DB thinks the dollar has truly peaked, BBG Daily Oil brief
Good afternoon. The Dollar is only down 9 after the retail numbers came out very healthy and instigated a rally from overnight selling. Bonds are mixed with the short-end weaker. Stocks are softer but notably divergent with Dow stocks unchanged and tech stocks down one percent. Gold is unchanged after being up $11 pre-data. Silver is also around unchanged after being up 65 cents. (today’s report aside we are not tactically bullish right here). Oil is down $1.77. Nat Gas is down 12 cents and Crypto is digesting more liquidation risks down with Bitcoin down almost 2%
GS: Gold Definitely on Their Radar
You may want to read the report at bottom if gold is your thing; or watch the 10 minute segment on it here from Sunday’s Founders chat. We spell it all out there.
As reports go, it is boring, dry, and not very exciting. But that is exactly how GS does it when they are pitching their better clients. And it came from their trading desk. We think they started buying last Thursday and added alongside “good” clients Friday before this note went out:
Friday's gains should turn the medium-term pivot. Therefore multiple systematic strategies could purchase in the coming week, assuming prices stay strong.
Translation: CTAs and momentum funds will be buyers of strength
PRE BUY-SEASON TABLE IS SET
We are increasingly convinced that Goldman has gotten long for itself and some of its bigger clients based on market behavior and research notes. This is a double edged sword for sure always. But we like the fact that the market is now on the cusp of “buy season”. While that does not guarantee a rally into year end, it certainly helps get a running start as we seem to have gotten from CTA shorts.
The one thing we are suspicious of in this GS mind-reading stuff is if a public bank recommendation comes out and Gold does not run up immediately, that is a sign they are liquidating their trade into strength. Then there is this part:
Ultimately, watch for continued central bank buying. Support conceivably waned. But if it resumes, the payoff for Gold could be asymmetric.
Translation: if we see CB buying return, we will be big buyers. But if not, we will sell rallies as well.
It is also very notable that post 3 different days of two percent plus rallies in the last 3 weeks, the market has yet to get slammed significantly. Today saw strong retail numbers which implies more aggressive tightening from the Fed. Stocks took it on the chin down an average of 50bps (tech down over 1% Dow flat showing a growing perspective on what economic segments matter now).
Gold and Silver, while backing off, are still hovering unchanged as we speak. Yes we know that can change in a heartbeat, but absent a material news item, we are starting to think the random extended slams are on holiday.
TACTICAL
We are dip buyers on any move that does not print below $1745. Under that and we reassess speculatively. We are NOT buyers above $1770 and $17851 as the price is too close to some bigger selling that may have to hit the market soon we feel. Above $1795, we may miss the boat however as taht is where the CTA types are likely to step in again.
SEASONALS and FUNDAMENTALS
Therefore from here on to the EOY, it seems more than ever trading disciplined and technically is the way to go. The macro drivers are in place as bearish but ending. The seasonal flow drivers are bullish and just emerging. Therefore the pieces are in place for a rally. Now it is about discipline and picking spots for trading. As to fundamentals and long term perspective, nothing has changed. In fact, its just getting better all the time.
CONTINUES AT BOTTOM
DB: Sell Dollars
They make the case that the end of USD’s 11 year rally has probably already occurred. They then discuss the how it will weaken, whether choppy or all at once ( an inverted V). Nice lesson in cycles here.
The Dollar Cycle is Ending…
Other than the day after the 1985 Plaza Accord, and a few sessions of high drama during the '08 Great Financial Crisis, the DXY has never had as large a two day percentage move, as we saw after the October CPI.
