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SECTIONS
Markets: weekly summary
Precious: analysis
News: stories on metals and markets
Technicals: active trading levels
Tools: educational videos and research
Charts: related markets
Calendar: next week
1. Markets
Capital Markets Summary
This week was a tale of two halves. Stocks chopped lower into Wednesday morning, bounced off an opening dump then accelerated (despite The Fed Minutes signaled considerably more hawkish taper and rate-trajectory expectations). Nasdaq was the week's biggest gainer (thanks to Small Caps puke today) and The Dow underperformed but only modestly. This week's buying reduced the drawdown from record highs (for the S&P) to just 1.5%.
After Monday's dump, every day this week has opened with a panicky short-squeeze to ignite momentum. But as today's OpEx struck early, the short-squeezers ran out of ammo. Financials were towards the lower end of the overall performance.- Source
Bonds were very mixed this week with the short-end dumped and long-end well bid (2Y +8bps, 30Y -12bps)- implies risk that the Fed will be tightening into a recession- VBL
On a side note, the 'kink' is back and building in the T-Bill curve as the odds of a clean debt-ceiling extension in December slide.- implies the can is kicked but not dead- VBL
That was the S&P's best week since July.
Sectors were all higher on the week but Utes lagged and Materials led the gains.
Both Defensives and Cyclicals were bid this week but the latter outperformed today to win the week
Crypto soared higher, rising for 3rd straight week, led by Bitcoin.
Bitcoin back above $60k for the first time since April and in fact reached almost $62k today
https://finviz.com/map
Commodities all made gains this week as CRB all comms hit an all-time record high.
The dollar fell for the 3rd straight day today and broke a 5-week winning streak.
WTI rallied for an 8th straight week, its longest winning streak since May 2015, topping $82 for the first time since Oct 2014.
Copper soared this week (its best week since Nov 2016 and 2nd best week since Oct 2011), back near the May highs, as global inventories plunge.
Gold tagged $1800 but was unable to hold it.
The Debt ceiling issue is not over yet as evidenced by the kink in the treasury curve.
2. Precious
Gold and Bitcoin
Most comparisons between these two assets have been made on every legacy media format in search of clicks on advertising. For our part, we’ve done side by side comparisons on numerous occasions, both educationally and directional opinion wise, starting back in 2017 when we called the top for Bitcoin in an interview with Daniela Cambone and why. We’ve discussed the fundamentals of Bitcoin as it relates to being money (it won’t be) also here.
This post is about right now. It is about the changing dynamic of markets and the confluence of events making it hard to justify not being exposed to bitcoin going forward.
It also is extremely important to not think of this as the end of Gold. It cannot be. But it will be painful to watch as massive flows leave one asset in favor of an other for a potentially a long time.
This we feel will set Gold and Silver up for the potentially the most large run ups ever. The confluence of LBMA reductions, Global inflation, Comex demise, deleveraging of physical markets, and the re-democratization of money as Bitcoin is reminding everyone will be a booster unlike any before.
Silver.. that will be even better. We don’t know when. We just know how and why. Bitcoin will first steal market share as a product from Gold. Then it will be the catalyst that forces Gold to wake up. That is an opinion we are betting on.
Bitcoin Now
Bitcoin is on a pricing path to become just like Gold1 as far as the Government is concerned.
It is also insane to think of Bitcoin as a safe haven or inflationary hedge compared to Gold and just blindly buy it for that reason. If you buy it now, you are buying it for price appreciation, not stability.
Bitcoin will change in time how it benefits a portfolio. But for now, have no illusion why you are buying it if you are. It is not a substitute for Gold in terms of portfolio insurance right now. The parallel is simple. Gold also was not an inflationary hedge at this point in its own life. It was a newly IPO’d asset.
When it ran up in the 1970’s. Gold was a new unlocked market that had massive demand-side flows pent up. Futures were listed and the floodgates were opened for ownership.
Why Am I Buying This Stuff?
When an asset is introduced to the broader investing public, 3 things influence price. Economic Data, Investment Flows, and Secular Trends. Here is how we look at these factors when making investment and trading decisions
Economic Data
This is what you read about daily. A newly minted asset like Bitcoin is not interested in these things despite what legacy financial media tell you. “Bitcoin is up on CPI today” is nonsense when you are talking about a newly created asset. Economic data is the main driver in very mature assets with low volatility. Bitcoin is not a mature asset at all.
Bottom line: If you are buying Bitcoin right now for inflation protection from a high CPI print at this point in its life, you are lying to yourself2. If you are using an inflationary data point as reason to buy it for a very long hold, then that is a different story!
