Having passed 6,000 for the first time in April, Nasdaq has now soared 17% since then to surpass 7,000 today...
As soon as cash markets closed last Friday (quad witch), US equity futures spiked... then spiked again on Sunday night"s open, and again at the US equity cash open this morning...
And VIX has been crushed this morning...
Bitcoin (BTCUSD) was rejected yesterday at upchannel resistance (on the weekly and daily chart), and may see a few days of profittaking as hinted by the daily MACD histogram sliding down. A stronger selloff could quickly coincide with the daily MACD negatively crossing. Nevertheless, longer term bulls will take comfort in the weekly MACD still sloping strongly up. I suspect that after the next few days of consolidation, BTCUSD bulls may try once again to reach the psychologically key 20,000 whole figure level (which BTCUSD nearly did with a rise to over 19500 last Thursday on GDAX) ahead of the highly anticipated CME Bitcoin futures launch Monday (Sunday night Chicago). For those who haven"t seen the BTCUSD price performance relative to other bubbles throughout history, or for those who are buying out of FOMO (Fear of Missing Out), take a moment to review the following chart.
Ethereum (ETHUSD) is seeing strong profittaking today, forming what appears to be upchannel resistance (on the daily chart). The rally yesterday to just above 700 fulfills the 300 in gains that could have been projected based on the approximate height of the ascending triangle (as calculated from the mid May low of 100 to the triangle resistance at 400), and the point of triangle breakout at 400. After another day or so of further consolidation, ETHUSD may want to retest the same upchannel resistance at 700 especially as BTCUSD stands a decent chance of reaching for the psychologically key 20,000 whole figure level (which BTCUSD nearly did with a rise to over 19500 last Thursday on GDAX) ahead of the highly anticipated CME Bitcoin futures launch Monday (Sunday night Chicago). The weekly and daily MACD are still sloping strongly up, suggesting bulls will continue buying on pullbacks.
Click here for today"s technical analysis on USDCAD
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Posted with permission and written by John Rubino, Dollar Collapse
It took a lot longer than it should have, but gold futures traders have finally started behaving “normally.” The speculators who were extremely, stubbornly long – and who are usually wrong when they’re this excited — had maintained their over-optimistic bets when they should have been stampeding for the exits, making the last few months both boring and depressing for gold bugs and related investors.
This departure from the familiar script raised questions about whether the action in futures (aka paper gold) was still relevant in the age of Chinese physical gold exchanges and cryptocurrency. The jury’s still out on that one, but for now the numbers are reassuring.
The following table (courtesy of GoldSeek) shows speculators cutting way back on long bets and adding to short bets, while the “commercials” – who tend to be right at sharp turns — did the opposite, going a lot less short.
Same thing only more so in silver, where another week like the last one will bring net positions into balance for both groups, which has historically been extremely bullish.
Here’s the same data depicted graphically for gold: Note how both the speculators (silver columns) and the commercials (red columns) held their positions from spring into fall, producing the previously-mentioned boredom and depression. Also note the sharp drop in the most recent reporting week.
The numbers we’re seeing here are as of Tuesday the 5th, and the final three days of last week were a bloodbath for precious metals, so it’s highly likely that the next COT numbers – due out on Friday the 15th – will show absolute panic among speculators, leading to an even bigger swing in the right direction.
If history is still reliable, January will be a great month to own precious metals and mining stocks.
Questions or comments about this article? Leave your thoughts HERE.
Posted with permission and written by John Rubino, Dollar Collapse
Check out these other articles by our contributors:
CBOE Global Markets Inc and CME Group Inc will launch futures contracts on bitcoin on Dec. 10 and Dec. 17 respectively. Here are some of the differences between the products to be offered by the exchange operators.
Sources: Reuters, Cboe, and CME
Gold futures found itself in dangerous waters during the 12/05 session as GC price action temporarily broke below 1,267 – a key support level from gold’s last two swing lows on 10/6 and 10/27. After closing at 1,268.40, GC became the chart of the day, with price sitting just above support trendlines on both the short and long-term. Having tread water in place by chopping around in a sideways price channel for the past two months, GC futures need to bounce immediately or may begin a lengthy plunge with a clear-cut downside drowning target of 1,215.
Silver futures continued to sell-off for the 6th consecutive losing session; swiftly breaking down below two previous major swing lows at 16.444 (10/09) and 16.282 (08/07). SI’s short-term technical profile has become very bearish, with silver futures floating around in ‘no man’s land’ without any meaningful support levels in sight. While a small bounce may cool-off the current sell-off - and attempt to push ‘poor man’s gold’ prices back up into 16.50-17.00 - what’s more likely is that silver futures will gravitate towards their next major support levels. If so, SI will be magnetically drawn down to 15.55 like Magneto lazily beckoning for a spoon.
