Are We Finally Seeing That Pullback?

As we came into 2017, I was looking for the metals market to bottom and begin a strong rally for 2017 which would take us back to the highs of 2016 and beyond. Thus far, the market has bottomed, but we have only been consolidating for most of the year.
For most people, this consolidation phase has been quite frustrating. So much so that many have actually been losing interest in this complex. But, there is still a certain amount of ‘hope’ evident in the market, especially as gold marginally broke out over its April high. Clearly, it was not a sustained break out, and it has left gold in a precarious short-term position.
I have warned many of those who read my analysis that trend line analysis in this complex most often will have you turning towards a certain ‘sentiment’ right before the market reverses strongly. This past week, many got bullishly excited with gold’s ‘break out’ of a trend line, only to turn down almost immediately. And, to be honest, this has happened at just about each and every metals turn we have seen over the last several years. Remember the failed heads and shoulders break down at the end of 2016? I even warned you in advance back in September and October that the heads and shoulders would set up and then fake everyone out on the supposed ‘break down’ of the neckline, only to get most of the market bearish right as the turn was about to occur to the upside.
Each trend line break, whether it be to the upside or downside, has only served to whipsaw those that make the use of trendlines their primary analysis. And, I have repeatedly warned how using trend lines as a primary means of analysis is the most crude form of technical analysis within which one can engage. Moreover, in the metals complex, it is almost a certainty that you will be whipsawed following trend lines, as we have seen time and again for the last several years. But, I digress.

This post was published at GoldSeek on 14 June 2017.

RBC Doubles Down: “The Slightest Fed Disappointment Could Rock Us”

Just in case RBC’s earlier warning that even a trace of hawkishness from the Fed after today’s disappointing CPI report was a major risk, moments ago RBC’s Charlie McElligott doubled down on his warning, and in a note to client said that the entire investing world now feels completely justified in coming into today with ‘dovish hike’ expectations. However, as he adds, “the issue there is that it sets a VERY fine-line on messaging, where you have such consensual expection of ‘dovish hike’ that the slightest disappointment in this view could rock us.”
His thoughts:

This post was published at Zero Hedge on Jun 14, 2017.

Fed Reveals Balance Sheet “Normalization” Schedule: Will Reduce Reinvestments By $10BN/Month

Coming in earlier than many expected, the Fed for the first time laid out how it plans to “normalize” its balance sheet which it expects to reduce by trimming reinvestments in TSYs at a rate of $6Bn/month initially, and MBS at $4Bn/month, or a total of $10bn/month, and will increase the reinvestment caps in steps of 10bn at 3 month intervals over 12 months until it reaches a total 50bn per month.
Indicatively this is well below Goldman’s expectation of $10bn and $5bn initial caps for TSYs and MBS, as we showed over the weekend.

This post was published at Zero Hedge on Jun 14, 2017.

14/6/17: Unwinding the Mess: Fed’s Road Map to QunE

As promised in the previous post, a quick update on Fed’s latest guidance regarding its plans to unwind the $4.5 trillion sized balance sheet, to the Quantitative un-Easing…
First, the size and the composition of the problem:

So, as noted in the post here: the Fed is aiming to gradually unwind the size of its assets exposures on both, the U. S. Treasuries and MBS (mortgage-backed securities). This is a tricky task, because simply dumping both asset classes into the markets (aka, selling them to investors) risks pushing yields on Government debt up and value of Government bonds down, as well as the value of MBS assets down. The problem with this is that all of these assets are systemically important to… err… systemically important financial institutions (banks, pension funds, investment funds and insurance companies).

This post was published at True Economics on June 14, 2017.


GOLD: $1272.80 UP $7.00
Silver: $17.11 UP 37 cent(s)
Closing access prices:
Gold $1261.60
silver: $16.90
Premium of Shanghai 2nd fix/NY:$9.63
LONDON FIRST GOLD FIX: 5:30 am est $1268.25
For comex gold:
TOTAL NOTICES SO FAR: 2206 FOR 220,600 OZ (6.8615 TONNES)
For silver:
For silver: JUNE
Total number of notices filed so far this month: 834 for 4,170,000 oz

This post was published at Harvey Organ Blog on June 14, 2017.