The Risk: There is little correlation at this point. Buying or selling Bitcoin purely for an inflationary hedge from short term data is just a fool’s errand. If you do that and make money week to week, Good for you. But the hamster in the box may have made as much. Be careful.
That said, data reports will be a trigger for others who have much more money than we do and are susceptible to sales pressures. They will move the market for weeks at a time from this nonsense. You just have to be in it for a longer time frame. Which is why we suggest never buy or sell a new asset class for short term data reasons.
Investment Flows
When an asset gets: approved, listed, let into the club etc; it gets past the doorman of regulatory agencies and in the sweet spot as a new product for brokers to sell you. It gets advertising just by price dissemination alone. It is legal.
To the extent those brokers pitching you are right, you will make money. It is a fractal version of buying a good IPO. The earlier you get in, the better chance of making money you have. The later you get in.. you know.
Bitcoin has a decade of press building up demand for it as an investment product. It is a broker’s dream. Why? Because it actually is the real deal, like Gold was in its teen years.
Bottom Line: Bitcoin will go up just because of the sheer volume of non-discretionary buying that will come into the market. How much is hard to say. How long is even harder because of the Secular Trends governing it. But purely as a “flow trade” Bitcoin will go up. A rising tide floats all boats.
The Risk: Bitcoin has already gone up massively in the last 3 months. Why? Because every institution that can has been buying it in anticipation of the incoming buying just discussed. Are they doing something wrong? No. They are betting that this will be a good product. Some of them also bought Betamax back in the day we bet.
But the problem comes when too many of these types buy in anticipation of a run up. The selling gets all bunched up and you have a massive market dive from midwit professionals tripping over themselves to get out.
If demand is less than expected, you will have a fire-sale like that. If you are buying Bitcoin on the “IPO” either you are trading it for a quick pop, or you are banking on the secular trends.
Note: Gold when it had its own ETF launch in 2004, It also ran up in anticipation. Then it stagnated for a long time after the launch. Almost a year of pain if you bought the IPO. This is how it could look for Bitcoin.
But then Gold ran up for 3 years. Look at what GLD did for gold awareness.
This is what Bitcoin is experiencing now. A mini version of this type of risk happened in 2017 when the CME listed Bitcoin futures. A spike and then a drop. However, the flows will be massive and cannot be underestimated. Can you hold Bitcoin for 3 years?
Secular Trends
We could write all day about this and already have. Here’s the short “money making” focused type version.
Bitcoin is a revolutionary product that will open doors to new ways to store value.
Bitcoin will take flows from Gold and in the future, provided unforeseen things don’t happen; will be a synthesis of Gold and Oil for investors.
It will not replace gold but it will compete with it as the definition of money changes over time. You will have money you spend, and money you save. Gold and Bitcoin will be the latter.
Nations want to own it whether they say so or not just like Gold. It is a chess piece like oil and gold in the global trade balance.
Risks: As big as the secular tailwinds are for Bitcoin, that is how big the risk is. If you are buying it for a long term life changing reason, this is what you have to consider.
Replacement technology, power issues, taxation, regulatory risk, nation-state attacks, and many still unknown risks are out there. But one thing is certain, Wall Street is embracing it because they can make money off if it. The US is acknowledging its existence even as it downplays the importance of it. Governments are dealing with it one way or another because it is not going away in concept or technology.
Also: Ignore Celebrity Opinions on Crypto
Hope this helps
3. News
Below are widely read news stories on Precious metals this week. We do not endorse anything they say at all. In fact much of this is marketing material for products and advertisement clicks. Nonetheless, they must be noted. If you wish a comment on these, please do not hesitate to ask in the comments section. We’re more than happy to give a clear take on these stories. The idea of this section is to not opine but to present. These are basis for discussion.
UNLOCKED: What the Bitcoin ETF Launch Means- Analysis - by VBL - GoldFix Bought the rumor, will they sell the news? vblgoldfix.substack.com
A Speculative thread on the Silver Coin shortage The Happy Hawaiian on Twitter: “For this entire year, mints have been talking about shortages of blanks to make silver coins, and have limited wholesale purchases by dealers Here’s a speculative thread as to why
China’s gold market in August: inflows into gold ETFs continued and wholesale physical gold demand rebounded | Post by Ray Jia | Gold Focus blog | World Gold Council Explore China’s gold market in August. We cover the Shanghai Gold Benchmark Price PM, wholesale physical gold demand, gold ETF inflows, impacts of the rise in COVID-19 cases and more. Post by Ray Jia
How the U.S. Government Inadvertently Created the $3 Trillion ETF Industry It all started with the SEC’s 840-page postmortem of Black Monday
Crypto Brief: SEC Set to Allow Bitcoin Futures ETFs, Australian Pension Fund considers Crypto Investment The Crypto Brief is a daily compilation of the main news, charts, fundamental and technical researches related to the Crypto universe.
