Technical Brief: Gold, Silver, and the Fed Effect

Gold

Overview

Stock and Commodity markets are stronger this morning, apparently discounting no activity by the Fed and/or more stimulus by the BOJ
The risk is now to the downside as the markets are asymmetrically discounting no rate hike.- SK
Almost a month after Slant laid bare how our Government will remove cash, Doug Casey reiterates his his growing concern that the Fed is" destroying currency"
As explained why in Slant last week , today the WSJ reports that Banks "Too Scared to Even make money"
Good chance BOJ lowers rates again, while moving to steepen the yield curve by reducing JGB purchases
- this, if announced in conjunction with a Fed hike could make themarkets, "Violently Unchanged"

Markets

It is all green except for the VIX. That tells us that people are not only discounting a bullish Fed meeting, but they aren't hedging when they can. There was a time when Bulls would buy Puts as they got long markets before events, Brexit being the most recent example.

But greed has taken over and players are going to buy them "when they have to" instead of when they can. It will be very bad if the Fed does actually hike. The "surprise" factor is in the Fed hiking. That said, we think a rate increase would be crazy

Unless the BOJ votes for stimulus and announces as much before the FOMC makes its own statement, we think it unwise for the Fed to hike and said as much last night.

Nothing to Worry About here

Technical Brief:

Stocks, Gold, Bonds, all Vulnerable

Gold

Is weaker by the numbers. But we still like it and want to buy strength above $1333. That said, we missed out on a trade to be short below $1325 due to our own bias. And that caused us to spend our risk capital trying a Tudor Way of getting long. This should be a lesson to anyone who is macro bullish. Missed opportunities to trade the swings can be a killer. And we missed a sale last week. Here is our analysis today.

Personal Note: We have a bid in Silver around $1800 in spot for adding to our investment portfolio in coins. These will be gifts to college bound children around book buying time. Given as needed.

Technicals are Always Valid.- events like a Fed Meeting Just make them valid faster

interactive chart HERE

Silver

Technically the same idea. We are bullish Silver in the long term relative to Gold and have said as much.

Silver is dangerous to trade for the following reasons:

Discontinuous liquidity- it is there , then it is not.
Its Volatility will find your stops- forcing you to widen stops and lowering volumes to preserve capital BUT
Contract size makes protecting your bankroll by adjusting volumes difficult

Personal Note 2: As of this writing Silver is up 2.35% with Gold up only 0.63%. And this is annoying. Clearly the market knows we are trying to buy a dip

Silver Conclusion: Use its larger volatility for investment entry opportunities. if you are trading it, use a mini contract for fine tuning of risk exposure. NB- started in Silver, traded it for 25 years. If you are not a player, you are a target

SPX

Technical Brief

Bear downturn to 2103
Bearflags under 2130 valid sales
2150 close or 2154 trade reverses momentum
in between 2130 and2154 is neutral

Stagflation: Why It's Back in 5 Charts

Stocks, ViX, and Post Brexit Hedging Behavior:

Before the Brexit event, stocks crept higher while the VIX also increased. This made sense as bulls were likely buying and hedging. The post VIX crushing and market recovery we believe has created a group of Bulls that are now eschewing hedging risk. This is bad, and just another herd mentality, but now in the other direction. It sets up for us an asymmetrical outcome. If the Fed does nothing, stocks may rally, but we don't see the ViX having as many hedgers to unwind their Put positions as last time. The risk reward play is to be long the ViX we think.