14/6/17: The Fed: Bravely Going Somewhere Amidst Rising Uncertainty

Predictably (in line with the median investors’ outlook) the Fed raised its base rate and provided more guidance on their plans to deleverage the Fed’s balance sheet (more on the latter in a subsequent post). The moves came against a revision of short term forecast for inflation (inflationary expectations moved down) and medium turn sustainable (or neutral) rate of unemployment (unemployment target moved down); both targets suggesting the Fed could have paused rate increase.
Rate hike was modest: the Federal Open Market Committee (FOMC) increased its benchmark target by a quarter point, so the new rate range will be 1 percent to 1.25 percent, against the previous 0.91 percent. This marks the third rate hike in 6 months and the Fed signalled that it is on track to hike rates again before the end of the year (with likely date for the next hike in September). The forecast for 2018 is for another 75 basis points rise in rates, unchanged on March forecast.

This post was published at True Economics on June 14, 2017.

When Will Janet Live Up To Her Reputation?

I am asking you to put aside all your notions about monetary policy for a moment, and think about the next couple of points with an open mind. Forget about scary Central Bank balance sheets. Fight the urge to worry about the unprecedented quantitative easing programs. Dismiss the warning cries of the frightening levels of debt. Ignore the apocalyptic forecasts of coming stock market crashes. Let’s just have a look at the data. And most of all, let’s not worry about what should be done, but think about what will be done.
Rightly or wrongly, the Federal Reserve has a dual mandate. They are tasked with maximizing employment and maintaining price stability. Although many will debate what constitutes price stability, the Federal Reserve has interpreted it as a 2% inflation rate. You might think this absurd, so be it. It is what it is. Complaining will get you about as far as yelling at clouds.
When Janet Yellen took the reins of the Federal Reserve, many pundits predicted a period of exceptionally easy monetary policy as she was widely viewed as a uber dove. But has her reputation proved deserved?

This post was published at Zero Hedge on Jun 14, 2017.

The Fed Accelerates The Collapse Of The Economy, The Clock Is Ticking Down – Episode 1306a

The following video was published by X22Report on Jun 14, 2017
Time Inc is cutting 300 jobs, Toy R Us is in trouble as sales continue to decline. Retail sales numbers are out and sales in each sector has declined. The retail industry is imploding. GM extends shutdown of more plants as inventories build up. 2nd Quarter GDP has taken another hit as the economy rips itself apart. Bundesbank’s warns that they are now looking at the biggest asset bubble they have ever seen and cryptos might cause everything to crash. The US Gov/Central Banks are going after cryptos now. The Fed makes their move and they raise interest rates. They have now just accelerated the collapse of the economy. As BoA reports when the Fed tightens we end up with an event.

A Powerful ‘This Time Is Different’ Argument for High Stock Market Valuations

US stock market valuations are high and, depending on the specific measure you look at, one can either argue that we are modestly overvalued or in a straight up bubble in just about everything. Those arguing stocks are modestly overvalued believe we can move higher. Those arguing for a bubble, usually believe a crash or crisis is upon us.
One measure we cite the most on our podcast is the average of four valuation indicators from Doug Short and it shows that the S&P 500 is currently the second most expensive on record, trailing only the tech bubble (see below).
As Ed Easterling at Crestmont Research recently explained on our program, current market valuations mean that we are likely to see below-average returns over the next ten years, but that doesn’t tell us what to expect over the short-term.

This post was published at FinancialSense on 06/14/2017.

What Would Yellen Do, with these Retail Sales?

The death spiral of the department store.
Retail sales overall were not a disaster in May. But there were some disaster areas. Total retail sales in May dropped 0.3% from April, to $473.8 billion and were about flat with January, adjusted for seasonal variation and holiday and trading-day differences, but not for inflation, according to the Commerce Department this morning. But year-over-year, retail sales were up 3.8%.
This year-over-year increase was in the middle of the five-year range of 1.6% to 5.2%.
The Consumer Price Index rose 1.9% in May, year-over-year, according to the Bureau of Labor Statistics this morning. So the increase in ‘real’ retail sales, adjusted for inflation, was 1.9% year-over-year. This is also in the middle of the five-year range of 0% to 4.3%. In other words, in May, ‘real’ retail sales grew at the same lackadaisical rate we’ve seen for years:

This post was published at Wolf Street on Jun 14, 2017.

