The gutting of Gold (1839) continues, the Dollar Index approaching its 107 handle, a level not seen since November 2021. However, Gold by Market Values is (in real-time) -115 points below its smooth valuation line, a fairly historical extreme: such prior deviation (per 01 July 2021) then found Gold move up by better than +200 points into the start of the 2022 RUS/UKR conflict, even as the Dollar strengthened across the same stint; (more on that in next Saturday’s edition of The Gold Update). At present, Gold is below today’s Neutral Zone, as are the Swiss Franc and Copper; none of the other BEGOS Markets are above same, and volatility is again moderate. At Market Trends, Oil’s “Baby Blues” are (in real-time) accelerating their drop: with the two recent daily lows in the 88s having been breached, the next structural low is 85.49. The Econ Baro is quiet today ahead of 10 metrics due tomorrow through Friday. And Q3 Earnings Season begins this morning.
The BEGOS Markets begin October on a mixed note. At present, we’ve the Bond, Gold and Silver below today’s Neutral Zones, whilst above same are the Swiss Franc, Copper and the Spoo; volatility is moderate. The Gold Update confirms the yellow metal’s weekly parabolic trend as having flipped to Short; and as anticiapted, such trend for Silver today has provisionally flipped as well to Short. Oil continues to flirt with its 90 handle: at Market Trends, Oil’s “Baby Blues” are slowly slipping lower; and at Market Values in real-time, Oil is +7.36 points above its smooth valuation line; price has not been below such line since 03 July, (price then 69.53 vs. today’s 91.24). The Econ Baro awaits September’s ISM(Mfg) Index and August’s Construction Spending.
We start by paraphrasing this oft-misquoted line from American TV icon Desi Arnaz: “mmb, you’ve got some ‘splaining to do!”, even as our two previous missives entitled Gold as being “Technically Torturous” and “The Torture Continues”. Following which — at precisely 13:40 GMT this past Wednesday — Gold succumbed to the guillotine in penetrating the week’s parabolic protection at 1905.2, provisionally flipping such trend from Long to Short, in turn confirming so with price settling yesterday (Friday) at 1865. In fact, you may recall that such guillotining was presciently previewed in our prior missive’s graphic of Gold’s weekly bars. And so it came to pass that 28 weeks of net gain for Gold are now gone, (albeit such trend for Silver is still barely Long, but likely shan’t be come Monday’s open). Here’s the updated dual panel graphic:
“That’s a gruesome graphic there, mmb…”
Sadly so, Squire, wherein we see at left Gold’s red-encircled parabolic dot confirming such trend having swung from Long to Short, whilst at right Silver’s Long trend is but 8¢ from the end, the guillotine in top gear as the Dollar Revolution continues.
In reaching this past week to as high as 106.540, ’twas the best level for the Dollar Index since 30 November of a year ago, (Gold settling that day at 1783 … but let’s not go there). Today at 105.870, the plucky buck is but -18% below its historical high of 129.050 upon its futures’ inception away back on 20 November 1985. And were that gap to close, U.S. interest rates shall be far higher still, the FedFunds rate back then being 8.05% versus today’s 5.50%.
Yet that noted, just yesterday the Bureau of Economic Analysis reported the Federal Reserve’s favourite inflation gauge for August, the pace of the Core PCE Price Index coming in at a rather benign +0.1%, which annualized is well below the Fed’s +2.0% target. Shall the Fed’s Open Market Committee therefore vote to again “pause” come their 01 November Policy Statement?
Regardless, as depicted above, Gold’s weekly parabolic Long trend never got off the pause button, was executed, and is now Short. And recall when said Long trend began a month ago, we were looking toward a fresh All-Time High show. Instead from Gold, out went the dough. Here’s our updated table of Gold’s ten prior weekly parabolic Long trends, plus the latest’s zero result across the bottom. As Sheriff J.W. Pepper said to the elephant in “The Man with the Golden Gun” –[Eon/UA, ’74]: “Boy, you is ugly”:
Understandably, you now may well ask “So how low is low?” There we shan’t go, save for some structural support from this 1865 level down to 1813 built in early March. And whilst conventional wisdom points to “Dollar strength” as the yellow metal’s culprit, we again hearken back to a Gold truism: that it plays no currency favourites. Simply recall the 2010 six-month stint wherein from January through June the Dollar Index gained +10% and Gold +13%. Boom! It does happen.
Still since mid-year, Gold and its equities brethren have been pressured. It being month-end, here’s our year-over-year view of those elements’ percentage tracks depicting the VanEck Vectors Gold Miners exchange-traded fund (GDX) +14%, Franco-Nevada (FNV) +13%, Gold itself along with Agnico Eagle Mines (AEM) +12%, the Global X Silver Miners exchange-traded fund (SIL) +3%, Pan American Silver (PAAS) -7%, and Newmont -12% (as we know encompassing acquisition costs). But again from mid-way, this hardly is the happiest chart in the house:
Month-end also means bringing up our year-to-date standings of the BEGOS Markets. And atop the stack for the first time in deplacing the S&P 500 to second spot is Oil. Rounding out the podium is the Doggy Dollar, (although because ’tisn’t a BEGOS component, we can still say Gold is in third position). Properly the cellar dweller is the Bond as the Year of the Yield continues:
Specific to the second-place S&P 500, clearly it struggled through the oft seasonally-challenged month of September. But more importantly, are both Wall Street and the FinMedia finally waking up to valuation reality? More on that in our closing paragraph(!) As for economic reality, here’s the StateSide Econ Baro from one year ago-to-date, replete with its mega yo-yo swerves and curves:
“Yo, Joe! Which way does it go?” For this past week’s set of 12 incoming metrics, eight were worse period-over-period and one was “unch”, thus leaving just three that improved, including August growth in both Personal Income and Durable Orders. But the month’s real stinker was Home Sales, both New and those listed as Pending. And pity the poor Chicago Purchasing Managers Index: its September reading of a paltry 44.1 marks the 13th consecutive month of regional economic contraction. “Go Bears…”
Speaking of “Go” — save for Oil — going down through September was the continued direction for the balance of the BEGOS Markets, (as ’twas the case back on 12 August when we penned “Ain’t Just Gold Been Headin’ Down…”). Nearly everything gets sapped during “Dollar strength”, but again its yield is decent, the three-month U.S. T-Bill paying an annualized 5.300% per yesterday’s settle. And that’s risk-free dough, (even if DC is closed). Either way, let’s go ’round the horn for all eight BEGOS components by their daily bars from one month ago-to-date, Oil being the sole market sporting a rising trendline, albeit its baby blue dots of trend consistency are weakening as we tweeted (@deMeadvillePro) earlier in the week:
As for the precious metals’ 10-day Market Profiles, obviously we find their respective present prices (the white bars for Gold below left and for Silver below right) down in le panier de la guillotine, the yellow metal alone having lopped off some -100 points in just eight days. Within the overall Profiles, Gold’s high-to-low is -5.4% whilst that for Sister Silver is -7.3%.
Again as ’tis month– indeed quarter –end, here we’ve the stratified view of Gold’s Structure per the past dozen years-to-date, its triple-top axiomatically waiting to break:
To close, per our aforementioned tease, here we go courtesy of the “Where Have You Been These Last Four Years? Dept.”
Regular readers know — and notably so since 2019 — we’ve been constantly concerned as to the overvalued state of equites, especially the S&P 500 Index as a whole. Oft we’ve quipped that we’re in “The Investing Age of Stoopid” purely by doing the honest math to compute the S&P’s price/earnings ratio, presently 37.7x as opposed to the parroted, dumbed-down 24.5x believed by your broker, (who frankly today appears incapable of doing the math). But that’s where we are now. And as we herein have written ad nauseum through these recent years: “…earnings are not supportive of price…”
Well here it comes… READY?
This past Wednesday the lightbulb finally illuminated in the children’s writing pool over at Barron’s, headlining their webpage “above the fold in bold” with:
“The Stock Market Has a Big Problem. It’s Called Earnings.”
They’re just figuring this out now???
And yet when we view our MoneyFlow page for the S&P 500 — even during its current decline — true “fear” has yet to appear.
But what appears most appealing to us is Gold being priced today (1865) at just half its Dollar debasement value (3726) per our opening Gold Scoreboard.
Thus — precious metal guillotines and Dollar Revolution aside — in strolling along life’s path, what ought you have glowing in your vault? Gold!
Following its fourth-consecutive down day, Gold is at present above its Neutral Zone as are Silver, Copper, the Euro and Swiss Franc; none of the other BEGOS Markets are below same, and volatility is moderate-to-robust, the white metal already having traded 108% of its EDTR (see Market Ranges). Oil, which yesterday traded its widest high-to-low range (-3.64 points) since 22 June, still finds its “Baby Blues” (see Market Trends) not having recovered their +80% level, (thus Tuesday night’s Sell signal remains intact if not over-ridden by prudent cash management): price yesterday reached to as high as 95.03 vs. the present 91.71; 90.50 continues as Market Profile support, followed somewhat structurally by the low 88s. Among today’s income metrics for the Econ Baro we’ve September’s Chi PMI, plus August’s Personal Income/Spending along with the Fed-favoured inflation gauge: the Core PCE Index.
Gold’s weekly parabolic trend has provisionally flipped from Long to Short, (as tweeted [@deMeadvillePro] last evening); more on this outlying exception in next Saturday’s edition of The Gold Update. Tweeted too was Oil’s breaking above its recent high (93.74) such that from a cash management perspective ’tis better to stand aside for the moment. At present, Silver is the sole BEGOS Market outside (below) today’s Neutral Zone: currently 22.70, should 22.32 trade, its weekly parabolic trend would also, like Gold, flip to Short. As for the S&P 500, its down-stint during these past two weeks has lacked “fear” as revealed our MoneyFlow page. Today’s metrics for the Econ Baro include August’s Pending Home Sales and the final read of Q2 GDP.
The BEGOS Markets are at present mixed: both the Swiss Franc and Gold are below their Neutral Zones, whilst above same are both the Bond and Oil; volatility is pushing toward moderate. Gold is a disappointment: trading to as low as 1913, should 1905.1 (precisely) trade, the weekly parabolic Long trend shall provisionally flip to Short. As for Oil, despite it being up today, its “Baby Blues” did confirm settling yesterday below their key +80% axis: the price area of 87 to 85 shows some degree of structural support, whilst nearer Market Profile support shows at 90.50; and by Market Values, Oil’s smooth valuation line (in real-time) is 83.19. The Econ Baro looks to August’s Durable Orders.
