Displaced Moving Average
Recall what we said first thing this week when we remarked the latest surge in Chinese physical gold buying: "As we have said before: keep an eye on the "gold holdings" of the GLD and other US paper gold ETFs, whose drop in holdings for now has offset Chinese accumulation on the margin. Once GLD gold holdings solidly resume their climb higher, that will be the key upward gold price inflection point." Perhaps it is a testament to the power of paper of physical gold (if only for now), that while yes, we were correct, and gold is now indeed soaring, having finally broken above its 200 DMA as we reported yesterday, all it took was the predicted rebound in gold ETP holdings which have finally ended their liquidation cycle. As Bloomberg reports "Assets in the SPDR Gold Trust expanded 1.2 percent to 806.35 metric tons, the highest since Dec. 20. The biggest ETP backed by gold, which shrank 41 percent last year, is up 1.2 percent this week, headed for a third weekly advance."
With so much of the recent bad news roundly ignored or simply "priced in" and blamed on the snow, it is unknown just what it is that catalyzed the overnight round of risk-offness, but whatever the ultimate factor, it first dragged the Nikkei lower by 1.8%, as we noted previously, then sent the SHCOMP down by 0.55%, then ultimately dragged the USDJPY below the key 102 support area which in turn pulled US equity futures to set the scene for a red open (with no POMO and no Yellen testimony today which also was canceled due to snow), and, putting it all together, suddenly Europe too is back on the scene, with a blow out in Italian yields driven by the realization that the Letta government is on the edge of collapse, in a deja vu moment to those hot summers of 2011 and 2012.
Yellen confirmed that the U.S. recovery is fragile and said more work is needed to restore the labor market. She signalled the Fed’s ultra loose monetary policies will continue and the Fed will continue printing $65 billion every month in order to buy U.S. government debt.
After Friday's surge fest on weaker than expected news - perhaps expecting a tapering of the taper despite everyone screaming from the rooftops the Fed will never adjust monetary policy based on snowfall levels - overnight the carry trade drifted lower and pulled the correlated US equity markets down with it. Why? Who knows - after Friday's choreographed performance it is once again clear there is no connection between newsflow, fundamentals and what various algos decide to do. So (lack of) reasons aside, following a mainly positive close in Asia which was simply catching up to the US exuberance from Friday, European equities have followed suit and traded higher from the get-go with the consumer goods sector leading the way after being boosted by Nestle and L'Oreal shares who were seen higher after reports that Nestle is looking at ways to reduce its USD 30bln stake in L'Oreal. The tech sector is also seeing outperformance following reports that Nokia and HTC have signed a patent and technology pact; all patent litigation between companies is dismissed. Elsewhere, the utilities sector is being put under pressure after reports that UK Energy Secretary Ed Davey urged industry watchdog Ofgem to examine the profits being made by the big six energy companies through supplying gas, saying that Centrica's British Gas arm is too profitable.
There are two major concerns that everyone should be concerned about that we see taking this sell-off further and faster than anyone else expects...
It is still all about the Yen carry which overnight tumbled to the lowest level since November, dragging the Nikkei down by 4.8% which halted its plunge at just overf 14,000, only to stage a modest rebound and carry US equity futures with it, even if it hasn't helped the Dax much which moments ago dropped to session lows and broke its 100 DMA, where carmakers are being especially punished following a downgrade by HSBC of the entire sector. Also overnight the Hang Seng entered an official correction phase (following on from the Nikkei 225 doing the same yesterday) amid global growth concerns and has filtered through to European trade with equities mostly red across the board. Markets have shrugged off news that ECB's Draghi is seeking German support in the bond sterilization debate, something which we forecast would happen a few weeks ago when we pointed out the relentless pace of SMP sterilization failures, with analysts playing down the news as the move would only add a nominal amount of almost EUR 180bln to the Euro-Area financial system. Elsewhere, disappointing earnings from KPN (-4.3%) and ARM holdings (-2.5%) are assisting the downward momentum for their respective sectors.
S&P 500 futures just crossed below 1,800 - its lowest since the FOMC's taper announcement on December 18th. The cash S&P 500 (and small cap S&P 600) have crossed below their crucial 50-day-moving average (with no sign of dip-buyers yet). This is the biggest drop through that historically critical technical support level since early October. Perhaps more notably, most of the go-go sectors that were heralded by all the talking head momo queens on mainstream media as leading the next leg of stock gains have seen their post-Taper gains gone. From Builders to Banks and Industrials, taper-gains are now a dim and distant memory.
Head Of Recently Bankrupt FX Concepts Wants You To Know He Is Back, With A Newsletter And A Bloomberg TerminalSubmitted by Tyler Durden on 01/09/2014 15:50 -0400
2013 may have been a bad year for Bill Gross, but nobody had it worse than John Taylor. The former head of FX concepts saw his hedge fund - once an FX trading behemoth and the largest in the world with $14 billion in AUM in 2007 - crash, burn, and file for bankruptcy as we reported previously. But the cherry on top was the revelation that a year before its filing, Taylor personally guaranteed some $5 million of the FX Concepts' debt owed to Asset Management Finance, a unit of Credit Suisse. Surely, such a sequence of events would be enough to turn even the staunchest financial addict away from the markets for ever. But not John Taylor - the former FX guru has a message for all of you: he is not only back, but is launching a newsletter.... oh and he has a Bloomberg terminal too.