4. Technical Analysis
Report Excerpts Courtesy MoorAnalytics.com
GoldFix Note: Michael Moor’s work is used by oil refiners, hedge funds, and large investors. There are few good objective technicians today. Michael’s work is his product.
Gold
Get short on a decent penetration and/or pullback below $1,793.7 (+1 tic per/hour starting at 8:20am) and look for the pressure warned about above. Get short below $1,778.5. Buy against $1,765.2 (+1.5 tics per/hour starting at 8:20am); get short on a decent penetration and/or pullback and look for decent pressure to come in. If we break below here decently and back above decently, look for decent short covering to come in. If we break below $1,750.5-49.9 and back above, look for short covering.
TECHNICALLY BASED MARKET ANALYSIS AND ACTIONABLE TRADING SUGGESTIONS Moor Analytics produces technically based market analysis and actionable trading suggestions. These are sent to clients twice daily, pre-open and post close, and range from intra-day to multi-week trading suggestions. www.mooranalytics.com
Bitcoin
Upside: Look for possible exhaustion in the $61,185-295 area. Sell against $64,000-410. If we break above here and back below, look for pressure. If we break above $65,435-520 and back below, look for pressure.
Downside: Get short below $57,250-075. Get short on a decent penetration and/or pullback below $55,795 (+15 per/hour starting at 9:00am) and look for decent pressure.
WTI Crude Oil
Upside: Sell against $82.18. If we break above $82.88 and back below, look for pressure (a moderate suggestion). If we break above $84.83 and back below, look for pressure (a moderate suggestion).
Downside: I am writing this from the higher call. Get short below 8168-62. Buy against $80.07 (- 2 tics per/hour starting at 9:00am); get short on a decent penetration and/or pullback below and look for decent pressure. Get short below $79.47-42.
Go to MoorAnalytics.com for 2 weeks Gold, Oil, and Bitcoin reports free
5. Tools:
Best of the Week’s Educational Pieces
CLIPS: If you want an insight into why Gold is getting hammered and Bitcoin is going up (what actual price drivers are) now, please listen to these 2 minute clips- VBL
Reports: A bunch came in late this week we want to go through them a little more and will be sending to premium subs during the week. Thank you
6. Charts
All Charts by TradingView.com
Gold
Silver
Copper
All Charts by TradingView.com
TiPs
GoldFix Premium Premium Weekly Report: Click for description
7. Calendar
Some of the upcoming week’s key data releases and market events
MONDAY, OCT. 18
9:15 am Industrial production Sept. -- 0.4%
9:15 am Capacity utilization rate Sept. -- 76.4%
10 am National Association of Home Builders index Oct. -- 76
TUESDAY, OCT. 19
8:30 am Building permits (SAAR) Sept. -- 1.72 million
8:30 am Housing starts (SAAR) Sept. -- 1.62 million
WEDNESDAY, OCT. 20
2 pm Beige Book
THURSDAY, OCT. 21
8:30 am Initial jobless claims (regular state program) Oct. 16 -- N/A
8:30 am Continuing jobless claims (regular state program) Oct. 9 -- N/A
8:30 am Philadelphia Fed manufacturing index Oct. -- 30.7
10 am Existing home sales (SAAR) Sept. -- 5.88 million
10 am Leading economic indicators Sept. -- 0.9%
FRIDAY, OCT. 22
9:45 am Markit manufacturing PMI (flash) Oct. -- 60.7
9:45 am Markit services PMI (flash) Oct. -- 54.9
Main Source: MarketWatch
Zen Moment:
RELATED CONTENT
8. Disclaimer
Disclaimer: Nobody is telling you to do anything here. Anybody who tells you to do something without first intimately knowing your personal situation is irresponsible at best and manipulative at worst. Worse, anyone who acts on other people’s opinions without first doing an inventory of their own situation shouldn’t be surprised if they lose money.
meaning as US banking influence grows in the space, so will custodial business. Which means the asset will be managed in its assent just like Gold is
Those of you asking, well why doesn’t gold work with inflation since it is older. Fair question. It does. Just not on a 2 week timeline, and not until everything else has gone up, and never when bullion banks can rehypothecate infinite supply.
Top drawer stuff, echoing my thoughts on BTC v Gold, but articulated way better than I could, thanks