Red is the watchword for the BEGOS Markets, all of which at present are below their respective Neutral Zones for today. Session volatility is moderate across the board, which is refreshing given the otherwise narrower-than-average EDTRS (see Market Ranges). Oil (currently 88.69) has its real-time “Baby Blue” dot at +78%: if this provisional sub +80% level is confirmed by close, we look to lower price levels, just as was the case some five weeks ago, albeit the downside follow-through from that signal was muted; the average price follow-through of the four “Baby Blues” signals that have occurred from one year ago-to-date is 5.7 points, (which in that vacuum alone from here “suggests” the 83s, without regards for other measurings). The Econ Baro gets its week going with September’s Consumer Confidence and August’s New Home Sales.
The Bond begins its week on a down note, at present trading below today’s Neutral Zone; the balance of the BEGOS Markets are within same, and volatility is mostly light. The Gold Update points to price’s still not being able to get off the mat even as the weekly parabolic trend enters its fifth week of being Long. As for Oil (currently 90.58), its “Baby Blues” (in real-time) have further slipped to the +86% level as we continue to watch for the +80% level to be breached, toward then anticipating lower price levels; at Market Values, Oil is +7.85 points above its smooth valuation line. The Econ Baro looks to 12 incoming metrics for the week, (with none due today), notably featuring the Fed’s favoured inflation gauge of the Core PCE Index for August come Friday.
On the heels of last week’s piece “Gold – Fundamentally Fabulous, Technically Torturous“, we’ve given consideration to some infamous tortures foisted upon mankind across the centuries. And how well-documented they are! The exasperating drips of the Chinese Water Torture… the exhausting torture of Sleep Deprivation… and (“Don’t say it!”) yet we must –> the excruciating endlessness of the Tickle Torture, (just to name a few).
But wait, there’s more! Today ’tis the ever-exponential agony of the GPTT: Gold Price Tease Torture! “Oh please mother make it stop!” –[Linda Blair, ‘The Exorcist’, Warner Bros., ’73]
“Well, mmb, there’s also your ‘live’ p/e of the S&P still unsupportably high in the sky as everybody waits — in your own words — ‘for it to all go wrong’; that’s kinda torture too…”
So ’tis, Squire. That price/earnings ratio now at 37.7x keeps clear-cut the case for a comprehensive S&P “correction”. However, there’s a significant difference between the S&P 500 and Gold: whereas the former is fully-engaged, the latter lingers unengaged. Folks follow stocks; few follow Gold. Going by Gallup as of this year, 61% of adult Americans own equities; going by “Gold IRA Guide” as of 2020, just 11% of adult Americans owned Gold. And globally, Gold’s ownership has been cited as less than 1%.
Still for those of us is the Gold know, our so-called GPTT continues blow-by-blow. For nary over a week ago, we were waving Gold’s flag to and fro. And as this past week did unfold, it appeared that Gold finally was on the go. Gold having then settled at 1946, we wrote our song and dance — including in last Tuesday’s Prescient Commentary the anticipation of price reaching the mid-1970s — and come Tuesday the yellow metal had streaked up to 1969 … only to then give it all back and then some by reaching down to as low as 1933 come Thursday.
“Blame it on the Fed!“, they say. “The Dollar’s soaring up!”, they say. “Rates’ll never go down!”, they say. Either way, Gold settled the week yesterday (Friday) at 1945 in netting a -1 point loss for the week after tracing therein a high-to-low range of -36 points. “It’s torrr-orrr-turrre…” –[The Cure, ’87]. And yet for both the yellow and white metals, the respective weekly parabolic trends remain Long per their rightmost four blue dots, with Silver actually bettering Gold for the week:
‘Course specific to the Federal Reserve — its Open Market Committee unanimously having voted to maintain the Bank’s Funds Rate in the 5.25%-5.50% target range — one’s take on it in large part is dependent upon one’s FinMedia source. Post-Policy Statement and Powell Presser this past Wednesday, if sourcing from Dow Jones Newswires, one read that “Fed predicts ‘soft landing’ for the economy — low inflation and no recession.” If instead sourcing from Bloomy, one read that “Stocks Fall as Yields Rise on Fed’s ‘Hawkish Skip’.” So which is it? Any wonder the precious metals are directionally confused? Fortunately for them, the math will out. To wit:
Per the opening Gold Scoreboard, albeit with price at a lowly 1945, valuation today is 3704, (i.e. +90% higher). Moreover, if you love Sister Silver, here’s the fun part: whilst settling the week at 23.82, given the century-to-date average Gold/Silver ratio being 67.7x, when applied to Gold’s valuation of 3704, that values Silver at 54.71! 130% higher! “What’s in your vault?” Nothing confusing there.
As to the StateSide economy, our Economic Barometer turned in a confusing week. Just eight metrics arrived, the best being August’s increase in Building Permits, and the worst ironically being August’s Housing Starts. Go figure, the Baro basically drawing a blank for the week:
As for the S&P (4320) -6.2% from its year-to-date high (4607 on 27 July) — or if you prefer -10.4% from its all-time high (4819 on 04 January 2022) — everyone wants to know “Why?“ The obviously answer (as we simply practice the otherwise archaic science of math) is that price vis-à-vis earnings is historically excessive. The average p/e of the Top Ten cap-weighted S&P 500 constituents (AAPL, MSFT, AMZN, NVDA, TSLA, GOOGL, GOOG, META, LLY and UNH) right now is 51.5x. Remember (ad nauseum) ol’ Jerome B. Cohen? “…in bull markets the average level would be about 15 to 18 times earnings.”
Other answers as to “Why?“ may include it seasonally being September, considered the year’s notoriously worse stint.
Or that the S&P’s all-risk yield of 1.582% is absurd to abide given the risk-less U.S. three-month annualized T-Bill yield of 5.305%.
Or that ’tis better to get one’s money out of stocks given the market capitalization of the S&P 500 is now $37.7T versus a U.S. liquid “M2” money supply of just $20.7T. Remember ol’ Egbert? “Hey Mabel! I sold some stock but the broker says they don’t actually have the money to pay us!” That shan’t be good.
Or there’s the market overall pricing excess thanks to COVID and the Fed: recall the S&P’s regression growth channel had said “pandemic” not occurred? And further how the increase in the market capitalization of the S&P 500 equaled the monetary creation by the Fed to counter COVID? Here’s that updated graphic:
‘Course, just as the S&P rocket-shot was fostered by the Fed’s monetary injection, the market has since been somewhat succumbing via the Fed’s monetary withdrawal (which commenced in the week ending 2 April a year ago). Or in the words of Inspecteur Clouseau: “Out with zee bad air [equities] and in with zee geuuud [yield]…” And that’s quite a drop from today to the channel were the Fed to so drain…
However through it all, the precious metals remain torturously tepid. Indeed were Charles Dickens around today to pen a book on Gold and Silver, ‘twould well be titled “Great Expectations, Part Deux”. Or more realistically given our two-panel graphic with Gold’s daily bars from three months ago-to-date on the left and 10-day Market Profile on the right, “What Expectations?”:
Silver as aforementioned is performing a tad better than Gold per the white metal’s like bars (below left) and Profile (below right). At least she is adorned in her precious metal pinstripes rather than in her industrial metal jacket. From her intraday low of 22.56 on 14 September she is now +5.6% higher, whereas Cousin Copper from his high a day later of 3.85 on 15 September is now -4.2% lower at 3.69. Stay your pinstripes pursuit, Sister Silver!
Torturous as may be this read, this let’s close with a notable FinMedia musing from late in the week: ’tis the notion that the Fed’s so-called “neutral rate” (i.e. inflation-adjusted lending rate) may have to naturally rise going forward. We wonder if this is to cover for the Fed having creamed the Dollar — increasing its “M2” supply by +42% or some +$6.6T from March 2020 into April 2022.
And yet specific to the Dollar Index, it has nonetheless risen from March 2020 (then 98.05) to 105.29 today. Either “the more there are, the more they’re worth” — else the offsetting currencies, substantively the €uro and ¥en — have been strained and puréed: which of course is the case. The €uro (that surprisingly has lasted more than four years) has gone from costing $1.104 in March 2020 to as low as $0.959 a year ago; (’tis today $1.068 as it now pays an interest rate). But pity the poor ¥en! From 107/$ in March 2020 to a vacation-worthy 146/$ today!
Cue Deep Purple from back in ’73 with “My Woman from Tokyo”
Our Metals Triumvirate, Oil and the Spoo are all at present above their respective Neutral Zones for today; none of the other BEGOS Markets are below same, and volatility is mostly light, (save for the Yen, which whilst not yet a formal BEGOS component, has traced 102% of its EDTR by our Market Ranges calculation). Yesterday’s selling in the S&P did not exhibit “fear” such as to drive the MoneyFlow differential lower; still by historical standards, the “live” p/e of the S&P remains excessively high, the futs-adj’d read now 37.3x. We continue to mind Oil (currently 90.19) and notably its “Baby Blues” (see Market Trends) which in real-time are at +89%: below +80% would make us anticipative of further near-term selling.
Post-Fed we’ve Oil as the sole BEGOS Market at present below today’s Neutral Zone; the balance of the bunch are within same, and volatility is light-to-moderate. The FOMC’s Policy Statement was fairly as expected: a key Fed metric for which to watch is the 29 September release of August’s Core PCE Index. Oil’s “Baby Blues” have (in real-time) kinked lower for the first time since 29 August: once below their +80% axis we can make a guesstimate as to near-term downside price distance; even by Market Values, Oil still is better than +6 points above tis smooth valuation line. The Econ Baro wraps its week today with metrics including September’s Philly Fed Index, August’s Leading (i.e. “lagging”) Indicators and Existing Home Sales, plus Q2’s Current Account Deficit.
Oil is trading below 90 (89.65) for the first time this week: it is the only BEGOS Market at present outside of today’s Neutral Zone; by Oil’s Market Profile, trading supports show at 88.40, then 86.90-86.40; and by Market Rhythms, Oil’s 6hr and 1hr Parabolics have of late provided attractive swung consistency on a 10-test basis. The compression in the EuroCurrencies is such (see both Market Profiles and Market Ranges) that we anticipate range breaking open in the wake of today’s FOMC Policy Statement: the consensus is for the Fed to stand pat; ramped up inflation (both retail and wholesale) can support a FedFunds increase, however housing data has sufficiently weakened per this week’s reports, (NAHB, HousingStarts/Permits).
