Weekly: Gold, Goldman on the Vixx Debacle, and More
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Founder’s Class : 3 p.m. SUNDAY: Gold, Silver spreads: How they function normally, during a short squeeze, and during the Covid Venue Squeeze. Zoom Link here: Password: (usual one). See you then!
1. Market Summary
We might be out of pocket a good bit this week. So a little extra effort was put in today.. Check out the technical section if that is your thing- VBL
US Stocks remain below pre Putin-invasion levels. That’s the bad news. The good news is last week was a face-ripping rally that flew in the face of the continued forces causing the sell off in the first place. All of the catalysts for the sell-off; Russia-Ukraine, COVID lockdown in China, accelerating inflation, Fed tightening, are all still front and center this weekend. But justified or not, the markets are looking forward.
All the majors moved back up to their 50DMA
The Nasdaq soared over 8% on the week
Taken in combination with European stocks erasing all their losses it is reasonable the recovery differential between EU and US stocks is a function of our born-again hawkish (recession -inducing) Fed. Speakers (raging rate hikers) and bond behavior (more stagflationary moves) added credence to that on the week.
Of special note, this was the US equity market's best week since the 2020 Election. We thought that would mean an increase in President Biden’s popularity too right? We thought wrong. The President’s popularity steeply declined.
War tends to distract people from domestic concerns, if only temporarily. The widening laptop scandal is not helping either. If the NYT is going after him, we think Presidential perception problems are growing.
Sectors: Duration Tech
Duration is back in favor. Back in January we gave a short primer on Duration and identified it as the driver of the Tech selloff. That cycle appears over for now.
From 'Growth Stocks More Vulnerable From Here' Goldman Sachs:
Duration in stocks is a relatively new thing. Generally speaking, growth and tech stocks are perceived as longer duration. Value stocks, whatever that actually means these days, are seen as short duration.
This reversed very aggressively last week. Markets are saying they are already starting to look at the next rate easing cycle. So not only did stocks rally, but the longer duration ones rallied more.
Tech and longer duration was back in favor
Cathie Wood's ARKK had its best week ever
Bottom line: Stocks are coming to terms with recession potential. Stocks are vulnerable to bad war headlines day to day and sticky inflation over the next 3 months. But an analyst we like, Leon Tuey has been friendly to the market for about a week. Since he called the Gold market rally back in December, we should give him some credence now. More on that in Section 6.
Commodities: Russians Like Diamonds
Commodities all gave back significant portions of Ukraine war moves with Oil remaining the most robust on the week. Industrials were strongest. Safe haven and Russian supplied types were weakest
Gold bounced later in the week but ended only marginally above pre-Putin levels
WTI bounced back above $100
The dollar was ditched as fears subsided somewhat
Copper managed gains this week
Sanctions are a diamond’s best friend
Bonds: Same Stagflation, Different Day
All Treasury yields were higher this week
the long-end significantly outperformed
Waller's call for a 50bps hike at every meeting
5Y Breakevens surged to new record highs this week
All occurring as global stagflation fears soar
Crypto: Ethereum Burns Clean
Ethereum soared higher this week near $3000 on news of successful testing or ETH 2.0 which will reduce energy footprint and costs significantly
Forward Inflation expectations are a good ETH oscillator. Generally they trend in the same direction, even if at different rates.The gap is pretty wide and the slopes are opposite right now. Either inflation is coming down, or ETH is going up. Probably both in the short term.
Long term, we’d bet on both rising at different rates. We also speculate an Ethereum ETF announcement is coming in the next year, and the 2.0 release will be perceived as successful. h/t ZH
GoldFix Friday WatchList:
Complete Watchlist Here
2. Technical Analysis
This section should be taken in context of Section 6 today which gives a more complete outlook for Gold should the market drop.
Micheal Moor is on vacation. We are neither technicians, nor trade technically. But we do note obvious formations because these should trigger some sharp behavior among those that actually trade on them. Last week ended almost a perfect evening/shooting star formation.
Credence can be given to these from our own approach using flow-trading type of discipline: Almost every buyer of Gold and Silver in these last 3 weeks that held on is now losing money. That is a very powerful motivator to sell.
And if for whatever reason stocks rally, you may see large selling during the week. If good news comes out in Ukraine, there may not be Gold dip buying this time.
Combined with our own Retail/CTA/CoT analysis, which said the last 2 weeks in the Founders meetings that longs are done buying and waiting for the market to bail them out, this suggests in the absence of news, those longs will be first to liquidate.
These “star” formations are obvious to macro traders and annoyingly tend to become self-fulfilling. In normal times we’d say look out below. What is different, and may mitigate it this time is the lack of initiating selling.
There are still few natural sellers initiating positions. Banks have little hedging on their books, and this has made them reticent to slam markets. So we expect (hope? pray?) there will be less selling pressure by bears to accelerate the usual long retail puke-fest.
Those on twitter know we started (successfully) playing short side 2 weeks ago. Last week we also played short, to no avail however despite the market cratering. Murphy’s law is in play now.
This is a weekly thing, One day doesn’t make a week and there are important levels that will almost definitely be bought below $1860 if it comes to that. Again, thoughts on that in Section 6.
3. GoldFix and Bitcoin Podcasts
Some upcoming key data releases and market events.
MONDAY, MARCH 21
8 am Atlanta Fed President Raphael Bostic speaks
8:30 am Chicago Fed national activity index Feb. -- 0.69
12 noon Fed Chair Jerome Powell speaks at NABE conference
TUESDAY, MARCH 22 None scheduled
WEDNESDAY, MARCH 23
10 am New home sales (SAAR) Feb. 820,000 801,000
THURSDAY, MARCH 24
8:30 am Initial jobless claims March 19 213,000 214,000
8:30 am Continuing jobless claims March 12 -- 1.42 million
8:30 am Durable goods orders Feb. -0.5% 1.6%
8:30 am Core capital goods orders Feb. -- 1.0%
8:30 am Current account deficit Q4 -$220 billion -$215 billion
9:45 am Markit manufacturing PMI (flash) March 56.8 57.3
9:45 am Markit services PMI (flash) March 56.8 56.5
FRIDAY, MARCH 25
10 am UMich consumer sentiment index (final) March 59.6 59.7
10 am 5-year inflation expectations (final) March -- 3.0%
10 am Pending home sales index Feb. 0.0%-- -5.7%
Main Source: MarketWatch
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6. Premium: Gold Analysis
Gold's Potential in Crisis Context: Flow trading analysis, Levels to buy if/when the selloff comes Wednesday March 16th
7. Premium: The Vixx and Stocks
Goldman on the Vix
What happened to the VXX? How does it compare with the TVIX creation halt in 2012? VXX creations were halted and the ETN is now trading at a premium to NAV. Effective yesterday (14-Mar), new creations of shares of the VXX (iPath Series B VIX Short-Term Futures ETN) were suspended…
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January 24th by Leon Tuey:
March 18th Leon Tuey:
In January, because of the market’s grossly oversold condition, the extreme pessimism, and excess volatility, I concluded that the correction was over, the bull market had resumed, and a “rolling bottom” has commenced….
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