Weekly: Russian Oil Gets "Capped" and CNBC Reanimates Goldilocks

GS on Oil, BOA on Stocks, RBC on Commodities

Sep 03, 2022

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Housekeeping:  ***FOUNDERS CLASS RESUMES ** Tomorrow 2p.m. Look for a separate  post with the link and info
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SECTIONS

Market Summary— R.I.P. Goldilocks
Research—GS /JPM on oil, BOA on stocks, and a lot of shorts in Gold
Week’s Analysis/Podcasts— Pozsar’s Monetary Statecraft Preview
Charts— Gc, Si, Dx, CL, Ng, Hg, and Gold/Silver
Technicals— Everything is range-bound except NG
Calendar— Holiday week, less data
Zen Moment— Camels exercising, Demons exorcised
Full Analysis

1. Market Summaries

After the Job numbers came out Friday CNBC couldn’t stop themselves from declaring: this was a great report, the Fed was doing a great job, and a soft landing was in the works.

“Goldilocks” was the word used over and over. Incredibly they are trying to bring back a word that is the absolute anti-thesis of where we are now. That word was thrown around all morning with regard to the labor market data.

Mind you they conveniently ignored the parts of the report that were not so good. Things like: a new record of people carrying two full time jobs, a new significant drop in wage growth, and… hours-worked keeps dropping (Zerohedge notes this is another recessionary sign) etc.

The collective of traders who bought into this narrative subsequently ramped stocks higher. They were briefly forgetful of what Jerome Powell said just last week about not being afraid to cause some pain to quell inflation:

…higher interest rates will also bring some pain to households and businesses. These are the unfortunate costs of reducing inflation. But a failure to restore price stability would mean far greater pain."

But their forgetfulness did not last long. It was Vladimir Putin’s Natural Gas pipeline that reminded them soon thereafter. This was the announcement that did it:

BREAKING NEWS: Nord Stream 1 gas flows to Europe to remain suspended indefinitely – Russia’s Gazprom

Nord Stream 1 found an oil leak and as a result decided to keep the crucial pipeline closed to Europe. This was just after the G-7 announced it would enact the much talked about (and potentially disastrous) price caps on oil, which we discussed before and do again in this report.

The combined effect of a “good” jobs report and a “bad” energy item sent stocks back lower. Which also sent rate hike expectations back down. But, unlike past moves in rate hikes, this did not feed back into stocks ( you know, recession is bullish for stocks etc). Why? We are in a different world now. This is how Anti-Goldilocks manifests in markets.

More specifically, the recession (post Powell’s tough-love speech) is currently being seen as something we cannot simply print our way out of. Hopes for a Powell Pivot are being methodically destroyed by Geopolitics on the physical/supply-side, and by Fed intractability on the monetary/demand-side.

Sectors/ Technicals

All S&P Sectors ended the week in the red
Tech and Materials were the worst performers
Energy stocks were the most volatile
Note Oil & Gas Exploration as stronger than producers
Nasdaq down around 8% since Powell's J-Hole

The S&P 500 is now below its 200-DMA over 100 trading days straight
Longest time sub 200- DMA since the Financial Crisis
The S&P rallied up to its 50DMA and then reversed... Putin's timing was perfect
Goldman noted: Liquidity in the ES1 - the most liquid future in the world declined by -50% this week compared to last week

Commodities:

The dollar extended post-Powell gains
Gold rallied on Friday extending Thursday’s gains after bouncing off $1700.
Zinc headed for its biggest weekly loss in over a decade on concern Chinese demand will be hamstrung by new virus restrictions. ( why you should not get crazy bullish silver yet)
Oil tanked this week again with WTI back below $90 but 3 new bullish events entered the radar last week (1) Price caps will go into effect (2) The last Iran talk news was negative and (3) price caps risk a major rally in Oil as well as Natural Gas.

Bonds:

Yield curves became a little less inverted with the 2 year bond yield dropping tiny and the 10 through 30 year yields rising. This implies less inflation fighting/concern ever so slightly,
Friday sent rate-hike odds tumbling, with the odds of a 75bps hike this month dropping from 75% to 55%

Crypto:

Litecoin managed some gains on the week but the rest of crypto was dumped with Bitcoin underperforming Ethereum
Bitcoin has now hovered around $20,000 for 10 days

H/t Zerohedge for data and some graphics.

2. Research:

BOA’s Hartnett Says New Highs and New Lows Coming
Goldman Says Oil Price Cap Won’t Work w/ comments
REREAD: JPMs $380 Oil Report Analyzed
TD CTA Report- Shorter Gold
RBC on Commodities
Russia Won’t Export to Capping Countries

CONTINUES AT BOTTOM…

3. Week’s Analysis/Podcasts

This week’s Precious Metals, Energy, and Economics pieces by GoldFix

4. Charts:

With comments in captions now

Dollar:

Dips on Jobs number, rallies when Pipeline is shut down because this implies recession in EU which means they will have ot make the EURO weaker than the USD.

Gold:

Silver:

Gold-Silver Ratio:

Significant new highs were met with buyers of silver. This ratio went from over bought to oversold in one day. Suggesting a real buyer of Gold and seller of silver.

Oil:

Seemed to rally on Jobs number, but did not sell off as quickly on the Pipeline news. this is perhaps a function of the Price caps, OPEC cut risk, and Iran hiccups.

NG:

The fact that it did not explode on the Nordstream news is interesting and possibly indicative of the EU getting all they need for now.

Copper:

Chinese lack of demand is the problem here. Note the anemic rally on the Jobs number, even with silver ramping up

Charts by GoldFix using TradingView.com

5. Technicals

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.

Gold:

Still (lower) range bound with upside surprises now.

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.