Gold and Copper are at present below today’s Neutral Zones; the other BEGOS Markets are within same, and volatility is again light. As highlighted in the current edition of the Gold Update, the yellow metal has confirmed its 12hr MACD crossing from Short to Long such that we’re seeking the mid-1970s near-term (current price is 1952). Looking at the best of our Market Rhythms on a 10-test swing basis, topping the stack for consistency are Silver’s 6hr Parabolics, the Euro’s daily MoneyFlow, and Gold’s 2hr MoneyFlow. Oil’s deviation from its smooth valuation line (See Market Values) is +10.64 points ((in real-time with price at 91.16); ’tis the most extreme deviation in at least a year. The final data due for the Econ Baro ahead of tomorrow’s FOMC Policy Statement is today’s reports for Housing Starts/Permits in August.
The Swiss Franc, Metals Triumvirate and Oil are at present above their respective Neutral Zones for today; the balance of the BEGOS Markets are within same to start the week, and volatility is light. The Gold Update acknowledges the rather precarious start to the precious metals’ parabolic Long trends which (still intact) commenced two weeks ago; however, both Gold and Silver have been getting a bit of a bid since Friday; see too Gold’s MACD on its 12hr candles — our best Market Rhythm for the yellow metal at present — per our Gold page itself. With Wednesday’s FOMC Policy Statement in mind (a rate raise wouldn’t surprise us), the Econ Baro faces a moderate pace of incoming metrics this week, including September’s NAHB Housing Index due today.
Firstly: Gold is fundamentally fabulous given its ultimate valuation is a function of currency debasement. Hardly is that news to our veteran readership, nor to anyone who fully comprehends The Gold Story. So let’s just briefly break down the ultimate effect of valuation on Gold with three bullets:
- Gold settled this past week yesterday (Friday) at 1946; per the opening Gold Scoreboard, valuation is 3706; Gold is thus presently priced at but 53% of its valuation;
- Gold’s highest level of valuation-to-date is 4031 (per the week ending 15 April ’22), with price concurrently at 1977; obviously since then, the Federal Reserve has been “rebasing” the money supply (“M2” from $22.1T to now $20.7T, or -6.3%);
- Gold’s price — whilst typically lagging valuation — eventually ascends to past high valuation levels; Price’s All-Time High of 2089 (on 07 August 2020) matched the valuation high of 2089 achieved eight years earlier (as of 24 July 2012).
Thus ’tis fundamentally fabulous to know there is so much higher for Gold — dare we say “automatically” — to go. Precisely put, Gold’s price today so relatively inexpensive, ’tis akin to Roger Moore opting for “player’s privilege” in rolling Louis Jourdan’s lucky backgammon dice: “It’s all in the wrist … double sixes … fancy that.” –[Octopussy, Eon-MGM/UA, ’83]
“Yet if I can play devil’s advocate, mmb, Gold is just not popular anymore…“
Your “Yet“ is the operative word there, Squire: merely move it to the end of your sentence in replacing the word “anymore“. Moreover as recently penned, Gold’s popularity amongst the so-call “sovereigns” remains substantive. When including Gold as a currency (albeit this data is six years in arrears per the World Gold Council), it reportedly makes up better than 50% of foreign reserves belonging to Austria, France, Germany, Greece, Italy, The Netherlands, Portugal, The United States, and (again per six years ago) Venezuela.
But as the Investing Age of Stoopid rolls along, “The Herd” don’t want yield-less Gold. Rather, their preference is to be all-in with equities, even if earnings-less. “No, we gotta own Nvidia ya know [p/e 105x]… “No, we gotta own Amazon ya know [p/e 110x]… “No, we gotta own Salesforce ya know [p/e 133x]…” That’s just a few of the 25 S&P 500 constituents with price/earnings ratios currently in excess of 100x. As for the total market capitalization of the S&P now priced at 4450? $38.9T. The aforementioned liquid money supply (“M2”) of the US? $20.7T. Sleeping well? Got Gold? Admittedly that said…
Secondly: Gold is Technically Torturous given its performance since the weekly parabolic trend flipped from Short to Long two weeks ago. “Long” means “Up”, not “Down”. But the latter has been Gold’s state from settling at 1966 since starting September, from which price has been as low as 1922 (-2.2%). Worse for Silver after settling 01 September at 24.55, she has since succumbed to as low as 22.56 (-8.1%). Torturous indeed! That stated, both precious metals are still clinging (precariously) to their respective weekly parabolic Long trends as we see here from one year ago-to-date:
At least by each rightmost respective bar, Gold and Silver got bids into week’s end to close well off those noted lows. And to stick with this technical treatise — torturous as ’tis — we’ve a near-term Gold study that bodes well for higher prices. In reviewing the week’s ending data runs, from the website’s Market Rhythms page up popped a pending positive crossover for Gold’s 12-hour MACD (“moving average convergence divergence” … which for you WestPalmBeachers down there is a very popular market-following study). Here’s the graphic of Gold from mid-year-to-date in 12-hour units with the MACD’s blue line poised to cross above its red line, visibly-viewed by the trading community as indicative of higher price levels in the offing:
‘Course, has this signal been performing well? In order to qualify for our Market Rhythms page, various criteria must be met. And specific to Gold’s 12-hour MACD: across the past ten signals (since 03 May — Gold then 2082 — in perpetually swinging from Long-to-Short-to-Long-etc.) has been complied a pure-swing bi-directional gain of 159 points with an “average maximum” gain per swing of 48 points. Just in case you’re scoring at home. The point is: should this next up swing confirm, we’d expect it to help Gold get back on its broader parabolic up track.
Speaking of “up track”, have you been following that of the StateSide Economic Barometer? Nothing recessionary there:
Highlighting the past week’s streak of 15 incoming Econ Baro metrics was August’s Capacity Utilization, the 79.7% reading ranking as second highest across the past 10 months, whilst Retail Sales increased their growth to +0.6% from July’s +0.5% pace. Too, September’s New York State Empire Index — which was largely negative throughout 2022 into 2023 — posted its fourth positive reading of the past six months.
Therein, the bogeyman of the bunch was ramped-up inflation which falsely feeds into economic “growth”. At both the retail and wholesale levels, August headline inflation (which acknowledges that you eat and drive) more than doubled their July paces. But is Mr. Bogey frightening Wall Street’s children? Going by our Moneyflow page, we’ve yet to see “fear” in the S&P 500, (note again that adverb’s emphasis). But with our “live” p/e of the S&P at an honestly-calculated 39.6x, “tick, tick, tick goes the clock, clock, clock…”
And to be sure, the rising price of Oil is nurturing numbers higher as it inflates its way through the economic system. Here we’ve the percentage tracks of the five primary BEGOS Markets (Bond / Euro / Gold / Oil / S&P) across the past 21 trading days (one month). “Somebody stop that Oil!”:
As for the precious metals from three months ago-to-date, here next we’ve their daily bars along with those “Baby Blues” that depict the consistency of the evolving 21-day linear regression trend. For both Gold on the left and Silver on the right, the baby blue dots are falling, which does not lend well to price’s firming and turning higher. Still, the rightmost bar in each case is indicative of buying interest, which beneath the umbrella of the weekly parabolic Long trend — plus the aforeshown pending MACD positive cross — can combine to “Turn the beat around…” –[Vicki Sue Robinson, ’76]:
To the 10-day Market Profiles we go for Gold (below left) and for Silver (below right). Their both having departed basement residency from the past two weeks enhances the (hopefully) supportive aspects for the yellow metal’s 1932-1952 zone and the white metal’s denoted 23.40 level:
Time to wrap with the stack:
The Gold Stack
Gold’s Value per Dollar Debasement, (from our opening “Scoreboard”): 3706
Gold’s All-Time Intra-Day High: 2089 (07 August 2020)
2023’s High: 2085 (04 May)
Gold’s All-Time Closing High: 2075 (06 August 2020)
Trading Resistance: 1952 / 1964
Gold Currently: 1946, (expected daily trading range [“EDTR”]: 16 points)
10-Session “volume-weighted” average price magnet: here at 1946
Trading Support: here at 1946, then 1942 / 1932
10-Session directional range: down to 1922 (from 1980) = -58 points or -2.9%
The Weekly Parabolic Price to flip Short: 1904
The Gateway to 2000: 1900+
The 300-Day Moving Average: 1859 and rising
2023’s Low: 1811 (28 February)
The Final Frontier: 1800-1900
The Northern Front: 1800-1750
On Maneuvers: 1750-1579
The Floor: 1579-1466
Le Sous-sol: Sub-1466
The Support Shelf: 1454-1434
Base Camp: 1377
The 1360s Double-Top: 1369 in Apr ’18 preceded by 1362 in Sep ’17
Neverland: The Whiny 1290s
The Box: 1280-1240
Contrary to this time yesterday, the precious metals are getting a deserved boost with both Gold and Silver at present above today’s Neutral Zones, as are both Copper and the Euro; the latter along with the Swiss Franc see their cac volumes rolling today from September into December. Session volatility is again moderate-to-robust, notably for the metals. At Market Values, Oil finds itself (in real-time) +9.49 points above the smooth valuation line; the Euro is -3 full points below same, even as the ECB moved to a record-high rate stance yesterday. ‘Tis a busy day for the Econ-Baro with September’s NY State Empire Index and UofM Sentiment, plus August’s IndProd/CapUtil and Ex/Im Prices.
The precious metals continue to weaken, albeit their relatively fresh weekly parabolic trends remain Long: Silver at present is below today’s Neutral Zone; Copper is above same, and volatility is moderate-to-robust, Silver having already traced 104% of its EDTR (see Market Ranges). Much is being made ado about the increase in August’s CPI, albeit the headline number (+0.6%) matched the consensus expectation, and moreover as we pointed out a month ago, July’s PPI (which tends to lead the CPI a month out) already had popped. August’s PPI is due today for the Econ Baro, along with other metrics including the month’s Retail Sales and July’s Business inventories. The FOMC’s next Policy Statement is Wednesday (20 September).
Both Gold and Silver are at present below today’s Neutral Zones; the precious metals have been struggling these past two weeks, even as their respective weekly parabolic trends have both flipped from Short to Long, (as detailed in the current edition of The Gold Update). The balance of the BEGOS Markets are with their Neutral Zones, and volatility is again light-to-moderate. Oil remains up, now better than +8 points above its smooth valuation line (see Market Values) and settling last evening +3.55 points above its Market Magnet, both fairly high readings. The Econ Baro looks to August’s CPI and Treasury Budget.