Platinum futures dropped for the third straight session, before finding support at the key trendline connecting the last two major swings at 895.40 (07/11) and of 906.50 (10/06). The next few sessions will likely determine whether platinum bounces back up towards 960 and remains in a sideways price channel, or if it confirms the Super DMI™ bearish crossover and heads even lower to test long-term support at 895-905. Price action will see a strong bounce at those levels, but a break below 895 means that 830-870 is where PL futures will be heading in early 2018.
Dr. Copper’s technicals are the only thing we would dare think to possibly know better than Gundlach; well, maybe how to handle frustartion with a pathetically hollow fourth estate of mainstream media and maybe haircuts, but we digress and absolutely adore the art-loving Buffalo Bill suffering true Bond King.
Copper futures were simply obliterated, suffering their largest loss in a single session since 12/14/11. If price continue to head lower over the course of this week, extremely strong support at 2.906 should provide a well-bid bounce back up towards 3.05. If not, Copper may only delay an inevitable move down towards long-term support at 2.55 now that price has confirmed the Super DMI™ bearish crossover.
Check out Fibozachi.com to learn about modern technical analysis and trading indicators that actually work.
VIX futures spiked up to 13.47 during the session before reversing 12% lower and closing back down at 11.88. Today"s 13.47 intraday high was just:
Drawing trendlines from each Lower Low provides future resistance at several levels. After another failed breakout attempt, the only thing noteworthy for VIX bulls is that the Super RSI™ has registered consecutive bullish divergences as the RSI has made higher lows while price has made lower lows.
A good way to get an early "heads up" that VIX futures may be ready for a true breakout is to draw the trendlines on the RSI"s plot values. We can see that the RSI value is turned up and poised to break above the trendline from the August highs, but true confirmation of a long-term VIX bottom will require a break above the trendline connecting the two major swing highs from 4/17 and 8/11.
Check out Fibozachi.com to learn about modern technical analysis and trading indicators that actually work.
The trading paradigms that dominate today’s investing landscape have undoubtedly served some of us well. For those who play by the rules, buying options or futures contracts is no strenuous exercise, and there is a huge market open at all hours of the day to serve willing participants. However, no matter how streamlined these practices are, or how fast online platforms become, the commodities trade will remain fragmented from bottom to top unless something changes.
In fact, the rules and major players within this modern industry are themselves keeping free market principles from proliferating. Bureaucratic protocols that purportedly keep us safe still do so, but oftentimes at the expense oftransparency and accessibility. The regulations that keep commodities markets behind the walls of large, centralized exchanges and brokers, not to mention within enforceable geographic borders, have admittedly helped with data security and verification standards. However, they’ve also created an opaque, closed ecosystem where it’s difficult to identify stakeholders, their motives, and their level of control.
Whether barrels of oil or bushels of wheat, it should not be hard to discern which traders (or institutions) are behind the price speculation and manipulations in the futures market for commodities. Individual traders who rely on these commodities markets to hedge their investments or improve their businesses lose in the long run when this status quo exists unchecked. Many people hope that the situation will change for the better soon thanks to the proliferation of blockchain and the emergence of companies employing it to improve the entire value chain for all stakeholders. Nevertheless, the powerful technology will need to demolish multiple obstacles in the road before making a qualifiable difference.
There’s No Such Thing as Equal Footing
Even before coping with the unfortunate, unpredictable nature of the modern commodities market, traders must first pass muster with the enormous entities that control the industry. A Belgian farmer who wants to defray risk in his home market must connect his bank account with a Belgian broker, who allows him to hedge the value of his crop with domesticfutures and options contracts. However, once this farmer finds customers in the United States, he will also encounter a massive struggle to register with foreign financial entities, become verified, establish new accounts, and then pay hefty fees for the privilege of allocating his own capital.
Besides dealing with physical and digital borders, traders often find themselves without any choice in who they deal with. Giant exchanges like the Chicago Mercantile Exchange and Euronext control commodities and force potential traders to utilize them as a conduit to access the world’s financialized resource markets. Such centralization creates the high-fee structures that we must struggle with, making smaller trades less affordable and edging out many willing market participants. Apart from creating a barrier that enables the biggest institutional players to maintain their iron grip thanks to scale that reduces their overall costs, this two-tiered playing field hurts other value chain stakeholders that are not financial institutions.