GM Extends Plant Shutdowns As Toxic Trifecta For Auto Loans Fuels Carmageddon

In yet another unsurprising headline, The Wall Street Journal reports that GM will extend the typical summer shutdown at certain U. S. factories to deal with slumping sales and bloated inventory, a sign the industry’s hot streak is grinding to a halt.
The No. 1 U. S. auto maker in terms of sales will idle its Chevrolet Malibu factory near Kansas City for five weeks starting in late June, Vicky Hale, president of the United Auto Workers Local 31, said. Job cuts will be needed if GM is forced to slow assembly-line speeds when those workers return.
Additional downtime is also slated in Lordstown, Ohio, a small-car factory already stung by deep layoffs related to a pullback in demand for passenger cars. A GM spokesman declined to comment on specific plans.
GM enters the summer with a glut of unsold inventory after running production lines at relatively high rates to prepare for factory downtime related to plant upgrades. estimates GM’s production increased 2.9% over the first four months of 2017, even as the broader industry pulled back.

This post was published at Zero Hedge on Jun 14, 2017.

Goldman Revises FOMC Forecast After Third Consecutive CPI Miss

First RBC, now Goldman.
After core CPI inflation was lower than expected for the third consecutive month, and the year-over-year rate fell two tenths to +1.7%, Goldman has made some changes to what it believes the Fed will report at 2pm today. It now expects the FOMC statement to include a stronger acknowledgement of the recent soft inflation data, and its expectations for the Summary of Economic Projections “have become incrementally more dovish.”
The details:

This post was published at Zero Hedge on Jun 14, 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.

Valuations: It Is Different This Time

(with additional contributions from Margie Fernandez; edited by Joe Calhoun)
The Net Worth of Non-financial Corporate Business declined slightly in Q1 2017 according to the Federal Reserve’s Financial Accounts of the United States (Z1). The revised quarterly figures suggest that economic net worth eased to $23.62 trillion after a record high $23.69 trillion in Q4 2016. That likely relates to economic weakness to start the year, though not of any lingering concern given what is a well-established upward trajectory.
In using corporate net worth to estimate equity market valuations, however, the quarterly stumble means that under Tobin’s Q, valuations would rise sharply. The Z1 statistics estimate that the market value of corporate equities rose, gaining $1.18 trillion in Q1 alone. That was the largest quarterly increase for equities since Q4 2013. Truly ‘reflation’ repeats.
The Q ratio, which had dipped under 1.0 for each of the past six quarters of the ‘rising dollar’, blows back above that mark being calculated at 1.04 for this latest period. It brings this measure of equity valuations back up to where they were at the start of 2015.

This post was published at Wall Street Examiner on June 14, 2017.

Gold Market Morning: June-14-2017 — Gold waiting for the Fed!

Gold Today – New York closed at $1,268.60 yesterday after closing at $1,268.90 Monday. London opened at $1,267.24 today.
Overall the dollar was slightly weaker against global currencies, early today. Before London’s opening:
– The $: was slightly weaker at $1.1217 after yesterday’s $1.1212: 1.
– The Dollar index was weaker at 96.92 after yesterday’s 97.04.
– The Yen was slightly stronger at 110.14 after yesterday’s 110.16:$1.
– The Yuan was slightly stronger at 6.7976 after yesterday’s 6.7979: $1.
– The Pound Sterling was stronger at $1.2785 after yesterday’s $1.2700: 1.
Yuan Gold Fix
As you can see from the above, Shanghai traded both yesterday and today lower than New York and London. This was the first time we have seen that happen! New York closed higher than Shanghai yesterday and London opened higher than Shanghai. On these numbers Shanghai is not a buyer from the west today.
We have heard that China stands accused of gold price manipulation. They are accused of keeping prices low until they have acquired a particular number of tonnes. Meanwhile, Shanghai prices have consistently been at a premium to western prices. This is not the path down.

This post was published at GoldSeek on 14 June 2017.