At present, the Euro is the only BEGOS Market outside (below) its Neutral Zone for today; session volatility is mostly light. As tweeted (@deMeadvillePro) last Thursday and reprised in the current edition of The Gold Update, Market Ranges (with the exception of the Spoo) have noticeably narrowed of late, such as to give thought for expansive moves in the near-term balance, (especially it being the September/October period): tis well worth minding the Market Ranges page, certainly so when considering prudent cash management. At Market Rhythms, our most consistent on a 10-test swing basis is again the Euro’s daily MoneyFlow study; on a 24-test swing basis, the best of the bunch is the Bond’s 2hr Price Oscillator. The Econ Baro remains quiet with both retail and wholesale inflation data due in the ensuing two days.
The BEGOS Markets begin the week with a “boom”: at present, six of the eight components are above their respective Neutral Zones for today; the two exceptions are Oil (within same) and the Bond (below same); volatility even early on is moderate-to-robust. Cac volume for the Spoo is rolling from September into December with 49 points of additional premium given the higher interest rate environment; “fair value” in toto is thus 53 points for today. The Gold Update emphasizes the precious metals needing to get swiftly off the mat following last week’s declines, even as the weekly parabolic trends for both Gold and Silver remain newly Long. The “live” P/E (40.1x) for the S&P 500 has reverted to its lifetime mean (since 2013; see too the closing graphic in The Gold Update). Whilst a busy week of 15 incoming metrics for the Econ Baro, none come due until Wednesday.
Quite the inauspicious start for Gold’s fresh parabolic Long trend as otherwise herein detailed a week ago. Indeed then we were all megaphones and pom-poms about Gold now being en route to a new All-Time High … and we’re still in that camp even though the drive to such high has commenced with a dive.
For having settled a week ago at 1966 in confirming the new up trend — and historically backed by the strength to surpass the present All-Time High (2089 on 07 August 2020) as we ascend — Gold instead this week fell to as low as 1940 toward settling yesterday (Friday) at 1943. Fortunately, ’tis not the end.
Further, this Gold uptrend remains intact, as does same for Silver. So let’s straightaway go to the two-panel chart of the precious metals’ weekly bars from one year ago-to-date with their respective parabolic trends in stride:
The optimistic news is that both the yellow and silver metals exhibit their rightmost two blue dots of fresh Long trend. The pessimistic news is that the margin for error — i.e. trend reversal — admittedly appears tight. Gold’s present distance from here (1943) to the flip-to-Short price (1902) is -41 points, which given Gold’s expected weekly trading range of 44 points is within a vulnerable distance. Similar is the case for Silver (currently 23.20) with her flip price just -1.00 point lower at 22.20; her EWTR? 1.32 points. Hang in there Sister Silver!
“But obviously you’re still bullish for higher Gold from here, eh, mmb?“
Would we otherwise be writing, dear Squire? Or to quote one JP from our Investors Roundtable: “The trend is your friend until it reaches the bend.” Moreover as cited a week ago in asking “How high is high?”, recall that Gold’s “maximum average” price follow-through per the prior 10 weekly parabolic Long trends is +11.1%. Thus again strictly in that vacuum, we’d see Gold 2184 on this run, eclipsing the still standing 2089 All-Time High by nearly +100 points. Here’s such historical table of positive percentage MaxGain follow-throughs:
“But if I may interject again, mmb, four of those last six ‘MaxGains’ have been less than +5%…“
Duly noted, Squire. Yet if we instead employ the weighted-average method, the “perfect world” MaxGain comes to +9.1%, which from that starting 1966 level still sets Gold for a new All-Time High at 2145. Either way, next week is important for the precious metals’ ascent to resume. Else these fresh uptrends face parabolic busts.
Too, we’ve another oft-overlooked analytical note: have you been following our Markets Ranges page? As we tweeted (@deMeadvillePro) this past Thursday night: “…Market Ranges becoming unusually narrow (save for that of the Spoo); may portend Big Moves ahead for the BEGOS Markets; have a look…”
Indeed for the month of September — wherein by conventional wisdom “it all goes wrong” — scant little has yet to happen, especially with respect to the precious metals in terms of day-to-day ranginess. Below on the left we’ve Gold’s “expected daily trading range” from one year ago-to-date; (for you WestPalmBeachers down there, this is not the price of Gold; rather ’tis how many points we expect Gold shall trade between its next day high and low). And the number “16” in the Gold box is as narrow an expected points range as we’ve seen in better than a year. Similarly on the right is the case for Sister Silver now with her 0.50 points expectation. ‘Tis said “Traders love volatility”, a condition rather absent of late. This is why understanding potential price movement from day-to-day is critical to cash management. Here’s the graphic:
‘Course, cash management has become a crap-shoot if investing via the StateSide trendless economy. “It’s up … no wait … it’s down … no wait … it’s ad nauseum…” Or as crooned by The Moody Blues: “School taught one and one is two. But by now, that answer just ain’t true…“ –[‘Ride My See-Saw’, ’68].
Too, there’s the standard verbage in the Policy Statements from the Federal Open Market Committee that it “will continue to monitor the implications of incoming information for the economic outlook”. Is it any wonder ongoing FedSpeak is so vague? Can you make heads or tails of it all? “In Search of the Lost Chord” indeed as we turn to the Economic Barometer:
And therein, we cite a notable number from this past week: Consumer Credit as calculated by the Fed for July was just $10.4B, the third-lowest reading since the core of COVID 30 months prior. Hitting the wall of the credit card limit? That rising variable interest rate is a credit killer.
Regardless, President Biden’s economy is said to be just fine, thank you. To wit these two headline doozies from Dow Jones Newswires as the past week unfolded: “Resilient U.S. Economy Defies Expectations” and “Why Higher Unemployment Is Good News Now“ (Clearly the FinMedia summer interns are closing out their stints at high writing levels as they return to University). Yet on this side of the pond, the EU’s leading economy — Germany — continues to falter. Further ’round the globe, China’s exports continue to plummet … does that mean Walmart (WMT) shan’t have anything to sell? Good grief…
Returning to Gold, ’twas a week of grief as told, made graphically bold in the graphic below: to the left we’ve Gold’s daily bars from three months ago-to-date, this past week not looking so great. Still, the baby blue dots of trend consistency continue to climb. And to the right, despite Gold’s plight, the most dominantly-traded price of the past two weeks — indeed the 1943 settle — has essentially held as support per the Market Profile’s fortnight:
As for poor ol’ Sister Silver, the like graphic is weaker, her “Baby Blues” at left having just turned tail, whilst her Market Profile at right finds price having taken quite the “THUD!” Hopefully it shan’t leave a bruise…
Notwithstanding the precious metals needing a boost into the new week, we wrap this missive with “Breaking News”:
The long-sought reversion of our “live” price-earnings ratio to its mean has finally occurred. And both elements of the fraction thereto contributed. The “P” of the S&P 500 at 4457 is -7% below its all-time high (4819 on 04 January 2022). And the Index’s “E” — which for Q2 grew year-over-year by +6% — was recently enhanced by post-earnings season power profits, notably from the large market capitalization likes of Nvidia (NVDA) and Berkshire Hathaway (BRK.B). Indeed, those two companies by cap-weighting comprise 4.1% of the S&P 500’s total of 503 constituents. Here’s our enhanced graphic, the green line having once again reverted to the red line:
So is that as low as the S&P shall go? Per what we know: no. With our “live” P/E today at 39.9x, ’tis still a very strained distance above Bob Shiller’s CAPE, which in turn has yet to re-meet with the oft-parroted S&P/DJI version of “twenty-something”. And should the economy recess and earnings not grow, a return to the “live” P/E’s low (25.4x in January 2013) means an S&P “correction” from here of -36%; (that’d be to 2852, just in case you’re scoring at home … and recall our musing earlier this year of an S&P sub-3000). As well, the imputed S&P yield per the P/E ( 1 ÷ 39.9 ) is 2.507%; but the actual cap-weighted yield is only 1.537% … and yet the three-month annualized T-Bill yield is more than triple that at 5.293%, and ’tis risk-free! Thus you can see where your money ought be.
But for security above and beyond risk-free we’ve the world’s best currency: Gold! Today’s 1943 level prices it at just 52% of its Dollar debasement valuation, which per the opening Gold Scoreboard’s calculation of 3709 even accounts for the increase in the supply of Gold itself. And save for smart sovereigns, just because “nobody” owns Gold yet, do not be without! Got Yours?
Never in a million years, Sweet Sister Silver!
A slightly weaker Dollar is giving the EuroCurrencies and Precious Metals a bid this morning, with the Euro, Swiss Franc, Gold and Silver all at present above their respective Neutral Zones; Copper is below same, and volatility is light-to-moderate. As tweeted (@deMeadvillePro) last evening, BEGOS Markets’ EDTRs (see Market Ranges) have really compressed of late (save for that of the Spoo) such that more substantive moves may be in the offing, (and of course ’tis September). Gold is flirting with Market Profile Support at 1942 (current price 1949). The Econ Baro concludes its week with July’s Wholesale Inventories and (late in the session) Consumer Credit.
At present, all eight BEGOS Markets are again within today’s respective Neutral Zones, and volatility is, in turn, light. Our “live” P/E of the S&P 500 (in fut’s-adj’d real-time) is below 40x (now 39.7x) for the first time since May; ‘course historically, this remains an extremely high level, as we’ve regularly said especially given risk-free three-month U.S. dough yielding 5.3% annualized. Whilst no material “fear” has yet to hit the S&P, there was a tinge of it yesterday as the MoneyFlow suggested an S&P drop of -1.0% vs. that of -0.7% for the Index itself; by Market Profiles, the Spoo’s most dominant overhead resistor is 4518, (price at present is 4458). Meanwhile for whirl-around Oil, price (87.26) is better than +7 points above its smooth valuation line (see Market Values). Included today for the Econ Baro are the revisions to Q2’s Productivity and Unit Labor Costs.
Quiet is the state of the BEGOS Markets at present: all eight components are within today’s Neutral Zones, and volatility is light. Gold’s drive to an All-Time High has begun with a dive, both the yellow and silver metals well off last week’s settles; by Market Profiles, for Gold (currently 1951) we’ve resistance at 1964 and 1972, with support at 1945 and 1932; for Silver (currently 23.83), Profile resistance shows at 24.60 and 25.00, (with no notable support this low is the Profile); of course, both metals have just commenced weekly parabolic Long trends such that we do not anticipate much downside relative to pending upside. Today’s Econ Baro awaits August’s ISM(Svc) Index and July’s Trade Deficit. And late in the session comes the Fed’s Tan Tome.
