour’s stock has crashed -65% since 4Q2015. The apparel bubble seems to be experiencing something called mean reversion with the possibility of further downside in excess of -29%.
    ***
    At or around today’s fair market value, industry comps show <UA> at a startling 43.7 P/E on expectations of growth compared to competitors.

    This post was published at Zero Hedge on May 23, 2017.


  • Cudmore: “I’m Failing To See Why Dip-Buyers Aren’t Correct”

    There has been distinct cognitive dissonance between Bloomberg’s two more prominent market commentators in recent weeks: on one hand, Bloomberg’s Richard Breslow has been growing increasingly frustrated with the “noise” in capital markets and the inability of traders to form a clear thesis, instead flip-flopping from day to day based on whatever the prevailing narrative of the past 24 hours (or minutes) is; on the other Mark Cudmore, who after starting the year off with a clear bearish bent, has become increasingly more bullish, at times dogmatically so, and his latest note released overnight does little to change the divergence.
    Writing in “Stocks Have Upside as Value Is a Subjective Measure” Cudmore claims that “too many investors seem obsessed with the fact that U. S. stocks are “expensive” and “overvalued” when compared to historical metrics”, something we showed over the weekend based on a BofA table which demonstrated that stocks are overvalued on 18 of 20 metrics…

    This post was published at Zero Hedge on May 23, 2017.


  • Ted Butler Quote of the Day 05-19-17

    It won’t show up in

    Friday’s COT report, but based upon

    trading, I would imagine that nearly all the 60,000+ contracts sold by managed money traders in COMEX gold over the past two reporting weeks have been bought back in yesterday’s trading (with the commercials pocketing $150 million or so). Were it possible to calculate the COT report as of Wednesday’s close, the market structure in gold would be back to levels that existed prior to the last two COT reports, or decidedly neutral. That’s not to say that gold prices can’t power higher should the technical funds continue to plow onto the long side, just that this will be what’s required to drive prices higher.

    Once again, it’s different in silver. I can’t rule out managed money technical fund buying and commercial selling in silver today, but with prices still far below the important moving averages, it’s harder to come up with a compelling technical fund motivation to have bought. I will say this; if silver prices had penetrated its key moving averages as decisively as gold had penetrated its moving averages today — and silver prices had been as contained as gold prices remained over the balance of the day, I would have been mightily disappointed.

    That’s because high volume but subdued price action after an upward penetration of silver’s moving averages would have very likely indicated significant commercial selling, particularly by the super COMEX silver crook and manipulator, JP Morgan. That would suggest the big move up in silver was less, not more likely to occur. Perhaps we will see signs that JP Morgan added to its silver short positions in this Friday’s or future COT reports, but until we do, there is little reason for me to abandon my big silver move premise.

    A small excerpt from Ted Butler’s subscription letter on 17 May 2017.

      More precious metals news & information available at
    Ed Steer’s Gold & Silver Digest.


  • Gold Nears $1250, Breaks Key Technical Resistance As Trump-Turmoil Safe-Haven Buying Escalates

    Gold’s initial spike after the NYT story last night has extended this morning with another heavy volume buying spike lifting the precious metal back near the $1250 level (and well above a key technical support level).
    Breaking above its 50-day moving average

    This post was published at Zero Hedge on May 17, 2017.


  • Interest in Gold and Silver is Always Lowest When Opportunity is Best

    Earlier, in February/March of this year, on my SKWealthAcademy SnapChat channel, I warned daily of potential deep pullbacks in the asset prices of gold and silver that then materialized. In mid-March as gold/silver prices recovered, I wrote a blog article, here, titled, ‘Expect Divergences, Not Convergences, Between US Stock and PM Asset Prices for the Remainder of the Year.’ This too has manifested, almost to perfection, thus far. As you can see from the chart below, after I posted that article, gold and silver mining stocks rose and US stocks fell. Then US stocks rose and gold and silver mining stocks fell. Will this relationship remain for the rest of 2017 as I predicted? Maybe not as perfectly as the below chart illustrates, but I still believe that this relationship will hold true in general for the rest of the year.

    This post was published at GoldSeek on Sunday, 14 May 2017.


  • Gold and Silver Technical Charts

    Gold and silver are short term oversold, and *may* be putting in a bottom here, at least for the short term. The technical measures are shown on the first two charts.
    Silver has been underperforming gold on this latest move later. But that is typically what an asset with a higher beta does. It underperforms on the dips, and overperforms on the rallies.
    Gold and the SP 500 have turned in a similar performance year-to-date as shown on the third chart.
    The gold/silver ratio is high as you can see on the fourth chart, but it seems to have been trending higher for some time now as gold and silver have been in a corrective pattern.
    If a precious metal rally returns, that should change as silver obtains greater traction to the upside.

    This post was published at Jesses Crossroads Cafe on 13 MAY 2017.


  • Goldman Spots An Odd Divergence In Energy

    In late 2015 and early 2016, as oil crashed, a curious divergence emerged: as crude was dropping, junk bonds crashed with a far greater beta to the drop in the underlying commodity than equities, which remained persistently sticky, stubbornly refusing to drop to a “fair value” implied by oil. The same phenomenon was even more obvious on the way up, as once oil had found a “bottom” energy stocks surged, at times approaching record forward P/E multiples. We showed this epic divergence one years ago in “There Is No Word To Describe This” – The Energy Forward P/E Multiple Is Now Off The Charts.”
    There was a simple explanation: markets assumed that last year’s oil crash was an outlier event, and as a result projected that oil would quickly return to its pre-crash levels.
    It tried, and despite OPEC throwing everything it had ad it, it failed.
    Which brings us to an interest observation made by Goldman overnight: in 2017, the relationship noted above has been flipped, and this time around it is HY Energy that is resisting lower crude, even as stocks are sliding far more than the recent drop in oil would suggest. Here’s Goldman:

    This post was published at Zero Hedge on May 12, 2017.


  • The Bearish Gold Bull

    The Bearish Gold Bull was the title of my presentation last weekend at the Metals Investor Forum in Vancouver, British Columbia. While the title could be ascribed to me personally for my recent tendency towards conservative and cautious views, it more importantly describes the current dichotomy in the gold sector. The mining sector saw its fundamentals hit rock bottom in 2014-2015 and became ‘bombed out’ at the end of 2015. However, while parts of the industry have performed well, as a whole it has been unable to push higher after a torrid recovery in early 2016. A big reason is the outlook for metals prices suggests lower prices before any large advance. Until metals prices are ready to rise, the miners may find themselves in a bearish bull.
    The mining stocks have fallen below their 50 and 200-day moving averages and are even struggling around their 400-day moving averages (which provided support in December 2016) but this does not threaten the epic 2015-2016 bottom. There are a plethora of valuation metrics from January 2016 that are unlikely to be seen again. That time marked the worst 5 and 10-year rolling performance for gold stocks in 90 years. Gold stocks relative to the S&P 500 hit an all-time low and Gold stocks relative to Gold hit a 90 year low. Gold stocks price to book and price to cash flow valuations were the lowest in 40 years. (The data does not go back farther than that). Finally, January 2016 marked the end of the worst bear market ever. Remember this chart?

    This post was published at GoldSeek on 12 May 2017.