Each week in NFTRH we review the multi-currency (weekly) chart and occasionally take a look at various pairs and ratios as well. With the look of things this year (so many items are going sideways) it is hard to fathom how anyone would want to be a FOREX jockey right now.
The multi-index chart shows Uncle Buck, Euro, Canada Dollar and Aussie Dollar going sideways with only the bias varying (e.g. CDW looks bearish and XAD tinged bullish). What a boringly sad crew with the exception of the Yen, which is still in rebellion (breakout) mode and the terribly bearish GPB, which could be making a bounce pattern.
USD-EUR is in an ugly pattern above support. (more…)
Below is the opening segment of the September 25 edition of Notes From the Rabbit Hole, NFTRH 414…
The Bank of Japan gave us a glimpse as to just how far down the rabbit hole we may have to follow global policy makers as we try to make sense of ever more complex and shall we say, innovative ‘tools’ being used in the effort to engineer individual economies and asset markets within the global financial system. BoJ announced it would conduct “JGB purchase operations” in order to “prevent the yield curve from deviating substantially from the current levels”.
The market initially interpreted this to mean BoJ stood in support of a rising yield curve, which would for example, help the banks (ref. MTU and SMFG, which exploded higher off of the support levels we had projected), but by the end of the week the Japanese Yield Curve had eased substantially and there seemed to be confusion about what the policy’s intent, or would-be effects, actually were. I wonder if the BoJ even fully knows what it is doing now. Lots of moving parts in a complex system.
We are well along in the precious metals correction and have downside targets for gold, silver and the miners. In order for that to be a ‘buy’, the sector and macro fundamentals will need to be in order. Some of those are represented by the gold ratio charts vs. various assets and markets. Below are two important ones.
Gold vs. Stock Markets has been correcting the big macro change to the upside since leading the entire global market relief phase (potentially out of the grips of global deflation) earlier in the year. A hold of these moving averages, generally speaking, keeps a key gold sector fundamental in play as the implication is that conventional casino patrons are choosing gold over their traditional go-to assets, stocks. A breakdown from the moving averages and it’s back to Pallookaville for the gold “community”.
The opening segment of this week’s Notes From the Rabbit Hole (NFTRH 412) was intended to be a quick blurb but went on to become a five page exercise. It is shared publicly not so much because it is hard core analysis (which the rest of the report took care of), but because after a week like last week I think being a little wordy can be for the better.
I had a difficult week last week; a couple things had gone wrong and my schedule was just ridiculous. On Wednesday I was feeling pretty stressed out and wondering why I just can’t seem to catch a break. Then I looked up and saw a man with two hooks for hands walk by. It was almost as if he were sent into my view to straighten me out.
Another source of perspective is a more obvious one. Today being September 11, I would venture that we all remember where we were and what we were doing on that day in 2001. I was working at my company. It was a normal morning and then it seemed like the world just stopped, except for the jet fighters that were putting a lock down to the sky above us. It seemed like the world then magically came together for a few days… fast forward to today’s divisive, sad and hateful political theater.
Thursday’s ISM report was Thing 1 in improving the backdrop for gold. But it was a small Thing. Friday’s August Payrolls report was Thing 2, and it was a better Thing. Gold and especially the gold mining sector are invigorated fundamentally during economic easing, not during economic growth phases, inflationary or otherwise.
In this post we’ll review two of the charts (gold vs. commodities and gold vs. stock markets) we have used since before the new gold bull market began in order to update some important macro fundamentals. Most of the ratios on these charts have not broken down even as the economy and with it, stock markets have experienced a recent bounce, which we anticipated through various signals belabored repeatedly, since before the BREXIT hysterics.
The weak ISM headline number (PMI) was an excuse for bonds and precious metals to bounce and the US dollar to drop today. It evidently inspired wild eyed casino patrons to unwind recent positions (short gold, long USD for instance) as the great and powerful Fed now has reason to stand down in September. Such is life in the casino; always a story, always a play, always manic, always addicted to short-term news and media inputs.
Before looking at the particulars of ISM, let’s review the Machine Tools sales data that we have not looked at in a while. It is and has been W.E.A.K. for years now, outside of the traditional year end tax mitigation bounce. Data through June (source: EDA):
We have been using the Semis as a one of several economic signposts, and as an investment/trading destination since the Semi Equipment ‘bookings’ category in the Book-to-Bill ratio began to ramp up several months ago. But those who say that Semiconductors are subject to pricing pressures are correct. It is a segment in which people need to be discrete with their investments. NFTRH 410 updated some details about this market leader.