The second of the two-day session finds all eight BEGOS Markets in the red, and all (save for the Euro) at present below their respective Neutral Zones. Combining the two days, session volatility is moderate-to-robust, with both Silver and Copper having traced in excess of 100% of their EDTRs (see Market Ranges), Looking at Market Rhythms, on a 10-test swing basis our most consistent studies are Gold’s 2hr MoneyFlow, the Euro’s ongoing daily MoneyFlow, and Silver’s 8hr Parabolics; on a 24-test swing basis, our leader is the Bond’s 2hr Price Oscillator. For the primary BEGOS components, the best correlation is positive between the Euro and Gold. The Econ Baro looks to July’s Factory Orders.
We start the week with a safe-haven BEGOS Markets’ bid: at present both the Swiss Franc and Gold are above their respective Neutral Zones for today; Oil is below same, and volatility is light. The Gold Update points to an All-Time High route given the fresh new weekly parabolic trend and the typical percentage gains that historically ensue. At Market Values, we’ve Oil nearly +6 points above its smooth valuation line. And at Market Trends, both the Euro and Swiss Franc find their “Baby Blues” of trend consistency struggling to get off the floor, the Dollar Index during July moving from the 99s to now the 104s. The Econ Baro awaits 8 incoming metrics as the week unfolds. StateSide bourses are closed for Labor Day; thus the BEGOS Markets are in a two-day session for Tuesday settlement, with trading halts late Monday (today).
The Gold Update by Mark Mead Baillie — 720th Edition — Monte-Carlo — 02 September 2023 (published each Saturday) — www.deMeadville.com
“Gold and Silver Finally Flip! How High Might Be This Next Up Trip?“
Thank goodness, THAT’S over.
“ ‘THAT’ being what, mmb? “
THAT, Squire, being the Short parabolic trend for both Gold and Silver having finally reached the end! For as last week herein penned:
“As to the ‘when’ for these two precious metals’ Short trends to end … it is plausible one if not both precious metals’ weekly trends can be Long in a week’s time. ‘Stay tuned to this channel for further developments…’“
Which as foretold by the Sibyl — here in the guise of the lovely Lady Fortuna — is exactly what came to pass as the week unfolded, Gold settling yesterday (Friday) at 1966 and Silver at 24.55. ‘Tis a beautiful thing, their new weekly parabolic Long trends each heralded by its rightmost encircled fresh dot in blue:
‘Course the key question from here is: “How high is high?” Notwithstanding last Spring’s structural resistance (for Gold in the 2000-2100 range and for Silver in her 25-27 range), let’s recall “average maximum” price follow-throughs. For Gold’s last 10 parabolic Long trends (dating back to September 2018), the average max upside upon Long trend confirmation is +11.1%: thus in that vacuum from today’s 1966 level, to reach such “perfect world” average would bring an All-Time Record High of 2184. Likewise for Sister Silver’s last 10 parabolic Long trends, (in her case dating back to December 2018), the average max upside (as anticipatively noted a week ago) is +19.6%. Such increase from today’s 24.55 price, would bring 29.36, a level not traded for Silver since 01 February 2021.
And for Silver, that’s still a far cry from her All-Time Record High of 49.82 on 25 April 2011, the Gold/Silver ratio on that day a mere 32.1x versus today’s 80.1x. The century-to-date average of that ratio is now 67.7x. Pricing Silver to that puts her at 29.04 … which is not far from the just-cited 29.39 potential upside follow-through per the new parabolic Long trend. ‘Tis one of those things that happily makes you go “Hmmm…”
“Hmmm…” (not necessarily happily) also applies to the state of the Economic Barometer. Hardly is it humming along, but neither is it sputtering to a stop. From this past week’s load of 16 incoming metrics, 8 showed period-over-period improvement, 7 were worse, and arguably the most important of all the data points — Core Personal Consumption Expenditures — again came in at +0.2% (an annualized rate of +2.4%) for the month of July. Such rate of this Federal Reserve-favoured inflation gauge means the Open Market Committee — some say — shan’t further raise their Banks’ Funds Rate for the balance of the year. On verra…
To look at the Econ Baro year-over-year, its net neutral state may argue that the Fed simply go to bed, i.e. “Everything’s great!” Dow Jones Newswires just went on record with August’s StateSide jobs report as “near perfect”. And as for equities, Bloomy concluded the week with “Stock Traders Get Back to Believing Everything is Just Perfect”. Perfection abounds. And why not? Oh to be sure, risk-free three-month U.S. “no debt ceiling dough” settled the week at an annualized rate of 5.268%, whereas the “all-to-risk” S&P 500’s yield is a paltry 1.507%. BUT: it doesn’t matter for neither do earnings, our “live” price/earnings ratio for the S&P finishing the week at 40.6x, not quite double the S&P’s 66-year lifetime median ’round 23x. (Best not to wreck everyone’s fun).
Regardless, here’s the Baro with the S&P 500 today at 4516, only -5.9% below its all-time closing high of 4797 from back on 03 January 2022:
So just as “The Sky’s the Limit!” for the S&P — clearly as ’twas in November 1980, August 1987, March 2000, October 2007, February 2020 and January 2022 (from which “corrections” then ranged from -25% to -58%) — ’tis no surprise that the mighty Index again tops our year-to-date standings of the BEGOS Markets with both Gold and Oil rounding out the podium, (albeit a distant second and third). Note Silver’s seriously lagging percentage performance; hence the aforementioned G/S ratio still historically high at 80.1x:
Too, it being month-end plus a day, ’tis time to go ’round the horn for all eight BEGOS Market components across these past 21 trading days (one month) incorporating their diagonal grey regression trendlines and the baby blue dot depictions of such trends’ day-to-day consistency. Notably therein is a most material move by Oil. Indeed as we twice tweeted (@deMeadvillePro) during the week, Oil initially en route to the 75-72 zone then defied its “Baby Blues” with a great gusher into the highest weekly close (86.05) since that ending last 07 November (then 88.96). As for Copper’s up gap, we can thank the price premium in rolling from the September to December cac:
As to Gold and several of the key precious metals’ equity offerings, let’s next look year-over-year at their respective percentage performance tracks. From the bottom up, note that only Newmont (NEM) by this time frame is in the red, -5% as its weathers costs associated with acquiring Oz-based Newcrest Mining. Then to the good we’ve Pan American Silver (PAAS) +9%, the Global X Silver Miners exchange-traded fund (SIL) +12%, Gold itself +14%, Agnico Eagle Mines (AEM) +17%, Franco-Nevada (FNV) +19%, and the VanEck Vectors Gold Miners exchange-traded fund (GDX) topping the stack at +22%, (although well off its May highs, as is the entirety of the bunch). But all ought benefit in anticipating higher metals’ prices near-to-medium term as the new weekly parabolic Long trends kick into gear:
Meanwhile per the past fortnight, Gold’s Market Profile below left depicts trading support in the 1945-1942 zone, whilst Sister Silver below right has slipped a pip below her most dominantly-traded price of 24.60. These of course shall wither away as higher levels come into play:
Toward closing, here’s our chart of the sedimentary Gold Structure by the month from a dozen years ago-to-date. Gold’s present All-Time High of 2089 was established on 07 August 2020 as the response to COVID shut down the world. Yet now that Gold has flipped to a brand-new weekly parabolic Long trend, as noted the typical average follow-through can well break the Triple Top into uncharted territory toward 2184. And when viewed by the rightmost monthly bars, it makes the nattering nabobs of Gold negativism appear nonsensical:
September starts with Copper the sole BEGOS Market at present above its Neutral Zone for today; the balance of the bunch are within same, and volatility is light-to-moderate, Copper having thus far traced 69% of its EDTR (see Market Ranges). Oil — for which we’ve been seeking near-term the mid-to-low 70s — has whirled ’round upward, its “Baby Blues” (see Market Trends) also having reversed course back higher, (albeit the 21-day LinReg trend itself still is negative): the Blues looked to lower price levels from 79.26 (16 August), however price since weakened to only 77.59: ’tis at present 83.79; the recent high from some three weeks ago is 84.89; dominant Market Profile support is now 80.00. The Econ Baro concludes its week with StateSide August Payrolls data and the ISM Index, plus July’s Construction Spending.
We close out August with the Fed’s favoured inflation gauge: Core PCE for July; expectations are for +0.2% for the month, (however a +0.3% reading as reasoned in the current edition of the Gold Update wouldn’t overly surprise us … but ‘twould the markets). Specific to the Spoo, it settled yesterday a full +100 points above its Market Magnet, an extreme deviation by that metric; thus we still do not see fear in the S&P’s MoneyFlow; currently our best Spoo Market Rhythm for swing consistency is the 2hr parabolic study. Otherwise early on this morning, we’ve the Swiss Franc, Silver and Copper as the BEGOS Markets at present outside (all below) today’s Neutral Zones; session volatility remains light by this hour. For the Econ Baro, other measures today also include July’s Personal Income/Spending.
The Bond, Silver and Copper are all at present below their respective Neutral Zones for today; none of the other BEGOS Markets are above same, and volatility is again light. Late in yesterday’s session, the cac volume for the Bond rolled from September into December, as is the like case today for Silver. The S&P 500 yesterday unwound a technically “textbook oversold” condition that had been in place through the prior 10 sessions; of course fundamentally with the “live” P/E at 43.2x, the Index remains in an extremely overbought state, especially given the higher risk-free interest rate environment. The Econ Baro looks to August’s ADP Employment data, July’s Pending Home Sales, and the first revision to Q2’s GDP.
At present ’tis but the Bond which is outside (above) its Neutral Zone for today; overall BEGOS Markets’ volatility is light. We’ve recently anticipated Oil to drop from ’round the low 80s (currently 79.85) to the 75-72 area given the “Baby Blues” (see Market Trends) commencing what now has become better than an ongoing two-week decline: by Market Values, price is fairly in synch with its smooth valuation line as well as with its Market Magnet; by its Market Profile, Oil settled yesterday at 80, its most dominantly-traded level of the past fortnight. The Econ Baro gets its busy week going today with August’s Consumer Confidence.
A fairly quiet start to the week for the BEGOS Markets; at present, only the Euro is outside (above) its Neutral Zone for today; session volatility is light, save for Copper which already has traced 70% of its EDTR by Market Ranges, (albeit price is back in its Neutral Zone after having traded higher); too, Copper’s cac volume is rolling from September into that for December. The Gold Update exemplifies Silver’s firm performance across the last week or so: both Gold and Silver are within a week’s expected trading range of flipping their respective weekly parabolic trends from Short to Long, should the near-term precious metals’ rally continue. Although no EconData is due for today, the Baro looks to 16 incoming metrics as the week unfolds, including this Thursday’s (31 August) Fed-Favoured Core PCE Index for July.
