For those who are speculating on the dollar—i.e. most people—there was good news. The dollar rose to 28.3mg gold. It’s a big gain, and welcome news for those who keep all of their eggs in the one dollar basket.
The US economy is widely seen as the world’s best performing major economy at the moment. However, so far this year most economic data have actually been somewhere between very soft and lackluster. The steep fall in truck tonnage is definitely an alarm signal. It indicates that inventories are already too high relative to demand, something that seems to be confirmed by recent industrial production and retail sales data. Given that tonnage has continued to decline since the end of Q1, one can no longer blame the port strikes either. To be sure, the US economy is not yet signaling an imminent recession. At best though it is muddling through at a very subdued pace. It probably won’t take much to push it over the edge.
Following last night's flash-crash dump across the precious metals complex, with gold tumbling to briefly test the multi-decade channel at $1080 levels, SocGen's technical analysis team digs in to understand key levels for gold, silver, platinum, and palladium, concerned about further weakness ahead.
Greece. China. Banking system messes. Central bank printing. And here we are, under $1140. Breakdown?
That cannot be determined from price charts. We want to know the fundamentals of supply and demand. Here's how we measure it.
Due to significant retail participation and the fact that the equity mania in China has served as a distraction for a nation coping with decelerating economic growth and a bursting property bubble, some (and we were among the first) began to suggest that the broader economy and indeed, social stability, may be at risk in China if stocks continued to fall. The extent to which this suggestion represented a real concern (as opposed to the ravings of a tin foil hat fringe blog) was underscored by the extraordinary measures China adopted in a desperate attempt to stop the bleeding and, later by several sellside strategists who began to warn about possible spillovers into the real economy. Now, with Beijing still struggling to restore the stock bubble, the first signs of knock-on effects are beginning to emerge.
The Greek default is a forcible contraction of credit, and bound to be negative for the prices of ordinary assets. But something extraordinary happened to silver this week.
Most leading indicators are warning; more trouble could be ahead...
A look at the psycholgoy of traders as reflected in the price action ahead the new week which promises to be eventful.
"We have a problem with this, and that is central bank hubris. They now think that they are omnipotent, because, essentially the government has said we are going to pass over all control of the economy to the central banks, they say to everybody else including financial market participants that “you don’t know, you don’t understand, we have our models and they are right”. And that kind of hubristic approach is when you sow the seeds of your own destruction."
"It's starting to get ugly..."
Moscow-based cybersecurity firm Kaspersky Lab has released a detailed report that outlines how spyware (which some suggest originated in Israel) was used to infiltrate the hotels that hosted the Iran nuclear negotiations. From the report: "Earlier this year, during a security sweep, Kaspersky Lab detected a cyber intrusion affecting several of its internal systems. Following this finding, we launched a large-scale investigation, which led to the discovery of a new malware platform. Notably, some of the new 2014-2015 infections are linked to the P5+1 events and venues related to the negotiations with Iran about a nuclear deal."
This breakdown marks the first day that Exxon Mobil has ever closed below this trendline. Now, assuming the stock’s behavior around the trendline is not completely random, and considering its capacity as the 2nd biggest stock in the equity market, the effect of this breakdown may be profound. Absent an immediate reversal back above the trendline, this loss of 28-year support would appear to open the door to more downside in the stock.
While it is likely oil prices could get a bit of a bump from a decline in the U.S. dollar, ultimately it will come down to the fundamentals longer term. It is quite clear that the speculative rise in oil prices due to the "fracking miracle" has come to its inglorious, but expected conclusion. What is interesting is that most have not figured out that the same thing will occur with the artificially driven surge in financial markets as well. It is quite apparent the some lessons are simply never learned.
A lot of people have got very excited as the price of WTI has bounced back from the lows reached a few months ago. If oil fails to break and hold above $62 this time around, however, their enthusiasm could well be misplaced, as the fundamental factors that caused the price decline in the first instance are still in place.
A look at the economic data and market psychology as a new week begins.