Jewellers across the world are seeing a surge in jewellery purchases because consumers are taking advantage of the price drop and purchasing investment pieces that will grow in value over time.
In the USA with Mother’s Day approaching this weekend, consumers like Whitney Court who would normally buy flowers instead wants to purchase something that won’t wilt: a silver necklace.
When a 'blog' puts the words Fibonacci, Gold, and Stocks in the same post, it well and truly earns its 'tin-foil-hat'-wearing "digital dickweed" honors. And so, we present, for the edification of all those who believe in gold as the only sound numeraire for judging value; for those who believe it's never different this time; and for those who believe in dead-cat-bounces; the Dow in Gold in the 30s, 70s, and Now...
In all the excitement over gold, silver has been largely ignored or forgotten. Today, it was the "poor man's gold"'s turn to stae a dramatic comeback posting its biggest single-day jump in 15 months. Having now retraced the Fibonacci 38.2% level of the record plunge, it appears $25 is th enext target - which is around 50% retracement levels.
For the Fibonacci fans out there, here is something rather stunning from Newedge's Brad Wishak. In the chart below, the strategist looks at the duration in days of each stock rally leg since the 2009 bottom. What is rather amazing is follow through between one rally and the next in terms of, you guessed it, the Fib 61.8% retracement. As Wishak comments: "obvious is the diminishing marginal utility of each bath of QE manifesting itself in shorter and shorter rallies. Less obvious is the underlying rhythm of the start and stopping points. Applying the 61.8% retrace to time, called the the most recent September stock highs within 4 days. And projecting this pattern forward, we're now just around the corner from the next 61.8% top, which hits on January 22." Because if in a centrally-planned world DeMark indicators still have any relevance, then certainly so does Fibonacci.
Once more, not much own stuff to chew on Europe’s own. Drifting. EGBs very strong on (relative) equity weakness. Periphery starting to glow like the ZZ Top Eliminator. In absence of any strong lead, need to start thanking everyone for input and support (Mario, Ben, Angie, Chrissie… Anyone working on the Fiscal Cliff. Mariano & Mario. Wolfie...). New paradigm put into practice: nothing will ever be weak again, nothing. And watch out for FC Ping-Pong! And I Thank You!
"I Thank You" (Bunds 1,37% -6; Spain 5,31% -20; Stoxx 2547 +0,4%; EUR 1,293 unch)
The yellow metal soared 4.9% in euros in one week from the 11 week low set November 2nd and has since fallen 1.3%. The rebound from the November dip means prices should recover to reach the all-time euro high set last month, before rising to the point-and-figure target at 1,395 euros, said the bank’s research. Point and figure charts estimate trends in prices without showing time. Gold may then reach a Fibonacci level of about 1,421, the 61.8% extension of the May-to-October rally, projected from the November low, Commerzbank wrote in its report on November 13th which was picked up by Bloomberg. Fibonacci analysis is based on the theory that prices climb or drop by certain percentages after reaching a high or low. “What we are seeing is a correction lower, nothing more,” Axel Rudolph, a technical analyst at Commerzbank in London, said by e-mail Nov. 16, referring to the drop since November 9th. Rudolph remains bullish as long as prices hold above the November low at about 1,303 euros. Technical analysts study charts of trading patterns and prices to predict changes in a security, commodity, currency or index.
The much anticipated Greek vote on "self-imposed" austerity came, saw and passed... and nothing: the EURUSD is now well lower than before the vote for one simple reason - the vote was merely a placeholder to test the resiliency of the government, which following numerous MP terminations, has seen its overall majority drop to 168 of 300, which includes the members of the Democratic Left who voted against the Troika proposal. Which means any more votes on anything split along austerity party lines and the vote will likely no longer pass. And, as expected, Germany already picked up the baton on kicking the can on funding the Greek €31.5 billion payment (due originally many months ago) when Schauble said that it will still be too early to make a Greek decision net week. Market-wise, Europe is limping into the US open, with the EUR weaker again due to a report that Spain may not seek an ECB bailout this year (as said here over and over, Spain will not seek a bailout until the 10 Year SPGB is back at or above 7%). Paradoxically, Spain also sold €4.76 billion in 2015, 2018 and 2032 debt (more than the expected €4.5 billion) at muted conditions, thereby the market continues to encourage Spain not to request a bailout, although this may not last, as promptly after the bond auction Spanish debt tailed off, the 2Y and 10Y both sold off, and the Spain-Bund spread is back to 445 bps, the widest since October, and means Spain can finally be getting back in selloff play: and probably not at the best possible time just as everything else, which was in suspended animation until the Obama reelection, also hits the tape. Today we get two key, if largely irrelevant, central bank decisions come from the BOE and ECB, both of which are expected to do nothing much. Finally, the most important event going on right now, is the Chinese Congress. For those who missed it, our previews are here: The Far More Important 'Election' Part 1: China's Political Process and The Far More Important 'Election' Part 2: China's Market Implications.
