friday wrap, july 25

market vibes

“Choosing the lesser of two evils is still choosing evil.” Jerry garcia

Gold fell a little more than expected today but rallied back to its POC at $3,340.00 after the pit close. What appeared to be a hit-and-run trade from Tuesday to Thursday apparently dragged a lot of buyers into the market above $3,400.00. Most of those longs stopped out yesterday and in Asia. The rest this morning.

It will be interesting to see if the 50k lots of new open interest Wednesday morning ended the week flat.

In daily data open interest is historically low (next chart). It has been my contention the glut of gold in Comex warehouses is hedged in futures. Therefore as much as 75% (300,000 to 350,000 lots) of the short side of the book is passive and when 50k new longs try to liquidate in a sell off 75% of the shorts are may not be contributing liquidity. Think of it like 4 sellers for every buyer. Lower prices can attract new buyers but the imbalance makes long below the POC now a risky position.

I always have a stop.

I expected silver to be weak today. Silver is always weak when millions of ATM SLV calls are expiring.

Stocks came in lower as usual and rallied as usual, in a steady low-vol creep. Profit-taking trimmed gains a few minutes before the final bell, but the algos swept in to defend the settlement. As you can see, volume in the last 15/20 minutes of the day is about equal to the previous 6 hours and 25 minutes. This is actually the rule, not an exception.

This is a chart of the last 4 sessions this week. Volume is always higher on the opening and close, but closing volume is always at least 2X the opening. I could create a month of 5-minute fractal sessions to make a point. However, if you trade stocks, you know I am correct. The algos save their volume for the close because they want it to close high and it usually does.

WTI fell $0.85 to $0.95/barrel on news Trump Is preparing to grant new authorizations to oil companies with assets in Venezuela, allowing them to operate with limitations and swap the produced oil, in a rare policy shift. My guess is he’s opening new supplies in anticipation of sanctions on Russia.

No doubt Putin is preparing to “immunize” the effects sanctions himself. If Trump does reopen Venezuela to US majors and operators, he won’t be able to change his mind on a dime. Therefore, this could be enduring new supply even if Putin comes to the table.

The September-October-November fly made new lows. Lower crude prices stabilized spreads and cracks.

This declining wedge (next chart weekly data) has been forming for 3 years, and sellers have become more and more aggressive competing for buyers as the trend went lower.

Margin liquidation as equities crashed in April took crude and other assets down with it. The oil markets were not prepared for $55.00 crude and Texas drillers started shutting rigs. Bad idea, I think. KSA, Iran, and Russia are prepared to sell oil at $55 or lower. Venzuela is coming back. Rigs in Canada are rising.

The war pop in June wiped out what few shorts existed and that made the oil market weaker, imo, in my opinion.

We have an isolated high in weekly data in Bitcoin.

Friday’s close was not great.

my vibe

This was not a good week for anything. Gold failed at $3400 again and fizzled. Silver was surprising docile at the doorstep of $40.00/ toz. Bitcoin looks iffy to me. I don’t like stocks full stop.

The most attractive possibilities are POC (point of control) failures in gold and oil. Both are massive formations of organic compression and every major POC ultimately fails. A quarter of the world’s oil is under sanctions or punitive tariffs or war. Imagine the price of a barrel if it weren’t. I still have a very small position in silver because I think we’re going to $50, but that might be after the FOMC cut in September or next year. I’m cool with that.

I think… I’m still trading like Biden was still President. I need to get that out my head. Everything is different. I need to be different, too.

this is a jerry garcia version of a dylan fav in some club in 1986 perfect listening with a whisky (or two) on a Friday night.

JJ

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Charts and data CQG and Bloomberg

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