Weekly: Germany's In (Very) Bad Shape, Gold is Oversold, and a U.S. Hard Landing Cometh

Hartnett Notes Gold Flows

Oct 08, 2022

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Housekeeping: This week there are several things to pick from.  We note Michael Hartnett has Gold flows on his radar now. We add some commentary on that. Hartnett also expects much more pain and a hard landing.  DB sees the German economy, for being so adamantly inflation-sensitive is in its worst predicament since the past 2 World Wars. Morgan Stanley is bullish Ford at GM's expense. And of course we update the CTA situation in metals. Finally, there are some novel charts for stock watchers.

SECTIONS

Market Summary— up, but barely
Research— Gold, Hartnett, World War Germany, and more
Week’s Analysis/Podcasts— lots of Gold and Silver analysis
Charts— Gilligan’s island top reversal
Technicals— Gold, Stocks, Oil, NG, BTC
Calendar— CPI, PPI, Retail Sales, UMich
Zen Moment— apple pie and birthday cake
Full Analysis— premium

1. Market Summary

Nonfarm payrolls beat for the 6th straight month Friday. Stocks managed to close the week green despite a horrendous Friday. Unemployment came in lower than anticipated and Non Farm Payrolls came in higher than expected signalling the economy isn’t in such bad shape1.

And as we know what is good for the economy is bad for inflation and thus the interest rate situation. That 'good' news spiked rate hike expectations today. Stocks therefore sold off hard. The good news is they were in fact up on the week. The bad news is they are only up off the lows of the previous week.

Sectors and Technicals:

Exxon had its greatest weekly return ever, Tesla not so much
Nasdaq's first positive week in the last four weeks

***INVESTORS: WE DIRECT YOU TO CHARTS SECTION FOR TWO DIFFERENT WAYS WE LOOK AT FINVIZ GRIDS***

Energy was the week's big winner, Defensives ended lower

Commodities:

Oil was up for the 5th straight day rallying over 17% on the week
Dollar this week ending marginally stronger vs fiat peers
Silver futures were down but above $20. EFP watch- This rally has been almost entirely shorts covering.

Bonds:

Credit market stress is starting to accelerate. Companies with poor cash flow are going under without a pivot soon.
Curve was pretty uniformly higher in yield on the week. 10Y yields are pushing back up towards 4.00% once again.

Crypto:

Bitcoin tumbled breaking back below $20k to end the week almost unchanged from last Friday.

H/t Zerohedge for data and some graphics.

2. Research:

BOA’s Hartnett—Gold is on his contrarian radar

Stated almost in passing, but on Hartnett’s radar, Gold is now extremely oversold from a flow point of view. `WE ADD INTERPRETATION AT BOTTOM AS WELL.`

CONTINUES AT BOTTOM...

Morgan Stanley— Buy Ford, Sell GM

GM LEFT, FORD RIGHT. Ford cash flows through FY30 may far exceed 100% of the company's current enterprise value. We have relatively less confidence that GM will execute a similar strategy along the same time-line.

CONTINUES AT BOTTOM...

CTA Position Tracker— Short Gold, Long Silver

Gold CTAs are short with buy stops above $1754.80. Silver CTAs are slightly long and sellers below $19.27. Neither are big factors right now for direction

CONTINUES AT BOTTOM...

BOA’s Hartnett again— The Case for a Hard Landing

If Fed true to 2% inflation target, rates shock to continue…past 60 years 15 Fed rate hiking cycles and average unemployment rates at time of last rate hike was 5.7% (vs 3.7% today

CONTINUES AT BOTTOM...

DeutscheBank—Worst Economy Since Last World War

Before that this is the worst period since the most infamous hyperinflation in history a century ago. This is a truly remarkable statistic for a country so institutionally minded to preserve capital and wealth, especially from inflation.

CONTINUES AT BOTTOM...

3. Week’s Analysis/Podcasts

4. Charts:

We look at charts in several ways in forming opinions and getting ideas. Here are two that may be helpful. These inspire contradicting comments as captioned

Wow- Commodity industries have alot of room to rise and tech has alot of room to drop as contributors ot the economy

. Shit-with commoditiies at 20-40 year highs, why haven’t these industries narrowed the gap already?

Stocks

This is a very powerful technical indicator called an Island Reversal. For some reason, the gap area is a hot spot for missed trade behavior.

Simply put, short is the safe play. Long is the very risky but potentially explosive play.

Current situation says: there definitely are trapped longs who wish to sell on and near the “island”. Assume there were trapped shorts who wanted to buy below before. But now they bought and are immediately in the wrong again. You know there are sellers all the way up and into the gap above. There are further more sellers stranded on the island itself. Usually these formations go lower before going higher.

Finally, when they are violated on the upside, it is generally a news event that does it and completely overwhelms the trapped longs who “need” to sell.

Many technical traders will therefore seek to sell this market as it rallies towards the gap with a stop-loss above. Or if they are bullish they buy the market as it strengthens once inside the gap and put their stop loss underneath the gap. It makes for fireworks in both directions usually. Good Luck.

Dollar

Gold

Silver

Oil

This weeks pieces by GoldFix using TradingView.com

5. Technicals:

Gold:

GoldFix Note: Do not attempt to use price levels without symbol explanations or context. Moor sends 2 reports daily on each commodity they cover. The attached are non-actionable summaries.

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