The markets are all about timing. In this case, 55 weeks.
If there is one dominant consensus in the financial sphere, it is that the Federal Reserve's $85 billion/month bond-and-mortgage-buying "quantitative easing" will inevitably send stocks higher. The general idea is that the Fed buys the mortgage-backed securities (MBS) and Treasury bonds from the banks, which turn around and dump the cash into "risk on" assets like equities (stocks). This consensus can be summarized in the time-worn phrase, "Don't fight the Fed." This near-universal confidence in a QE-goosed stock market is reflected in the low level of volatility (the VIX) and other signs of complacency such as relatively few buyers of put options, which are viewed as "insurance" against a decline in stocks. The usual sentiment readings are bullish as well.
But what if QE fails to send stocks higher? Is such a thing even possible? Yes, it does seem "impossible" in a market as rigged and centrally managed as this one, but there are a handful of reasons why QE might not unleash a flood of cash into "risk on" assets every month from now until Doomsday
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Leonardo Fibonacci (1170-1250) may have just stuck his 'golden-ratio-based' fork in the equity market's rally. As the following chart shows, the diminishing marginal utility of Quantitative Easing's wealth effect has followed a rather remarkable pattern... and today marks the next turning point.
Do you believe in miracles? Well, all those managers who were long the QE-sensitive darlings of Financials, Materials, and Consumer Discretionary into the month can breath a collective unchanged sigh of relief - thanks to last week's Draghi drag higher. The Energy sector managed a stupendous 4.9% gain on the month. The S&P 500, Dow, and Nasdaq all finished about 1-1.4% higher on the month (while Dow Transports ended -2.3%) as we came close to some Hindenberg Omens in the last few days. Today's market felt like the start of a sell-the-news day as we leaked back to the edge of the Friday cliff in S&P 500 e-mini futures (ES) - with an after-day-session-close snap down to catch-down to where risk-assets had broadly been biased all day - amid huge volume (leaving ES below its recent swing highs and Fibonacci levels). Commodities generally slid lower but WTI led the way ending down over 3% from Friday's close. Gold, Silver, and Copper all slid even as USD slid lower too. Treasury yields fell back retracing about half of the post-Draghi sell-off. VIX ended testing 19% into the close, up almost 1vol as the term-structure flattened ahead of the events of the next couple of days. The massive rip in volume at the close (and 5pt drop in ES) suggest plenty of short-term exits ahead of the fun-and-games of the next two days and certainly Treasuries were sending similar derisking signals.
CRAAPL taketh and Draghi giveth it all back. The question remains - given all the front-running anticipatory moves on the back of jawbone after jawbone, will ECB/Fed action have anything but a brief romance with higher prices when/if it occurs? The S&P 500 pushed up to fill its Monday opening gap-down on a reasonable volume day (heading into T-3 from month-end shenanigans) but the participation is absolutely not what one would expect if this was belief with S&P 500 e-mini futures seeing their lowest average trade size of the year. Gold was a winner again as the USD was sold against everything. Treasuries gave back some of their gains - yields leaking higher by around 3-5bps at the mid- to long-end. Credit and equity stayed largely in sync but the former was quiet and likely being reracked more than traded as it gapped at the open and stayed there. Stocks took off from their broad-risk-asset peers from the day-session open, retested VWAP, then pushed back to highs into the close - ending well above risk-assets' view of the world as correlations fell modestly. VIX ended the day down 2 vols at 17.5% but was unable to close the gap to Friday's close like stocks - which closed (rather coincidentally, given month-end, at June's closing price)
Stepping back from the trees to survey the forest (from the Moon perhaps) often provides some clarifying picture-paints-a-thousand-words view of the world. This is exactly what Citi's Rick Lorusso has done and while he called for a correction back in March which was followed by a 10.9% drop in the Dow, he was disappointed and is looking for a far greater adjustment - no matter how many times he hears about negative sentiment and QE and soft-landings. Starting from a truly long-term yearly chart of the Dow Jones Industrial Average, Lorusso conjures wave patterns, Fibonnacci, and cycles as he rotates down to monthly and daily charts to conclude that his charts "suggest the potential for a very significant high this year," in the July/August period, summarizing that Citi is "anticipating that the market will form a terminal high." - even more so on a rally from here as he warns "beware of new highs" so bulls be careful what you wish for.