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."
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.
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.
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.
Another session in which the market continues to be "cautiously optimistic" about Europe, but is confused about Cyprus which keeps sending the wrong signals: in the aftermath of the Diesel-Boom fiasco, the announcement that the preciously announced reopening of banks was also subsequently "retracted" and pushed back to at least Thursday, did little to soothe fears that anyone in Europe has any idea what they are doing. Additional confusion comes from the fact that the Chairman of the Bank of Cyprus moments ago submitted his resignation: recall that this is the bank that is supposed to survive, unlike its unluckier Laiki competitor which was made into a sacrificial lamb. This confusion has so far prevented the arrival of the traditional post-Europe open ramp, as the EURUSD is locked in a range below its 200 DMA and it is unclear what if anything can push it higher, despite the Yen increasingly becoming the funding currency of choice.
Ironically, the very success of stock market manipulation only thins the market of legitimate participants and thus increases the probability that risk that has been suppressed for years will erupt uncontrollably. That the stock market is manipulated is no longer in question. One explicit goal in the Fed's zero-interest rate policy (ZIRP) is to drive capital into risk assets such as stocks. That is a first-order, transparent policy of manipulation, i.e. a centrally managed policy aimed at managing markets to meet a key central-planning goal: creating an illusion of prosperity via an elevated stock market and the resultant "wealth effect" for the 10% who own enough stocks to matter. Indirect manipulation is hidden from public view lest the rigging of the market taint the perception that a rising market is "proof" that Federal Reserve and Administration policies are "succeeding." Indirect manipulation is achieved via Federal Reserve quantitative easing operations, unlimited liquidity and lines of credit to fund bank speculations and masked buying of market futures. This multilevel manipulation creates a Boolean either/or for any Bear market: either it is a planned "panic" that profits the banks or a systemic failure of the orchestrated campaign of market manipulation.
No politics, no "death crosses" - just simple fundamentals.
What a roundtrip! After starting off November with a bang, and after nearly retracing all October losses in the aftermath of the NFP headfake in less than 2 trading sessions, the S&P futures literally imploded, and dropped 23 points from the intraday high, the same distance traveled as it crossed yesterday, only to the downside and on very strong volume for the second day in a row. While the 1400 support in ES is once again in play (ES closed literally on the lows of the session at 1405.5), as we suggested earlier, the far more ominous news is that the AAPL bubble appears to have popped (but, but, it is so cheap on forward multiple basis: guess what - forward multiples are based on forward earnings, which may very well never materialize! and thanks to the dividend, not even AAPL's cash hoard is the bastion it one was) and is now close to entering bear market territory, down just shy of 20% from its all time highs of $705.07 hit on September 12. Now with the 200 DMA taken out, the next support is the 20% retracement from the high which is at $564. After that it is freefall for a long time as a very deep gap needs filling. It is unclear just how much of the selling was there to cause max pain for Dick Bove and Rochdale, for whom every tick lower in the stock means a bigger margin call.Finally, news hitting literally seconds ago that MSFT may be launching its own phone if its partner strategy falters, means there go even more margins.
Moments ago AAPL broke the 200 DMA. Whether or not this was due to the earlier news from Rochdale getting caught with its pants down, and supposedly losing tons of money due to a rogue trader "buying" the stock as its proceeded to tumble from its all time highs less then 45 days ago (during which time it has lost more than 10 years worth of dividends in market cap), is unclear. What is quite clear, is the moment when the general market realized what had just happened. Sure enough, the jobs number came and want, and ES largely faded that move in under an hour. It remains to be seen if a technical indicator for the world's most widely held stock is more important to the general stock market than how many 60 year old workers the US economy added in October. Oh, and as for that whole iPad mini launch spectacle? Sorry. Time for the iPad Mini Magnum launch... or maybe even the maxiPad.
Caution is the word of the day.
Playing in the market, with Phil.
After dropping to its 200 DMA, and threatening to breach its recent support level of 1.2800, the EURUSD has seen the usual powerlift over the past 4 hours, on two key events out of Europe: Eurozone unemployment, which came at a record 11.4%, up from 11.3% (which just happened to be revised to 11.4%) but because it was in line with expectations of the ongoing recession, all was forgiven. The other event was Eurozone manfucaturing PMI, which rose by the smallest amount possible from the 46.0 in August to 46.1, on expectations of an unchanged print. That 0.1% "beat" is what has so far set off a near 100 pip rush higher in the EURUSD, which has ignored the Chinese weakness overnight (the SHCOMP is closed for the Chinese Golden Week), as well as the UK PMI which did not share in the European "improvement" and tumbled from 49.5 to 48.4 on expectations of a 49.0 print (so much for that latest BOE easing), and instead is transfixed by headlines proclaiming the strongest PMI in 6 months. What also is being ignored is the components in the Eurozone PMI, with the leading New Order index falling to 43.5 from 43.7. But the data being ignored the hardest is the French PMI which tumbled to 42.7, the lowest print in 41 months, of which as MarkIt's chief economist Chris Williamson said "France is perhaps the new worry, with its PMI slumping to the lowest for three-and-a-half years." Coming at a 3+ year low when France desperately needs its new wealth redistribution budget to be credible, is not the best possible outcome. Bottom line: Europe is in a recession, but maybe not outright depression just yet, so the thinking is - buy the EUR, strengthen the currency, make German exports weaker, and make sure the recession becomes a full on depression. Or something like that.