Bring On Blockchain
Trade finance is an especially important aspect of the global commodities market, but oftentimes,small and medium-sized firms are underrepresented due to high financing costs and expansive reporting requirements. One of the reasons these entities are pushed aside is that institutional participants typically like to focus on big deals which are more lucrative in a market that generates relatively high fees thanks to a high degree of opacity.
However, efforts like those undertaken by Singapore to establish itself as a fintech hub for global commodities trading is rapidly changing the stakes for the smaller players. Singapore has invested heavily in attracting companies dealing with investments and trading to create a better model to help its citizens trade commodities without the massive hurdles that currently exist.
Blockchain is already showing curious financial market participants a glimpse of what the future might look like without these realities. Platforms likeChainTrade, one of the first companies to take on the entrenched interests in the modern commodities market, exhibit extraordinary functionality. By hosting a platform for commodities options and futures on a completely decentralized network, the costs of maintaining a complicated centralized system, namely security anddata reporting, are decimated. The virtual elimination of fees that could once be pinned on these costs is the least of such a system’s benefits.
More impressive is the opportunity to deploy smart contracts in conjunction with the blockchain ledger. Although commodities exchanges are designed for contract standardization, this level of consistency ignores a huge wellspring of opportunity to fold in other commoditized goods and services. While most of the disruptive fintech models are focused on taking share away from centralized exchanges, ChainTrade has effectively built an architecture that could expand trading beyond the traditional mining and farming emphasis. Soon, traders will be able to easily create custom contracts with their preferred expiry dates, margins, prices and other factors, and find willing parties to sit on the other side of the table.
An Improved Form of Guarantees
One of the best aspects of these new models is how they handle counterparty risk. Concepts like building risk-reduction features directly into smart contracts, requiring “Insurers” to back up both sides of the contract in case of default further contribute to the intelligence of this system. Smart contracts use the blockchain’s ledger to determine when these custom conditions have been fulfilled, and then autonomously distribute the correct funds to each recipient. In this case, funds take the form ofcryptocurrency to help streamline the process associated with the smart contract ecosystem.
While smart contract functionality also reduces overhead and fees for participants, it has the secondary bonus of eliminating borders for the market. Cryptocurrencies are now very universal, and can be purchased with any currency and traded no matter where the trader or their funds originate. Alongside an irrefutable record of trading activity, blockchain solutions like these eliminate fraud, improve transparency, increase accessibility and expand assurances for participants.
Safety In Decentralization
With trading environments built on blockchain that are both open and freely accessible, yet simultaneously protective of individuals, smaller traders and hedgers typically overlooked by the existing paradigm have something to look forward to. The lucrative stranglehold that institutions keep on the commodities market serve the interests of the few, and not the many, but blockchain is the people’s new champion.
Blockchain gets its power from a combination of limitless accessibility alongside the consensus of those who choose to participate. Traders are now opting for blockchain-based solutions, and it is becoming increasingly clear that markets will be forced to address this choice in some way.
When many American traders went to bed last night, China was tumbling, the euro was in trouble, and US equity futures were notching lower. Then, as former fund manager Richard Breslow scoffs, it appears the world "reconsidered" and everything rallied to erase any sign of discontent or uncertainty by the time everyone woke up...
Via Bloomberg,
Apparently, the word of the day is “reconsider.”
Across a whole host of assets, we got somewhat violent moves early in the 24-hour trading cycle that managed to unwind themselves over the course of the day.
I kept being told that the euro, Chinese equities, U.S. equity futures, gold, bond yields, Eurostoxx 50, and so on, all reversed their opening, sometimes gap, moves after the market reconsidered what it all meant.
Of course, that’s being a bit too kind. It would be more accurate to say things turned around when traders actually considered things for the first time. But this all matters more than just a collection of knee-jerk reactions that have come to naught as another trading region came in.
North America isn’t being asked to break the tie and decide who was right. They are being told that they can afford to ignore the news that propelled things in the first place. After all, we’re right back where we started. No harm, no foul. That would be a mistake, as once again we keep muddling-up short-term and long-term information as if they should be discounted by the same rate and assuming we should trade without benefit of context.
Chinese equities opened lower leaving gaps from last Friday’s close.
Big swings: the Shenzhen dropped a quick 2.1% before staging a relentless rally throughout the day to finish up by 0.9%. No leap on the close, just a steady rally.
The commentary at the lows was as dire as the dismissive tone was at the close.
