evening wrap

market vibes

April 8… )

"To survive a war, you gotta become war.” John Rambo

Today, China drew first blood. CNH made all time lows vs USD (chart below). “We will fight to the end.” China’s Commerce Ministry.

Metals sagged in sympathy, but gold was surprisingly steady. As I noted this morning, China is thought to be selling treasuries and buying gold. Traders are expecting a firm session in Shanghai tonight. The oil ship has sailed without the bears. A live podcast with Maggie Lake this morning and more straight ahead.… Let’s get started.

Everyone thought stocks would be up today, including me. But prices fell all day. By 3:00 PM, the rally was rout.

A vast amount of script has been sold into the market, and prices have generally discounted that. But buyers are taking protection with wide spreads in thin conditions. Which is good trading. Market makers are not the Red Cross. They are going to charge for liquidity. So would you.

A parallel day is usually and indication of uncertainty.

Gold (next chart) had an inside day. Volume fell off a cliff. Oscillators and trend indicators are negative, but prices are not breaking. Watch the Shanghai premiums tonight.

Silver came in higher and faded slowly with equities and a sluggish slide in gold. The GSR is trading ca 100, and the prices are $30 and $3000. Silver surprises me. I covered ICBC during the 2010/2011 run to $50 in April 2011. China is 100% silver country. However, so far, that has not been a factor

I would avoid buying silver between $30.75 and $31.35. I think there’s a margin of safety at or below $29.12.

Copper had an inside day, closing on the lows in sympathy with equities and oil, as it should. Gold is steady. Silver is sort of steady, and copper is not steady at all. Right now, the “fight” is probes and jabs. If it turns into a slug fest, China will need cash. Collateral could be at risk.

Although the time sample is small, CBOT 30-year long bonds made new lows for the week, month, and quarter today. If there was any doubt that China is selling bonds with a purpose, today’s activity in CNH leaves no doubt in my mind. Bonds should be bid with stocks on the lows, and the front of the curve looks fine.

Oil fell 3 dollars as the session unraveled. All 3 front months of gasoline fell into the low $1.90s. The lower it goes, the worse it looks.

Dec Red Dec settled .71 contango. Brent spreads from 6 months forward slipped into contango. Oil is coming.

my vibe

This is a contest of can’t not won’t, I think. China is in a debt loop that might be worse than ours. Our finances are each equally unsustainable. Status quo for us is not an option. Change for them is equally unacceptable. Japan and Europe are no better. none of them can exist without their tariffs. In short this is a margin call of trillions between countries, not a local futures or credit and banking issue. At midnight, we cross the Rubicon. Actually, China crossed it earlier today.

I did a podcast with Maggie Lake this morning that was unfortunately interrupted by some tech issues with me (or maybe Stubstack). At any rate, I got into some of the markets in some detail. I was decidedly circumspect about equities but I didn’t expect the Chinese to hit first.

JJ&Maggie April 8…)

Have an excellent evening and good luck in Asia!

JJ

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