Current Affairs/Investing./Television Media

Interesting TACs of the Week (November 19 – November 25, 2016)

Posted on by MV

Summary – A top-down review of interesting calls and comments made last week in Treasuries, monetary policy, economics, stocks, bonds & commodities. TAC is our acronym for Tweets, Articles, & Clips – our basic inputs for this article.

Editor’s Note: In this series of articles, we include important or interesting Tweets, Articles, Video Clips with our comments. This is an article that expresses our personal opinions about comments made on Television, Tweeter, and in Print. It is NOT intended to provide any investment advice of any type whatsoever. No one should base any investing decisions or conclusions based on anything written in or inferred from this article. Macro Viewpoints & its affiliates expressly disclaim all liability in respect to actions taken based on any or all of the information in this article. Investing is a serious matter and all investment decisions should only be taken after a detailed discussion with your investment advisor and should be subject to your objectives, suitability requirements and risk tolerance.

1.Thanksgiving in its glory!

Remember inertia? How a moving force keeps moving? The US indices kept moving up nicely and this week carried with them emerging markets as well. This procession has been led by flag bearers who rode in front of all – CLF up 34% this week & FCX up 16.5%, right in the face of all those commercial shorts in copper. Banks, Semis, Transports – Winners win & losers lose, right? Of course, especially ahead of huge college football game at noon on Saturday. 

charlie-microcaps

 

 charlie-banks

charlie-10-yr-ylds

 

charlie-yen

 

2. What’s Next?

Next week is month-end and a Non-Farm payroll week. Frankly, NFP hasn’t mattered much in the last couple of months. Rate hike by FOMC in mid-December is baked in any way and any outlier NFP number might be dismissed as prone to revision.

But next week might get interesting if longs take profits ahead of the Dec 4 referendum in Italy. Before that comes the OPEC meeting on November 30 and the pre-meeting on Monday, November 28. 

forexlive-eur

 

Euro held the lows but yields did not. 

felder-treasuries-oversold

 

  • “The slump in Treasuries this month is breaking all previous speed limits. A gauge of whether asset-price movements have gone too far, too fast is signaling the slide in the Bloomberg Barclays U.S. Treasury Index is the most overdone since the gauge started in 1973. The relative strength index reached an unprecedented 17.48 last week and was at 17.52 on Monday — anything below 30 usually signals a rebound is due”.

David Rosenberg seemed to concur in his note on Friday:

  • The 13-week rate of change in yields has hit an extreme level that in the past did touch off a bit of a reversal. 

One bit of a non-negative sign is that the 30-year yield did not rise on Friday with the rest of the curve. Over the week, the 30-year yield rose 7 bps while the 10-year, 5-year & 3-year yields rose by 20 bps, 23 bps & 19 bps res. Even the 2-year yield rose by 8 bps, one 1 basis point higher than the rise in 30-year yield. 

On the other hand, the weekly closing levels have decidedly penetrated Gundlach’s “watch out” levels – 2.35% on 10-year, 1.80% on 5-year & 1.1% on 2-year. That makes next week critical, we think. 

For those who dare consider a bit of a reversal in stocks:

What about the U.S. Dollar? Tom McClellan discussed that in his article Peculiar Move by Dollar and Small Caps:

tom-mcclellan-dollar-small-caps

  • “We have seen episodes before when the US Dollar Index rose while this relative strength line was falling, and the basic point is that they do not tend to end well for the dollar trend.  Given the way that these two have related to each other in the past, it is not possible for this current condition to last much longer”
  • “The most likely outcome is that currency traders realize how far they have wandered off course, and get to work on the corrective action“

That brings us to Gold.

3. Gold

Talk about losing luster:

charlie-gold

If you think that is bad,

$100 is another 11% below Friday’s close. And there might be a fundamental trigger to cause that steep a drop. But before that,

dana-fibonnaci-levels

 

Levels, Schmevels! Especially if somethings hits something!  

Felder referred to a Kitco article titled Indian Gold Import Ban: Fact or Fiction? The article quotes “experts” who say both yes & no. What if there is a sudden ban?

  • And while Arora [Nigam Arora, chief investment officer of the Arora Report] thinks if the ban should occur, gold could fall $200 an ounce on a given day, Holmes [Frank Holmes, CEO of US Global Investors] forecasts that it would be more along the lines of a potential $100 decline and then the metal should reset itself.

We have no idea whether a ban will be implemented but we are inclined to think a $200 decline in a day might lead to a buying opportunity. 

 

Send your feedback to [email protected] Or @MacroViewpoints on Twitter   

MV