Doc’s take on the direction of the markets, gold and the US dollar
Doc joins us with his take on the conventional markets, gold and the US dollar. How they are all reacting to each other and where they could move in the short term.
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You could be right—and I wouldn’t be surprised since the dollar index downtrend line from the mid 80s and early 2000s hit the top this time right on the “schnoz”—come on, wmk; you’re slipping. I haven’t seen you post a graph of that yet.
I have it though, I guess it just got lost in the shuffle. ๐
Here’s one, but it’s a log chart.
http://stockcharts.com/h-sc/ui?s=%24USD&p=M&st=1981-03-13&en=today&id=p14680514546&a=398541021
Looks like this one got the memo.
http://stockcharts.com/h-sc/ui?s=%24USD&p=M&yr=20&mn=11&dy=30&id=p14844536490&a=384143206
Oh great, now you are plotting timber futures … er … logs. Right?
๐
Well Plum Creek Timber does look pretty good here! ๐ฎ
http://stockcharts.com/h-sc/ui?s=PCL&p=D&yr=1&mn=1&dy=0&id=p72282868215
Good one Doc! …….and good charts Matthew. ๐
The USD did come right up and hit the longer term trend-line, so that leads credence to the dollar is heading back down for some time to come position. However, another position is that it may retrace, and then turn to climb and break above the trend-line in a blow off top to 110 or some say 120 to challenge the most recent 2001 highs. This surge in the dollar would likely be triggered by the effects of the currency wars and falling oil prices in the mid-term.
Either way, 2015 is going to get very interesting……..
The dollar actually overshot on the long term chart, Shad. I think that’s part of what makes some people think it has higher to move yet…..but I very much doubt that so I won’t be plotting a course that considers the current rise in USD as anything more than a corrective move as the big picture is still down.
Well, you may be correct Bird. I definitely agree with you longer term on the dollar, but just think we’ll have one last leg up due to central banking nonsense, and then I think it will put in it’s blow off top. We’ll have to see how the rest of the year shapes up. Good thoughts though, and you’ve made a good case for your position.
Thanks.
WMK, I told you. Gold todamoon !
https://www.dropbox.com/s/gnyjpzzfpr1anih/GLD-UUP.jpg?dl=0
Y-UUP! ๐
Bought some SPY puts for July and December. Hardly an aggressive top call.
Might be a little early on that one, Matthew but doesn’t matter if you’re holding that long.
If SP500 drops tomorrow, I think we will see one last push higher after the drop. That will complete an Ending Diagonal structure (wedge) on the larger time frame (Weekly/Daily). An overshot of that upper trend line is common with wedges, so I am hoping to see the SP500 retest 2105-2110 and then make another all-time high. That’s when I will probably go in for a short.
Stay frosty ๐
I have no intention of holding that long, Mark. Going further out simply reduces the rate of decay. I still have plenty of leverage to SPY itself though. I even ended up buying a few that expire this Friday.
Your Friday ones might do fine if we start the pullback tomorrow that I’m looking for. But even your longer term ones should do well by mid-June in my opinion, maybe even before.
That’s almost all I ever trade is weekly options, with an occasional swing using the monthlies.
Stay Frosty…. haven’t seen that cool line on this site in a while ๐
good thoughts Mark Alan.
Frank Sinatra and Don Rickles appear on The Tonight Show with Johnny Carson. Too Funny! https://www.youtube.com/watch?v=6QcvaVysYHs
GOLD GOLD IN ISRAEL !!!!!! (( BREAKING NEWS 1 BILLION DOLLARS OF GOLD !!!!!! !https://www.youtube.com/watch?v=GfSgPSASEhE
TLT vs Gold doesn’t look so good:
http://stockcharts.com/h-sc/ui?s=TLT%3A%24GOLD&p=D&yr=1&mn=0&dy=0&id=p62976699109&a=387870283
Mark June 17th on your calendars men!
The last paragraph could be bang on, that and with higher rates the Fed would have the ammo to cut rates cooling off a much higher US$ when 100 is left behind.