The PBOC proposed additional regulations to curb the run-away shadow banking industry. What was described in the morning as policies that would cause a flood of outflows from various short-term investments were later described as likely to attract foreign inflows. Wait, we’re not collapsing through the last lines of support any more? What a gift -- buy!
The message from this is that, once again, the PBOC is delivering on what they have warned about and promised to address. Perhaps instead of trying to deconstruct the “real” Chinese intentions based on outmoded epigrams, we should start to listen to what they’re actually saying. And accept that regulation isn’t bad by definition. Sometimes a healthier Main Street can actually be good for equities--the old-fashioned way. But it would be folly to decide these new regulations must not be all important because of the day’s price action.
European shares and the euro were hit early on the German coalition talks collapse.
What began as “markets are being roiled” quickly turned to markets “shrugged it off.” Hardly. They recovered on the very fortuitously timed announcement that Volkswagen was going to spend an additional EU25B over the next five years on its core brand. That’s hard and good news. May even help out with Germany’s hopelessly flat Phillips curve.
But don’t think, Chancellor Merkel on her back foot isn’t something with negative possibilities that make it foolish to dismiss. Just hard to enumerate the immediate implications.
As Breslow concludes, the mirage of markets" ignorance does not mean anything is solved.
Some of the other realities to keep factoring into your analysis and avoid being lulled into ignoring include:
- Brexit wasn’t solved because today’s headline was upbeat, it’s serial noise;
- you’ve no way of handicapping Nafta as each debating point is aired;
- no one has a firm handle on the Middle-East;
- and U.S. tax reform may end up just stoking the debate of whether a bad deal is better than no deal.
Don’t ever let someone tell you the really big news is the ones you can afford to ignore
And it appears we"re gonna need more "help"...
After five straight weeks higher - read by many as confirmation of how awesome the global coordinated recovery must be - WTI and Brent dropped this week as inventories rose, demand outlooks dimmed, and OPEC hope faded.
As Alhambra Investment Partners" Jeffrey Snider notes, there is a titanic struggle going on right now in the oil market.
On the one side of the futures market are the usual pace setters, the money managers. Last week, the latest COT data available, they went the most net long since March. If it continues, it will close in on the most positive futures position since the record long they established back in February.
Normally that would be insanely bullish for oil prices. But just as in February/March another part of the futures market has intervened on the other side. Back then it was the oil producers who rising inventory forced into a larger and larger offsetting net short (hedge).
This time, however, it is the swap dealers who are short for reasons that aren’t really clear. The weekly COT report for the last week in October showed a record net short for dealers, just beating their most extreme position from the middle of 2013 at -424k contracts. In the first week and November, they blew away that record at -470k.
It clearly matters because in 2017 the oil market has changed. It may be the inventory story, or it may be the exit of producers from hedging that inventory and other products. Whatever the case, money managers just aren’t setting the price like they used to. And it could be that managers have changed their market activities, too, where other parts of the futures market are now cueing off (shorting) this possible difference. I honestly don’t know what it is, but I can safely point out where it is.
Now with swap dealers apparently showing very, very strong conviction on the short side, oil prices can’t gain any traction beyond the $57 established by in all likelihood geopolitical risk.
The fundamentals of oil continue to favor the dealers over the managers, with oil inventories remaining at the same crisis “rising dollar” levels. Being slightly better than 2016 is not a real achievement toward clearing the leftover physical imbalance, not when oil inventories are instead still consistent with late 2014. With 2017 nearly over, there should have been much more progress toward 2013 levels of stock long before now if there was ever going to be a realistic chance to balance the oil market next year (at the most optimistic).
Instead, it indicates yet again a demand problem, as in lack of materializing upside demand due to, as always, economic constraints that in the mainstream aren’t ever considered real (like when the oil crash was called repeatedly a “supply glut”). Pushing the expected rebalancing date into 2019 or even (more realistically) 2020 creates greater downside not upside risks.
That may be why dealers have jumped all over the shorts; if it is geopolitical risks driving oil prices higher, and maybe what managers are betting on now, then if or when they fade the negative fundamentals of oil will be re-imposed on the price. That seems to be what the futures curve is saying, too.
Backwardation indicates expected balance, but at a very low price rather than a rebounding one. In the latest oil pullback since last week, the curve has moved lower in unison, with the same almost identical indicated backwardation rather than toward any serious rewind toward contango.
One additional factor to consider is those record and near-record opposite futures positions. What happens if the oil price starts to move in either direction? There may need to be a whole lot of covering by whichever side ends up on the losing end, perhaps turbocharging the price as it begins to move whatever way it decides to go.
There is right now a lot at stake in the crude market, and it’s not just about oil.
