Source: Michael Ballanger for Streetwise Reports 09/06/2018
Sector expert Michael Ballanger discusses the influences on market trading and the status of a pair of small-cap miners.
Another Labor Day has come and gone, and I sit here in the back of my boat typing yet another rambling, rancorous recount of forty-one years covering the financial markets, and I have to tell you—I am depressed.
Don’t get me wrong; this summer was yet another magnificent series of forays into northern Georgian Bay, and despite fierce forest fires and terribly dry conditions, there was just so much to explore that I come away damning Mother Nature for making Canadian summers so short.
Despite that, I look at the global fiscal situation and am constantly amazed that the world’s stock exchanges remain elevated. What is even more puzzling is that the only market celebrities left that are able to show their faces on CNBC these days are the thirty-something permabulls who forge ahead buying any and all dips because “the Fed has our back,” and who have never experienced crashes even vaguely resembling 1987, 1998, 2001, or 2008. All of the old stock market “gurus,” like Robert Farrell or David Stovall, have moved along and even the more recent superstars, like David Einhorn or Doug Kass, are hiding. Truly smart, experienced managers are being left behind in the performance race due to their unwillingness to ignore history in terms of both valuation and risk. Poor Dennis Gartman has flip-flopped from bull to bear to bull no fewer than a dozen times since 2008, each time admitting his errors but failing to explain why he keeps getting whipsawed.
As I explained a few weeks ago, we all look at the same data and read all the same headlines, all failing en masse to accept that the fuzzy-cheeked kids buying stocks on margin day in and day out are actually the “smart money.” With their thirty-something brethren manning the computer terminals, they are seen using trained algobots to decipher all the patterns and analyze all the word clouds before launching microbursts of buy orders through microwave transmission systems many nanoseconds faster than anything even remotely similar to the “Quotron” order execution terminals of the 1970s and 1980s. So when I see the S&P down 3% with an hour of trading left and leave for the day thinking that there is simply no way any human trader would step into a market this bad, my jaw drops through the floorboards when I see on the news that a “Late Rally Saves Stocks.” Therein lies the source of my angst (and anger).
Last Friday’s COT report has now been the focus of more than fifty breathless commentaries, complete with table-pounding and cymbal-clashing, as the anticipation of a proctologically challenging short squeeze resembles a “visions of sugar plums dancing in their heads” type of expectational nirvana. Yes, it was noteworthy in that in the futures and options portion, the Commercials are actually net long silver for the first time I can ever recall. They are also pretty close in gold, creating one of the most powerfully bullish set ups since the COT was introduced in 1986.
However, that was before the “machines” took over the trading floors. What I think we are going to get is a retest of the August 16 capitulation lows, both precipitated and engineered by Primary Driver #1 (algobots) at the prompting of Primary Driver #2 (Sovereigns and Central Bankers).
You see, this type of “trading action”is about as unnatural verging on the perverse as I have ever experienced. There is indisputable evidence that conditions similar to December 2015 have arrived, but the defining difference is that while the Commercials and the Large Speculators are still in battle, the market is still reacting to external factors rather than the bullish COT. It is beyond anything I have ever studied in all my years studying the back pages of the Wall Street Journal and Barron’s Market Lab section on a Sunday afternoon, while listening to Zeppelin (70s) and Supertramp (80s) and Nirvana (90s).
The maddening element in analyzing price action in gold and silver lies within the realm of consistency, which is totally absent. The same applies to stocks and bonds, where risk premiums should be skyrocketing due to the likelihood of default, given the debt loads associated with stock buybacks and, in the case of governments, the inability of the populace to generate enough tax revenue to meet interest payments.
I usually include charts in my missives because they provide a visual canvas upon which the analytical painting gains substance and form and allows my readers to glean a sense of purpose in the assessment of the next direction of whichever market I am viewing. However, irrespective of the identity of the perpetrator, someone or something is influencing the dollar-based prices of gold and silver.
In light of this, charts remain meaningless and ineffectual. Head-and-shoulders, cup-and-saucer, gravestone dojis, hanging drunkards, and whatever other technical formation, I absolutely refuse to make investment decisions on their interpretations. In this day and age, it is the double drivers of technology (algobots) and government (interventions) that have, as their sole mission, the protection of the reserve-currency-status of the U.S. dollar. This directive is indelibly etched into every facet of financial market warfare by the U.S., while combatting it remains the sole mission of Russia and China and a vast majority if the Islamic world.
Integral to all of this is the necessity of keeping a stranglehold on gold and silver prices while juggling the stock and bond markets like a one-eyed circus clown to maintain the status quo of how international money flows in favor of the Americans. Specifically, it does not matter whether the Commercials are long or short, or whether Large Speculators have amassed a short position, the notional amount of which is larger than total global mine production for the past year. The algobots …read more
From:: The Gold Report