I’ll take a nice rally from here in the pm’s sector leading into mid June before a shocker of a 1/4% rate hike is announced, then ride the short side back to $1180
http://www.zerohedge.com/news/2015-05-18/san-francisco-fed-just-gave-green-light-june-rate-hike
That might not be a bad trading plan, Original. That might correspond to the end of the EUR bounce as well. Falling EUR = Falling gold price (at least that’s the way it’s been)
If Fed indeed increases its interest rate, it is time to see inflation and gold price will start its long term raise …
Interesting thoughts Original JJ. I tend to agree for a reversal in a few things in June, (the Dollar will rise, the Euro will fall, the PMs will fall, Oil will fall, bond yields will go lower)
I believe just the threat of the June or September rate hike will be a looming factor, but there are many mixed messages in the marketplace. Some think the Fed presidents statements about holding off until 2016 is expected, yet some think the gradual small increases they hinted at 1/8th of a basis point .125 may be on the table for September, but June would be a market surprise.
I’ll eat my shares of JDST if The Fed raises rates this Summer.
you will not have to worry about that……….they are now putting out info, that says next year
Worth the read
Good read ::
http://seekingalpha.com/author/ben-kramer-miller/articles/9
“So I think a significant catalyst for gold in the near future could be a Fed rate hike, although given the incredible global USD-denominated debt load and the concomitant cost of servicing this debt in a “normal” interest rate environment I am extremely skeptical that we will see this. That’s bad news for gold, at least in the near-term. In the long-term low interest rates and continued inflation in interest-bearing assets all provide additional potential energy for the gold market, and the disparity between gold’s fundamental valuation and its low market valuation will widen.
But whether the Fed or the market forces interest rates higher eventually this has to happen. When it does correlated assets such as bonds and “stable” dividend paying stocks will see their primary catalyst dissipate. The money creation that the gold bulls had expected to go into gold will finally enter the market, and so will begin the gold bull market that I am expecting.”
Ben Kramer Miller is on it with his stock picks….a guy cut from the same fabric ๐
I don’t know a lot about Kramer but I do know that I was a buyer of Claude when he advised avoiding it. He might be the guy that was bearish Primero at the low too.
the stock picks and companies covered are what I like. As for his timing…..he may be off there. He does have good fundamental analysis, just not the technical expertise.
does anyone here understand that BANKS MAKE MONEY when their friend the Fed raise rates…and that gold stocks can go up in that environment….. Mathew… LPG…Doc… ?
Agatha, in my view, the banks don’t necessarily make money if the fed fund rate &/or short term rates are raised by them. One of the main reasons longer term rates are down is because of the Fed buying as much of that paper up as possible in order to depress long term rates. In normal markets, long term rates are determined by the markets but they’ve been artificial since the Fed involvement. If they raise short term rates and it rocks the stock market, you may well see the bond market move up again along with rates moving down—-that would result in a potential flat or inverted yield curve. Of course, the bond market could move down more with an increase in rates if folks really believed the Fed must have moved rates higher because the economy was stronger then believed by some. Then you would get your spread in yields along with what you mentioned—-that BANKS MAKE MONEY when the Fed raises rates. Currently, I personally don’t worry what they do since I believe we’re in a long term bull market for gold and the technicals don’t show an eminent breakdown for gold except for the usual seasonal affect. I might add that there are those that believe raising rates can be a precusor to inflation. Also, historically, gold has moved down and up with increase in rates. In my view, it’s a flip of the gold coin.
Agatha, I agree with that statement and have been saying for years here that rising interest rates won’t hurt gold one bit.
Matt, it depends on the why behind an interest rate cycle kicking in, this is not your 70’s rates rising to fend off inflation or cool a robust US economy
They rose throughout the ’70s because of inflation, not to fend off inflation. There was no robust economy in the ’70s either. The term “stagflation” was born in the ’70s for a reason. Gold did well while the economy struggled and inflation was rising. Too many deflationists seem to use inflation to mean economic expansion.
Based on the interest rate cycle, the current environment is probably more like the 1940’s.
https://s.yimg.com/fz/api/res/1.2/640LUhY45LnOMHWIa4rndQ–/YXBwaWQ9c3JjaGRkO2g9MzY1O3E9OTU7dz01MzI-/http://www.thebahamasinvestor.com/wp-content/uploads/2012/05/COTD-535.gif
If gold can rise 6 fold from 2001 to 2011 while rates were falling and bonds were still rising, just imagine what will happen when it is finally clear that stocks and bonds have peaked. It is not the dollar that will soar!
TIME BOMB………….
To me, interest rates aren’t what determines gold’s price.
So gold CAN indeed raise in a rising interest rates environment… and likewise for gold stocks.
Best,
LPG
Meant to write:
“So gold CAN indeed rise in a …”
Apologies for the typo.
LPG
I agree with most of what you guys are saying here. There is no rule that says gold MUST fall as rates rise nor even one that says gold MUST rise when inflation arrives either.