The first trading session of previous years has always been a whopper for those betting on central planning and capital flows. In fact, if one adds up the S&P performance on the first trading day of each year going back to 2009 (i.e., 1/2/13: + 2.54%, 1/3/12: + 1.55%, 1/3/11: + 1.13%, 1/4/10: + 1.60%, and 1/2/09: + 3.16%), one gets a whopping 10% return just on that one trading session. Which is why the fact that futures are glowing read, if only for the moment, may be disturbing for index investors and all those others who put all their faith, not to mention money, in St. Janet. Today's red open is hardly being helped by the 10 Year which continues to drift lower with the yield now at 3.04%, even as the Spanish 10 Year yield just got a 3 handle as well. At this rate the two streams should cross some time in the next two months. Just what a higher yield in the US vs Spain would imply for fair and efficient markets, we leave up to readers to decide.
In the "west", the higher the price of gold rose, the more demand there seemingly was by momentum-chasing gamblers investors, if only for paper certificates claiming to represent gold, or GLD as the case may be. Conversely, once the momentum turned, the same investors couldn't be bothered with gld (sic) even at 30% lower. At the same time, in the "east" the higher the price of gold rose, the lower the demand was for physical, which for that extinct breed of deranged gambler known as "value investor" is a familiar concept." And now that gold's price is not only back to early 2011 levels, but is essentially below production costs, demand out of China is off the charts. Demand in India - traditionally the greatest in the world - continues to also at unprecedented levels, although now that official purchases of gold are regulated and limited through capital controls, it is forcing the local population to smuggle in gold through the most innovative of schemes. But while the west is the west, and the east is the east, and no amount of adaptive behavioral modifications can change that, much to central bankers' chagrin, what lies in-between? Courtesy of the Saudi Gazette we learn that the uber-rich middle eastern kingdom, which floats on a sea of oil has picked its side... and it has chosen to take advantage of the ongoing paper-driven price collapse and load up on as much gold as possible.
Following last night's freak central-planning accident (previously in history known as "selling") in the S&P futures, we said that "we expect Overnight Ramp Capital to arrive promptly or else confidence in central-planning may take a hit ahead of the Wednesday Taperish FOMC, and Thursday's double POMO." A few hours later, even we were surprised by how high the low volume tape managed to drag ES, which staged a dramatic 20 point comeback, on the back of a sharp reversal in FX driven higher by both a stronger Euro (helped by better than expected German and Eurozone PMIs offsetting China PMI weakness, and lack of optimism in the core Japanese Tankan) and a weaker Yen, the two key signals for E-mini directionality. Sure enough, at last check the futures we trading just why of the "independence day" 1776, after briefly breaking the 50-DMA and then being supported by 1760 in the futures. The rest is perfectly predictable central-planning history.
Today 3:00 pm nomination by Obama of Janet Yellen as the next Fed chair was hardly news (certainly wasn't news to stocks which briefly dipped below their 200 DMA) in the aftermath of Larry Summers' self-elimination, but nonetheless the sellside brigade was quick to praise her now official nomination for one simple reason: it means more of the same Bernanke policies that have done nothing to benefit broad America, but more importantly have resulted in year after year of near-record Wall Street bonuses, and unprecedented asset bubbles. Why shouldn't the banks then be giddy with excitement that the status quo will not only continue, but the monthly $85 billion in liquidity may in fact increase in time? Below is a selection, courtesy of Bloomberg, of the most vocal praises sung on behalf of the former San Fran Fed president byt the numerous banks that currently exist only thanks to the Fed's actions in 2008.
The reason why gold just did an upward spike move of the type not seen since the summer of 2011, when it exploded higher by $20 in seconds, is clear - as we noted yesterday, JPM is now actively buying up gold in the market to meet delivery demands. That, and countless stops getting hit, helps. But the most important factor: Paulson, Soros et al finally got out of the yellow metal. That meant there is only upside as the latent selling overhand is gone. As for silver: why not...
It was bound to happen: after the Tuesday "winning" streak was lost 8 days ago on the 21st unlucky week, it was the turn of the "BTFD mentality" that had prevented a 3-day losing streak in the Dow Jones since December. And while today's selling was still somewhat contained, it did not prevent the DJIA from closing below the psychological 15,000 support level, driven according to some, by the breach in the 200DMA of the USD index.
The Analytics Group of IIROC performed a Trading Review and Analysis of High Frequency Trading on Canadian equity markets. IIROC uses a methodology to identify user IDs exhibiting high order-to-trade ratios, or HOT User IDs, and covers the period from August 1, 2011 to October 31, 2011.