This past week wherein Gold finally garnered a wee bit of grip, ’twas Sweet Sister Silver who showed how to rip! Whereas Gold settled yesterday (Friday) at 1943 for a +1.3% weekly gain, Silver settled at 24.285 for a reigning +6.8% weekly gain. Let us thus duly start with the white metal in revisiting a few phrases from recent of these missives as below dated:
- 15 July –> “How many times have we herein written ‘Don’t forget the Silver!‘”
- 12 August –> “…from the ‘Means Reversion Dept.’ to price Silver via the century-to-date mean [Gold/Silver] ratio of 67.7x puts it at 28.76, (i.e. +21% above today’s 22.75). Again: ‘Got Silver?’”
- 19 August –> “Silver’s ‘Baby Blues’ … are just starting to curl upward, whilst price sits just above major trading support (22.75) in the Profile … Can Sweet Sister Silver actually lead Gold? Absolutely!“
And so justifiably it came to pass this past week that Silver indeed did rip, and moreover, she did so before Gold itself at least sought some grip. In fact: all-in from Silver’s low of 22.265 on 15 August, it took but six trading days for price to touch 24.430, a low-to-high gain of +9.7%. Had you been impossibly lucky enough to have bought that low and sold that high for a gain of +2.165 points, your single contract gain (at $5k/pt) equated to $10,825 … or as a deep-pocketer had you instead bought 100 contracts, your six-day gain equated to $1,082,500 … (just in case you’re scoring at home). Visually, here are the respective cumulative percentage tracks (per net daily closes) for Silver and Gold from two weeks ago-to-date, wherein the latter still looking rather flat is saying “Gimmie more lift, baby!”
Significantly intrigued by Silver’s finally coming ’round, we warrant her being paired with Gold in displaying the weekly bars and parabolic trends for both precious metals from one year ago-to-date. In each case, such trend remains Short (per the declining red dots), but with prices knocking on their respective doors to flip Long:
Indeed with Silver less than one point away from flipping her trend from Short to Long, the question is begged: “How much farther does Silver then climb?” Answer: across Silver’s past 10 weekly parabolic Long trends (extending back into December 2018), the “median maximum” price gain from each Long confirmation at week’s-end until again flipping back to a Short trend is +13.2%, and such average max gain is +19.6%. Strictly in that vacuum, were Silver’s trend to flip Long in the ensuing week at 24.870, a match to that median max gain would bring 27.480 — and further to the average max gain — 29.040. As for duration, the average Long trend across those 10 prior cases has lasted for 11 weeks. A lot of statistics there, but the prudent trader/investor looks to both time as well as range in cash management.
“Which means that 90% are not very prudent, right mmb?“
So say various studies, Squire. Or as a dear futures mentor of ours from many years ago might say: “They all knew better than the market which is why they’re not around anymore.” In other words, investing as Smart Alec on a wing and a prayer won’t get you anywhere, (e.g. how’s that “live” 41.5x price/earnings ratio of the S&P 500 gonna work out for ya?). Scary remains the story there.
As to the “when” for these two precious metals’ Short trends to end: Gold is 32 points away from flipping to Long with the “Expected Weekly Trading Range” now 47 points; and Silver is 0.585 points away from same with an “EWTR” of 1.315 points. Thus it is plausible one if not both precious metals’ weekly trends can be Long in a week’s time. “Stay tuned to this channel for further developments…”
Meanwhile in briefly reviewing our “non-events” take from a week ago, ‘twould seem that (after all the FedMedia hype as was anticipated) both the Fed’s Holiday Camp and the BRICS’ Revamp had almost no sway on our primary BEGOS Markets: week-over-week, the Bond was +0.6%, the Euro -0.7%, Gold (as noted) +1.3%, Oil -1.7%, and the S&P 500 +0.8%. Add to that the quiet Economic Barometer producing just a mild thud, and the week on balance (save for that of Silver) was a dud. Here’s the Baro as Federal Reserve Chairman Powell keeps a tight grip on the money whilst BRICS’ arguably succumbed to its namesake in adding six bricks to its mix:
But let not too much summertime complacency enter your veins as next week’s incoming Econ Baro metrics shall bring both losses and gains. Wherein this past week was weathered just five economic data points for the Baro, the ensuing week brings 16 metrics, the key highlight being Thursday’s (31 August) release of July’s Fed-favoured Core Personal Consumption Expenditures Index, the consensus for which is an annualized pace of +2.4%, (i.e. +0.2% for the month). Yet, if you really want to get into the weeds, recall the recently reported/leading July Core Producer Price Index having registered +0.3%; moreover the Core PCE’s 12-month regression level also “suggests” +0.3%. Too much information perhaps, but should +0.3% be the number, we shan’t be too surprised whilst all around are “expecting” +0.2%.
Either way, one must deem Silver as the anticipated “surprise” of the past week. Per our tweet (@deMeadvillePro) on Thursday, Silver’s “Baby Blues” of trend consistency were well on the northerly move after pointing to their commencing a fresh up-curl in last week’s missive. Such is recalled below in the following two-panel graphic of the precious metals’ daily bars from three months ago-to-date with Gold at left and Silver at right. And specific to the latter, we’ve coloured in red Silver’s bar and dot from Friday a week ago, from which point she truly did go. Way to rip, Sister Silver!
In so “ripping”, the Gold/Silver ratio in a mere week fell from 84.1x to now 80.0x: such like week-over-week drop has happened but one other time this year, indeed just recently so from the first-to-second week of July. Thus our interpretation? Sister Silver is getting a long overdue bid!
Long overdue, too, to rise from their respective Market Profile basements were both Gold next on the left and Silver on the right. The volume-dominant supporters and resistors are as labeled:
So with Sister Silver having put in a semaine superbe, let’s wrap it here with something hardly superb. As you regular readers of The Gold Update know, we’ve become more and more skeptical these recent years of the FinMedia’s foundational grounding and market understanding, (i.e. in referring on more than one occasion to the once-mighty and revered Barron’s as having become a children’s writing pool). And to wit, we balked again at a headline yesterday from ever-lovin’ Bloomy. Ready? “Stock Rally Has a Ways to Go Before Americans Feel Rich Again”. Instantly, we had a John Patrick McEnroe moment: “You canNOT be SERious!” What rally is being cited? ‘Course having virtually vanished from essentially the entirety of bullish market musings is the “E” word (Earnings) — which themselves haven’t actually vanished — but are, on balance, unsupportive of the S&P 500’s present level (4406 and its ghastly-high aforementioned P/E of 41.5x).
In fact, let’s go all the way back to The Gold Update penned on 28 January with respect to the S&P: “The S&P is today priced at [then] 4071. Morgan Stanley already is well on the record of it reaching down this year to 3000. We anticipate sub-3000. The P/E reverting to its historical mean (22.4x) suggests — were there no growth in earnings — 2313.” Yet to be fair for Q2 Earnings Season, as you know S&P cap-weighted profits grew at a +6% pace; but the overall level (as just stated) remains Index unsupportive.
Regardless, from here with just over four months remaining in 2023, ‘twould be a terrific tumble: from today’s S&P 4406 level to 3000 = -32% with 87 trading days to go. Has the S&P ever fallen by -32% within 87 trading days? Of course it has: during 1987, 2002, 2008, and most recently in 2020. Shall it so do in the remainder of 2023? Until we see fear at the website’s MoneyFlow page, the answer is “No” and our sub-3000 notion we’d have to forego.
Still, let us also reprise that: “Marked-to-market, everybody’s a millionaire; market-to-reality, nobody’s worth squat.” Or translated for you WestPalmBeachers down there: shall you be out of stocks before it all goes wrong?
And better yet: be in Gold and Silver!
We’ve the Euro at present below its Neutral Zone for today, whilst above same is Oil; otherwise, BEGOS Markets’ volatility is mostly light. Across the past eight trading days, Silver’s low-to-high run is +9.7%. By Market Rhythms on a 10-test swing basis, the Euro’s daily MoneyFlow study continues to top the stack, followed by the Yen’s (not officially a BEGOS component) 15mn Parabolics. Looking at Market Values, the Bond is some -4 points below its smooth valuation line, the Euro some -0.02 points “low”, and the Spoo -144 points low. The Spoo (4382) by its Market Profile shows its most dominant resistors at 4385 and 4420. The Econ Baro concludes its quiet week with UofM’s Revised Sentiment Survey for August. FedChair Powell speaks at Jackson Hole.
‘Tis the metals in play thus far today, Gold at present above its Neutral Zone, whilst Silver and Copper are below same; the balance of the BEGOS Markets are quiet, and volatility is light. Silver has risen better than +6% net these past three days; more on Silver in this Saturday’s edition of The Gold Update. Oil finally has weakened such as to break its previous low (which was 78.95), reaching down yesterday to 77.62: this suggests a move sub-75 as the “Baby Blues” (see Market Trends) too continue their descent; further, Oil’s 21-day LinReg trend has now rotated to negative. Included in today’s metrics for the Econ Baro are July’s Durable Orders.
The Bond, Metals Triumvirate and Spoo all are at present above their respective Neutral Zones for today; none of the other BEGOS Markets are below same, and volatility is mostly light, save for Silver which has already traced 60% of its EDTR (see Market Ranges). By Market Rhythms, heading the list of the 24-test swing basis (for 405 studies) is the long-time visibly-observed Spoo’s 15mn MACD, likely the most popular trading study going back better than 20 years from our days at AvidTrader. At Market Trends, Oil’s “Baby Blues” continue to descend; however, price has yet to break lower to our anticipated mid-to-low 70s range (currently 79.46). The Econ Baro awaits July’s New Home Sales.
The Euro is the only BEGOS Market at present outside (above) its Neutral Zone for today; session volatility is light. As was previewed in The Gold Update, Silver yesterday took off, its +2.5% single-day gain ranking as 10th best year-to-date; and now in real-time, Silver’s “Baby Blues” (see Market Trends) have provisionally crossed above their -80% axis, confirmation of which at day’s end would suggest still higher price levels near-term; Silver’s favoured Market Rhythm at present is its 8hr Parabolics, (which triggered Long on 16 August from 22.660, price now 23.370). For the S&P 500, “fear” still has yet to appear as the MoneyFlow’s differential to the Index itself is gaining ground; nonetheless, the “live” (futs-adj’d) P/E of the S&P is a terribly expensive 45.8x. For the Econ Baro today we’ve July’s Existing Home Sales.