We have seen gold perform well (and poorly as the case may be) during periods of inflation, deflation, rising and falling rates, rising and falling dollars…..with or without QE etcetera etcetera.
It’s why almost nobody understands gold because there are so few consistent correlations that hold over short and medium trading periods. Its also why chart dynamics are so important to follow because gold has its own cycle that will carry on pretty much regardless of whatever else takes place.
Right now it is still in a bear although there have been some recent positive signs that the ice age could be melting soon.
Hello Agatha. I think it is very possible that gold can rise when interest rates are risen, and the reverse, it can fall in a zero interest rate environment if the threat of inflation turns to a fear of deflation (that is what has been happening).
I’ll also give WMK a nod because he has been posting charts for years showing gold rising the last 4 time periods where interest rates were risen, and has been pretty consistent there.
PLATINUM ………. stock pile at 10 year low………..zerohedge
Heres a related article with a different conclusion from Mining dot com.
Platinum price to remain under pressure due to abundant stocks in spite of deficits in both 2014 and 2015; palladium price to pause in its long-term bull run
This is the best article on the supply side for Platinum and Palladium that I have read in a while from Thomson Reuters. They see Palladium outperforming with a price target of $940 by year end. (check out the 2015 Outlook at the bottom).
Thomson Reuters GFMS: Platinum & Palladium Survey 2015
Thanks for posting the above article ……………….. the BOOT
no prob Frank from……….moscow!
As DT pointed out………….zerohedge is not to be trusted………. ๐
Shad , I read both articles , and both contain some great informative comments. Appreciate your efforts in providing the articles……………Thanks again the BOOT.
right on FFM…….The Boot. I”m still bullish on Palladium.
“The world is a mess!” for all the wrong reasons:
http://time.com/3882439/madeleine-albright-tufts-graduation-speech/
They can’t raise rates it’s not just about The Government, the citizen’s and the whole world is in debt, when will some of the posters here realize that.
Notice that I never said they would raise rates, I just pointed out that gold will do very well if they do. In fact, we’re at a point now where gold will do well either way. The central planners have painted themselves into a corner.
Agree with you BUT they want to get off zero so that they can cut later on when they fail again. Even if it is only ‘symbolic.’ I would almost guarantee that this is their game plan.
I wonder if they will increase the rate that they pay the Banks on their excess reserves that the Fed provides? That could be another motivation. They could play that a bit. Or maybe using rates to drive investors into riskier assets is just for the little people, and they could just use it to increase the Banks’ share in their vigorish.
I agree Gabriel that the Fed won’t raise the rates much, but may raise them a little just to show the world that they can (window dressing).
The currency wars will wage on, and they’ll end up cutting the rates again, and will keep shoveling money at the debt mess to try and keep things inflated.
There is no way the Fed can raise the rates in any significant way without blowing up the whole financial system.
RATE RAZORS……and ” Gary’s blood bath stage” should go neck and neck……
Sure they can raise rates DT. And if they don’t the market will do the raising for them because it will be a response to inflation. The dynamics of the chart language alone should be enough to tell you that.
Show me any other chart that fell to its bottom and simply stayed there forever!
That’s why the argument for rates to rise is easy to make. Timing it is another matter however and as we have seen proven in Spades, the market can indeed stay irrational longer than some people can stay solvent.
GDXJ is at Fibonacci arc resistance. Maybe we’ll get that gap filled tomorrow.
http://stockcharts.com/h-sc/ui?s=GDXJ&p=D&yr=0&mn=11&dy=28&id=p62995489356&a=403939785&listNum=1
Feels like being in a submarine when I look at this chart, WMK ! ๐
Hormin Kerdun underwatta ztyl ! ๐
Best to you, and hope all’s good.
LPG
All’s good; hope you’re not claustrophobic! ๐ฎ
Gold looks like set to decline based off the weekly chart. So I would not be betting big on GDXJ right here. The other thing is that the VIX is showing complacency right now in the region we might expect to see it bounce. Stock markets meanwhile have quite away to move up yet inside their normal range but should be facing a decline as the VIX rises this week and early next. And that suggests to me miners will suffer.
And there she goes. Gold is off 10 dollars already this morning. Silver falling too. Bounced right off the upper diagonal line of the weekly chart peaks. Once again the bull camp has gotten ahead of itself predicting a breakout under way. Its almost always the same story too the way a couple days of positive action leads to dramatic conclusions about how 1300 or 1350 has suddenly come into view.
