evening wrap, october 24

market vibes

“‘Tis the night of the grave’s delight soon!”

Looking back at the 3rd week of October, the flotsam and jetsam in oil and metals seemed far less chaotic at the close today. Frenzied volumes mellowed. Inflation came in surprisingly dovish, and a sunny zeitgeist in equities arrived like the cavalry at the nick of time. Gold and silver finished down 5%; not too bad actually. Bitcoin and S&Ps finished up 1.8% and 1.5%. Stocks of course hit another countless all-time high. WTI was up 6.5%, the long bond was +4 ticks, and the dollar was up .63 bps.

Individual stocks were actually mixed. GS, Boeing, and Ford had big gains (good earnings). Big tech was up 1%ish. Netflix fell again. I get a bad feeling about Netflix, not that I know anything but the chart looks bad. The Mags report next week. Indexes did post record highs. The Dow crossed 47,000 for the first time in history. Shelter and gasoline may be moderate, but the shares of companies that produce them are inflating daily.

In the markets, weekly data tonight

Gold volume increased at an accelerating rate from the week of 18 August for 8 consecutive weeks, peaked last Friday, and decelerated abruptly on Wednesday. Combined volumes on Thursday and Friday were lower than peak volume last Friday. The fever has broken, IMO.

In daily data, there is a 3-day up wiggle in December gold (primary low = A, followed by a reaction low = B, and a third low exceeding B but not A = C). Execute on a close above B and stop out on close below B. Technically the trend in gold is still up.

Note: a failed wiggle is as good as a wiggle.

In silver, this ‘DMI 1-bar false positive’ (the isolated blue bar on Thursday) means buyers were able to rally the market into the void between $49.30 and $49.60 but lost momentum in resistance. The sell-off this morning reinstated the downtrend (red bars). Even though prices rallied on CPI, the trend in silver is still down; however, there is a three-day up wiggle in silver as well. Murky picture!

I’m bullish on silver and gold but there are no safe entries here. If I had to take a position, I’d buy as close to $47.64 as possible and stop out under $47.64 or stop out under $47.385 if I were willing to take a bit more risk. I’m not convinced this is a hard low. On the other hand, there is another big option expiration on November 21 but that’s a month away. A lot can happen in a month.

High volume in gold and silver is instructive when analyzing the S&P on low volume.

When markets move away from a high volume area it is clear who has dominant location. It is likely the architects of the software created rules to eschew surges and vol spikes that give sellers good location. TWAPs are not built to create vertical moves; they are created to maintain an increase at extremely low vol.

I wrote an algo in 2015 that stopped buying when prices exceeded the VWAP by a variable amount. If prices traded below the VWAP it accelerated. It worked great! Processing high volume over time is always relative to liquidity; therefore, these very low volume numbers mean a very modest amount of AUM is going into the stock market on these new highs. That’s a good thing.

Oil closed lower following a day of ferocious short covering. The narrative is bullish but technically this looks dangerous. No one is short anymore… no one. I wonder who was long to sell it because they are flat, too.

I won’t pass judgement yet but if this is another Trump and Dump I’m going to be seriously annoyed..

Bitcoin was up $500 (at least it wasn’t down). The thing about Bitcoin is the financial community and political establishment are heavily invested. However, the needs of the P&L are suffocating it and I think they must be aware. Call me crazy but … do you see what I see?

In other markets, PGMs followed gold and silver, copper is motionless and range-bound.

my vibe

The VIX is down, yields are down… a chill mood for a change in markets and some chilly weather this weekend. The boom in gold made it easier to live with a messy world lately, and just like the efficacious strategy on Wall Street, unchanged is up in my book. I won’t tempt the Gods by saying we’re on the other side, but I’ll say the other side… if this is it… looks pretty good.

remember when Fallon was a good guy?

fell down a rabitt hole w Ingrid Michaelson what a singer.

Bon weekend!

JJ

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