The Bond starts its week at present below the Neutral Zone, whilst above same is that for Oil; volatility remains light-to moderate per this time of the session. The Gold Update looks to Gold’s low for the current weekly parabolic Short trend as either being in place or quite nearby in the 1901-1893 area (price currently is 1918); too, the Update looks to this week’s BRICS rendezvous as a “non-event” in terms of any material outcome. In looking at Market Rhythms with the most consistent returns of late (10-test swing basis), we still note the Euro’s daily MoneyFlow plus its 30mn MACD, the Yen’s 8hr Parabolics plus its 15mn MACD, and Oil’s 30mn Parabolics. ‘Tis a muted week for the Econ Baro, with nothing due today.
Gold just completed its 10th down week of the last 15, “spot” settling yesterday (Friday) at 1890 and the far more actively-traded December contract at 1918. Regardless, where is the bottom?
Such bottom-seeking descent hasn’t actually been that dire: basis December from its 01 May settle of 2081 to today’s 1918 is a price decline -7.8% across those 76 trading days. Within that period, the yield on three-month money has increased from 5.000% to now 5.278% whilst the liquid StateSide money supply (“M2”) has shrunk from reaching $20.89T (per 02 June) to now $20.70T. Thus in turn, the Dollar Index has increased from 101.885 on 01 May to now 103.350, as “less is more”.
‘Course you long-time readers of The Gold Update well know that such conventional wisdom “resistors” are futile. For when Gold goes, it goes. Recall the six-month run from January 2010 through June 2010 wherein even as the Dollar Index rose some +10%, Gold in stride rose nearly +7%? Or with respect to interest rates when from 2004 through 2006 the Federal Reserve’s Funds Rate rose from 1.00% to 5.00%, Gold therein rising +59% (from 402 to 639)? So again now, with respect to Gold today: where is the bottom?
Let’s assess Gold’s weekly bars and parabolic trends from one year ago-to-date:
Our best sense is that Gold is near — if not at — its bottom for this red-dotted parabolic Short trend, (now 13 weeks in duration). Note the two green support lines for the 1901-1893 zone: 1901 is the trend’s overall low from the week ending 30 June; and 1893 is the oft-reliable mid-point of the 1975-1811 support structure established during those weeks ending 03 February through 03 March. Were that zone to go — to which we say “No!” — 1811 would then become ripe for consideration.
To be sure, the market — today 1918 — is never wrong; yet neither is Gold’s value — today 3719 — mathematically to Dollar debasement. And since Gold is overwhelmingly priced in Dollars over any other currency, let’s briefly consider some FinMedia bantered-upon tricks by the BRICS.
Thus with a tip-of-the-cap to our “Who Knows What to Believe Dept.” as Brazil, Russia, India, China and South Africa gather in the latter for the ensuing week’s meeting, speculation is significantly rife over a variety of outcomes. “Yet another new currency regime”, they say, (indeed a curious combining of the “5Rs”: Real, Rouble, Rupee, Renminbi, Rand). “The world’s new reserve currency”, they say. “And it’ll be pegged to Gold”, they say. “But it won’t be convertible to Gold”, they say. And the “they says” continue ad nauseum. For what ’tis all worth, (which perhaps is nothing), we deem the outcome of it all as a non-event, and further that ’tis (whatever ’tis is) already priced into the primary BEGOS Markets (Bond, Euro, Gold, Oil, S&P 500)
Still, we’re a bit bemused again by the speculation of pegging a new currency to Gold yet without convertibility thereto. Given Gold primarily is transacted in Dollars, then is the new currency not in that sense pegged to the Dollar? And given the Dollar itself is (as are all the fiats) based on nothing, a BRICS currency is but another money mix. It thus might well be based on cereal box of Trix. You can see where the logic in pricing falls apart.
Moreover, what would you pony up to buy a “5R”? If the BRICSters desire creating a new currency, great: go for it. We’ve had ’em all though history, some notables being various Dinars, Kwanza , Pengo, various Pesos, notorious Reichsmarks, et alia. Remember too 97’s Asian Contagion and 98’s Russian Debt Crisis? So what’s another pile of bad actors’ BRICS anyway, eh? “Got Gold?” To reprise the late, great Richard Russell: “Gold’ll be the last man standing.”
In fact, let’s see how Gold has been standing across the past dozen years. As vastly undervalued as the yellow metal remains, the bent of price’s daily settles from what was then (on 22 August 2011) Gold’s All-Time Closing High of 1900 to today has at least regained resiliency even as StateSide “M2” has since more than doubled!
“But mmb, you did write back in 2011 that Gold was too high…“
Absolutely correct, Squire. But run the regression vis-à-vis Dollar debasement across the last four decades and — even accounting for Gold’s own supply increase — valuation today is the aforementioned 3719. Just in case you’re scoring at home. “Tick, tick, tick goes the clock, clock, clock…” Do not miss out:
Turning to the Economic Barometer, its week produced quite an up-streak. Of the 14 incoming metrics, 10 improved period-over-period, albeit the National Association of Home Builders portends August’s Housing Starts and Building Permits shall show slowing (when next reported on 19 September). But quite curious amongst the data was the NY State Empire Index tanking from July’s +1.1 reading to -19.0 for August, whilst the Philly Fed Index was rising from -13.5 to +12.0(!) Is that indicative of a mass exodus from New York City to so-called “Little New York”? Stay tuned…
Meanwhile as to this current Econ Baro spike, to borrow from an old Memorex advert of 40-50 years ago: “Is it real? Or is it inflated?” This past 27 July we had the first peek at Q2 Gross Domestic Product annualized growth, which at +4.6% — less the 2.2% “chain deflator” — netted a real GDP pace of +2.4%. In other words for you WestPalmBeachers down there, essentially half of the economic growth seems solely due to inflated numbers: “Yeah, well we sold less product this year but we made more money ’cause we raised prices!” Let’s see how long that lasts. Here’s the Baro:
Therein the red line is of course the S&P 500, this year’s high (4607 on 27 July) we’re ruminating as it for all of 2023. Yes, our “live” price/earnings ratio for the S&P remains unrealistically high at 44.3x (basically double the Index’s lifetime P/E mean).
That is even more significant given the overall poor quality of Q2 Earnings Season having just ended. Doubtless you shan’t find the following on your favoured FinTv station: because we actually do the math, for the 1,867 companies collected, only 49% bettered their bottom lines from Q2 a year ago. Ex-COVID quarters, that is the worst year-over-year comparative performance since Q3 of 2015. (‘Course 65% of earnings “beat estimates”, the brokering tool to suck in the ignorant). And whilst 60% had revenue increases, this bottom-line decline means ‘tis getting more costly to run businesses. “Uh-oh, say it ain’t so!” See? ‘Twasn’t on your FinTV. From the website, here’s Q2 visually:
Visually for Gold we next go to our two-panel display of price from three months ago-to-date on the left and 10-day Market Profile on the right. And as much as we hate being right when assessing Gold’s descending baby blue dots of trend consistency, again we say “Follow the blues instead of the news, else lose your shoes.” (To wit, too, last week’s leading tweets [@deMeadvillePro] on Oil). As for Gold, price again lies near the base of the Profile:
Then we’ve Silver — whose ratio from Gold is a value-grabbing 84.1x (this century’s mean being 67.7x) — and for whom the like display is looking a bit better. Silver’s “Baby Blues” (below left) are just starting to curl upward, whilst price sits just above major trading support (22.75) in the Profile (below right). Can Sweet Sister Silver actually lead Gold? Absolutely! (Your homework assignment is to review October-November 2022). Whoo-hooo! Here’s the current graphic:
Let’s wrap with a look at the stack:
The Gold Stack
Gold’s Value per Dollar Debasement, (from our opening “Scoreboard”): 3719
Gold’s All-Time Intra-Day High: 2089 (07 August 2020)
2023’s High: 2085 (04 May)
Gold’s All-Time Closing High: 2075 (06 August 2020)
The Weekly Parabolic Price to flip Long: 1982
10-Session “volume-weighted” average price magnet: 1945
Trading Resistance: 1923 / 1935 / 1950 / 1960 / 1969
Gold Currently: 1918, (expected daily trading range [“EDTR”]: 18 points)
10-Session directional range: down to 1914 (from 1982) = -68 points or -3.4%
Trading Support: (none by the Profile)
The Gateway to 2000: 1900+
The 300-Day Moving Average: 1851 and rising
2023’s Low: 1811 (28 February)
The Final Frontier: 1800-1900
The Northern Front: 1800-1750
On Maneuvers: 1750-1579
The Floor: 1579-1466
Le Sous-sol: Sub-1466
The Support Shelf: 1454-1434
Base Camp: 1377
The 1360s Double-Top: 1369 in Apr ’18 preceded by 1362 in Sep ’17
Neverland: The Whiny 1290s
The Box: 1280-1240
To sum, the two big (arguably non-) events in this week next spent are of course the FinMedia BRICS-speculative narratives plus the Kansas City Fed’s annually-sponsored summer camp at magnificent Jackson Hole, to a degree on par with The Who’s (indeed Krazy Keith Moon’s) “Tommy’s Holiday Camp” –.
So who’s camping your monetary value? Hopefully YOU with Gold and Silver too!
The Bond is at present above today’s Neutral Zone; the Swiss Franc is below same, and volatility is again light-to-moderate for the BEGOS Markets. Per our S&P MoneyFlow page, fear has yet to be exhibited during this recent selloff, (which is why the MoneyFlow line is rising relative to the Index itself); in fact near-term, the S&P 500 is now a bit “textbook oversold” and the Spoo (in real-time) is -184 points below its smooth valuation line (see Market Values). By the same measure for the other primary BEGOS Components, the Bond shows as -6.5 points “low”, the Euro as -0.27 points “low”, Gold as -44 points “low”, and Oil as +3.8 points “high”. Today is the final day of Q2 Earnings Season.
The Bond is at present below its Neutral Zone for today; both Silver and Copper are above same, and volatility is light-to-moderate. Oil confirmed its “Baby Blues” (see Market Trends) as dropping below their +80% axis; as tweeted (@deMeadvillePro) yesterday, typical downside price follow-through would suggest we see the 74s, 73s, 72s near-term; (note that cac volume is beginning to roll from September into that for October; both cacs are currently in the 79s). For the S&P 500, the recent selling has been light vis-à-vis MoneyFlow, even as earnings have hardly been impressive. The Econ Baro wraps its week today with metrics including August’s Philly Fed Index and July’s Leading (i.e. “lagging”) Indicators.