Now lets see if we get that solid breakdown this next time as gold declines.
originaljj
you sure theres not inflation……sniffing…. this sure feels & looks like the 70s to this
old lady..
“Compensation costs for civilian workers increased 2.6 percent for the 12-month period ending
March 2015, rising from the March 2014 increase in compensation costs of 1.8 percent. Wages and
salaries increased 2.6 percent for the 12-month period ending March 2015, which was higher than the
1.6-percent increase in March 2014.”
Agatha, I learned a very long time ago, its not what you and I think regarding inflation as I know it clearly costs me more to live today than it did last year or the year before.
What we need is Mr Market to be signaling re-flation that’s the wind, momentum we need behind any inflation trade, so far its still a deflationary outlook
The other thing is that hardly anybody can even agree on what constitutes inflation and deflation in this environment. If your fuel bill dropped 20% but your home, stocks and bonds are up 40 to 70% then which is it?
On the other hand, if next year your bond holdings drop in double digits amounts but lettuce goes up 15% can you still agree that we are either deflating or inflating?
Gold has been rising only in the weakest currencies. The gold action is just ho-hum.
Nice!
Ultimately, the highest inflation generator would be “cost push inflation” which are wages and salaries. Very quietly, they’ve begun to rise. We haven’t seen “demand pull” inflation as it relates to commodities. However, if any of us ever go to the supermarket, it certainly feels like significant inflation has occurred with certain food stuffs. A 2.6% yoy increase in wages and salaries is pretty significant and with slow growth would increasingly put us in the stagflation camp if it continues.
Auto repair……..is out of sight………talk about inflation………
FFM,
Talking about auto repair, if you have issues with the transmission, this might help you:
https://www.youtube.com/watch?v=1gYE5TyijxE
Best,
LPG
๐
ha…….funny……….could be ha ha…….if it had been a Greek auto repair shop…
Cost push ……….if auto repair cost keep increasing……I will be forced to push
And cost-push inflation is all about currency debasement. When money is sound, wages, raw materials, and living costs don’t rise in a poor economy.
This article is about one year old but worth reading.
http://investmentresearchdynamics.com/this-is-why-i-believe-rickards-is-wrong-about-the-imf-sdr/
I haven’t even clicked on it yet and I agree with the author!
Doc, I am intriguing by Rickards. Do you think he is right ?
I know that D.Kranzler don’t trust him and that he thinks he works for Washington.
http://davidstockmanscontracorner.com/forget-the-china-myths-gold-will-rise-when-central-banks-fail/
Gabriel, that’s a good question. The fact that he’s a consultant for defense department in the past and worked for the government makes him suspect. However, I can’t argue with his positions on the dollar and the PMs. The IMF and SDRs are another story. I believe that what happens in that area will be determined by China/Russia and the rest of the BRICS. I wouldn’t be surprised if China might join the SDR system just to give the U.S. the idea that they’ll become subservient to them in the future all the while moving ahead with their military and economic plans to thwart ultimate control by the U.S. I just hope I live long enough to see how all this plays out.
I tend to agree with you.
This article from zero hedge indicate that the Us will block China again …
http://www.zerohedge.com/news/2015-05-17/belligerent-us-refuses-cede-control-over-imf-snub-china
And China and the Brics will have all the structure to operate without the IMF and the US (SCO, CIPS, SGE, AIIB, Silk road), Like you, I hope to live enough to see what will happen .
It will be an interesting history in the making.
Before you take Kranzler too seriously you should go back and read his gold calls during the past four years since the declines started. Almost nobody has been more wrong on more occasions about theories for why gold should rise from the ashes. He is the biggest pumper out there. Total fluff. I refuse to read a single word from that guy anymore.
perhaps some of the silver bulls will find this site of some use, the performance tap at the top of the page keeps one up on what miner is leading the % gain charge, you can adjust the timeframe
Great Recommendation Original JJ.
I’ll second that !
(OT) Kirkland Lake Gold (KGILF)
For the “Grade Geeks” amongst us …
http://brrmedia.co.uk/event/137380?&autoplay=true
Interesting interview about the increasing grades over the next couple years:
12 months: 0.77 opt
24 months: 0.99 opt
The dollar has already put it a double top. Using UUP as a proxy, we can see that the criteria have been met.
-Volume right after each peak is very high
-Peaks are three weeks apart
-The second peak is just 1% away from the first
Note that the highest volume came on the break of the double top neckline.
http://stockcharts.com/h-sc/ui?s=UUP&p=D&yr=0&mn=11&dy=0&id=p03912053651&a=361825427