Outside at present of their Neutral Zones for today are both the Bond (above) and Oil (below); the balance of the BEGOS Markets are within same, and volatility is again light. At Market Trends, Oil’s “Baby Blues” have provisionally dropped below their key +80% axis, which if confirmed by day’s end portends still lower price levels near-term; even as Oil declined yesterday, price remains (in real-time) +4.60 points above its smooth valuation line, (see Market Values). The Spoo yesterday reached our initial downside target of 4455. The Econ Baro today looks to July’s Housing Starts/Permits and IndProd/CapUtil. Late in the session we’ve the FOMC’s Minutes from their 25-26 July meeting.
Following a below-average volume day for the BEGOS Markets, quiet thus far today is again the watchword, (albeit a lot of EconData waits in the wings); at present, the Bond is below its Neutral Zone for today, whilst the Euro is above same; session volatility is light. We continue to mind Oil’s “Baby Blues” (see Market Ranges): in real-time they’ve kinked lower, although are still above the key +80% axis; at Market Values, Oil is +6.96 points above its smooth valuation line; presently priced at 82.73, Oil’s most dominant Market Profile resistor is just above here at 82.80; (the recent high is 84.89). For the Econ Baro we’ve August’s NY State and NAHB Housing Indices, July’s Retail Sales and Ex/Im Prices, and June’s Business Inventories.
Copper and Oil commence the week at present below today’s Neutral Zones; the balance of BEGOS Markets are within same, and volatility is mostly light. The Gold Update emphasizes that ’tis not just the yellow metal that’s been in decline, but — save for Oil — all the BEGOS components have been falling as the Dollar firms, notably so their “Baby Blues” (see Market Trends). Specific to Oil, again mind its “Baby Blues” to crack below their +80% axis as this week unfolds, (which in turn would suggest lower levels for price). This is the final week of Q2 Earnings Season; and whilst the Econ Baro is quiet today, it awaits 14 incoming metrics tomorrow through Thursday.
Before we graphically elaborate on this week’s double-entrendre Texas-speak title, let’s be up front as regards a mis-guided inference from a week ago. Therein we wrote with respect to Fitch’s downgrading StateSide credit from AAA to AA+ that: “…it remains to be seen if raters Moody’s and S&P follow Fitch…” to which a charter reader of The Gold Update pointed out S&P already having dropped their rating to “AA+” 12 years ago. Given we command accuracy in all that leaves these fingertips, this correction is obligatorily warranted.
Now in transiting from Kings’s English to this missive’s title drawl of “Ain’t Just Gold Been Headin’ Down…“, we begin with the following graphic normally reserved for our month-end missives. ‘Tis our ’round-the-horn view of all eight BEGOS Markets across the past 21 trading days, (i.e. from one month ago-to-date). The day-to-day consistency of the grey diagonal trendlines is denoted by the baby blue dots:
And quite clearly — save for Oil remaining bold even as the Dollar maintains a currency toehold — hardly is it just Gold that’s been getting sold; rather ’tis the balance of bunch, (again ‘cept for Black Gold).
Further, the firming Dollar suggests the Federal Reserve’s foot is “expected” to stay on the interest rate pedal, (or again as a long-time StateSide colleague would quip, the Buck continues to “lead the ugly dog contest”).
Indeed wholesale inflation — which for you WestPalmBeachers down there leads retail inflation — just recorded for July finds the Core Producer Price Index having made its largest monthly pace leap (+0.4% from June’s -0.1% to now +0.3%) since that for March 2022. Such suggests the Fed’s money noose looks to remain tight rather than return to loose. Recall too the Fed-favoured Core Price Consumption Expenditures Index through June still ran a bit in excess of the Fed’s 2% annualized inflation rate; the July PCE reading is scheduled for 31 August with the Open Market Committee’s next Policy Statement not due until 20 September. And a lot can happen (understatement) between now and then.
Within the debiting deluge we turn to Gold’s weekly bars and parabolic trends from a year ago-to-date. And even initially inclusive from two weeks ago of +40 points of December futures premium over spot, Gold has been unable to break above the red-dotted Short trend, price settling out the week yesterday (Friday) at 1946, (still +33 points over spot’s 1913 level). To break said trend in the ensuing week requires a rise of at least +43 points (from 1946 up through 1989), which technically is “in range” given Gold’s “expected weekly trading range” is now 50 points. Specific to statistics, century-to-date Gold is now in its 48th weekly Short trend, the average duration from 2001-to-date being 11 weeks, this current stint now 12 weeks. Thus if stretching for positives, one might opine that the current trend is getting a bit “short in the tooth, partner”…
Meanwhile, still “short” on establishing any kind of trend these days is the Economic Barometer, this past week’s 10 incoming metrics finding six having improved — and thus four having not — period-over-period. “But it’s an uptrend!”, they say. “No it’s a downtrend!”, they say. To be sure, the yo-yoing chop-chop continues it way:
‘Course, within the overall FinMedia rah-rah of inflation nearing the Fed’s 2% target such that another “pause” is in the offing, we’re nonetheless told that borrowing money to purchase real estate is nearing a cost of 7%. Why so high if inflation is so low? Seems quite the large income spread for the bank that pays some 3% to collect some 7%. Yet as Q2 Earnings Season drifts towards its close, in glancing at banks’ earnings, about 40% of those reporting had lower bottom lines than in Q2 a year ago. The good news is: at least that sudden spate of bank illiquidity during this past March quickly stopped, right? “Whew! That was close!”
As for the S&P 500, at least it finally is correcting, albeit thus far to a rather wee extent. From the year’s high of (4607) to yesterday’s low (4444) spans just -3.5%. And given our initial S&P Futures target from that top is 4455, having since reached down to as low as 4459, we’re nearly there, albeit as herein previously penned: “Other in-house measures suggest the 4300s.” As well, our “live” price/earnings ratio for the S&P 500 — which recently was nearly 60x — has come off, such reading now still an otherwise ridiculously-high 44.8x given annualized risk-free dough pays 5.265% at the three-month T-Bill window; (the yield on the “all-to-risk” S&P is now 1.526%). Still, we believe reversion to the mean will out: it always does. (Anyone remember the March 2009 month-end P/E of the S&P? 13.3x). Too as we tweeted (@deMeadvillePro) this past week, mind the website’s MoneyFlow page, its leading measures of late now weaker than the decline in the S&P itself.
“Also don’t forget that we’re getting close to September, mmb…“
A little seasonal spice there from our Squire. Indeed, September into October have on occasion been torrid times for stocks. Certainly the stars are well-aligned for fallout this time. But then again, they’ve been well-aligned as such since the days of COVID came to be with nary a material pullback to see.
In the interim (short or long as it may be) what we can below see are the 10-day Market Profiles for Gold on the left and for Silver on the right. Therein we’ve present prices (Gold 1946 and Silver 22.75) buried at their respective bases. Moreover as noted in Gold’s aforeshown weekly bars, the Gold/Silver ratio is now 85.5x, the highest week-ending level since that on 23 June (86.0x). Again from the “Means Reversion Dept.” to price Silver via the century-to-date mean ratio of 67.7x puts it at 28.76, (i.e. +21% above today’s 22.75). Again: “Got Silver?”
So as these “Lazy-Hazy-Crazy Days of Summer” –[Nat King Cole, ’63] now work through the so-called “Dog Days of August” let us not be too remiss to “check out”. For the data drums continue with the ensuing week’s slew of 14 incoming metrics for the Econ Baro, including the Conference Board’s lagging “Leading Indicators” for July. Uptrend? Downtrend? The consensus leans to the latter.
Thus what’s on your platter? Hopefully Gold!
Oh nice touch there, Squire, on the Sam Pepys’ Silver plate!
Early on we’ve all eight BEGOS Markets at present within today’s Neutral Zones; volatility is very light. By Market Trends, every component (save for Oil) is now in a decided downtrend, evidence of the Dollar’s strength during the past few weeks. Specific to the Spoo as regards our anticipated run down to at least 4455, yesterday’s low came relatively near at 4474, (considering having come down from our first such musings at 4634 some two weeks ago); Market Profile support shows at 4487, with the first notable resistor at 4514. The Econ Baro wraps its week with the UofM Sentiment Survey for August, plus July’s wholesale inflation read via the PPI.
The Spoo is the sole BEGOS Market at present outside (above) its respective Neutral Zone for today; however by Market Trends, the Spoo’s 21-day LinReg trend has just rotated to negative (as tweeted earlier this morning @deMeadvillePro); we still seek 4454 to trade near-term, (price currently 4508). Session volatility is quite light ahead of retail inflation data. By Market Rhythms on a 10-test swing basis, the Euro’s daily MoneyFlow study remains our most consistent, whilst on a 24-test swing basis ’tis Oil’s 30mn. MoneyFlow. As noted, metrics due today for the Econ Baro include July’s CPI and the months Treasury Budget.
Both Copper and the Spoo are at present above their Neutral Zones for today; none of the other BEGOS Markets are below same, and volatility is light, (Copper the sole components having traced in excess of 50% of its EDTR by Market Ranges). At Market Trends, save for Oil, the seven other markets all find their “Baby Blues” of regression trend consistency in decline, even as the Spoo itself seeks a relief rally off of yesterday’s low (4482, now 4530); by its Market Profile, the Spoo shows trading resistance initially at 4537. Meanwhile, the P/E of the S&P has notably come off from the mid-50s to the mid-40s (still “way too high”) in large part from AMZN (3.7% of the S&P 500) earnings improvement knocking its own P/E down from 300+ to just over 100. With much of Q2 Earnings Season in the books, 57% of the reporting S&P 500 constituents have improved their bottom lines over a year ago.
The Bond is at present above its Neutral Zone for today; below same are Copper, Oil and the Spoo; volatility is again light-to-moderate. Whilst the S&P yesterday rose +0.9%, its MoneyFlow was actually negative, (see S&P: sub-menu MoneyFlow); specific to the Spoo (4525), we continue to seek the 4455 level (i.e. the mid-point of the initial 4498-4411 underlying support structure). At Market Values, we note two excessive readings: Oil is some +7 points above its smooth valuation line, whilst the Bond is some -6 points below same. For June metrics, the Econ Baro awaits the Trade Deficit and Wholesale Inventories.
The Spoo is the sole BEGOS Market at present above its Neutral Zone for today; below same are the Bond, Euro, Swiss Franc and Silver; volatility is light-to-moderate. The Gold Update — whilst depicting price nearing its “flip-to-Long” level by the weekly bars — is nonetheless duly cited as being in sync with the other primary BEGOS components, which save for Oil, are in near-term decline; too we review the S&P’s P/E as posied to revert to its mean, which from the current price level (4478) would be a “correction” of -27% toward the 3200s. The Econ appears starts its week late in the session with June’s Consumer Credit.