friday wrap, June 6

market vibes

“Mistakes are always forgivable, if one has the courage to admit them.” Bruce Lee

May’s NFP at 139K was high, considering credible opinions were looking for sub-100k or lower. Despite a downward revision last month, the markets, or word algorithms rather, were programmed to buy on an upward miss in payrolls and they did. UE was unchanged at 4.2. S&Ps popped 70, the Dow rallied 500, and NDX rallied 250. The dollar did rally as promised by the press, but oil, bitcoin, silver, and gold were unfazed. They had their own issues.

Bonds (chart below in hourly data) traded at 114.10 on yesterday’s initial claims (produced by the BLS) and traded at 112.09 just minutes ago (thanks to the BLS).

80% of the rally in stocks today happened within microseconds at approximately 8:30:00.005 AM EDT. By the 9:30 equity opening, prices turned lower for most of the session.

Silver made new contract highs of $36.51, held its gains, and posted a new high close for all contracts, usually meaning margin calls for the entire short side of the book.

Silver had an excellent week, accelerating above sequential multi-year ranges in force since the Y2-teens. I like the April 4 isolated low (encircled chart below), indicating extreme long liquidation, leaving the long side of open interest in “anchored” control, which has proven to be more powerful than the habitual suppression of the shorts.

In fact, the SLV shorts had a challenging week of gamma hedging. If anyone has ever had the job, it’s akin to being a chain smoker in a gas station.

Gold did nothing today, but it really has nothing to prove. There might have been some movement from gold into the white metals this week. A flat range in gold should be welcome to the owners of hedged gold in the warehouses. A spike higher in silver is going to cost them relentlessly funding the carry in a bull run.

The rally in silver knocked the stuffing out of the gold-silver ratio, and part of the silver rally might have been liquidation of the GSR, but there is no evidence of that in open interest.

August WTI rallied again and closed a few ticks above its April/May highs. In fact, the front of the WTI curve has tightened despite weak product cracks and spreads.

The impetus is the front spread, although there is crude in the US, product inventories are ample, and demand is not great. The rub is an ad hoc producer strike.

Rigs are down 10% in a month. It seems no one is drilling new wells, and OPEC production increases haven’t changed the daily auction. A cynic might say the oil patch liked Biden a lot better than Trump! They are, in fact, subsidizing Iran’s production with their production cuts. That is pretty crazy!

my vibe

Silver and platinum have been a refreshing reminder that some markets are still partially free. Most stock indexes trade like regulated goo oozing from a tube. Oil is totally upside down. OPEC said they’re going to pump, and the boys in Texas skedaddled!

Trump said it’s time to cut a full point. Be bold. Better to really grow and fight real inflation than simper about basis points and celebrate 139K new payrolls. Perhaps the FOMC is disinclined to cut rates for the same reason most people don’t do almost everything. “No” feels a lot better than yes, even when it’s wrong.

If you’re planning some time off, there’s no data on Monday, no data on Tuesday, CPI Wednesday, PPI Thursday, and U Mich on Friday. The FOMC meets on June 17 and 18 the following week, so definitely take Monday JUne 16!

Andre Rieu very chill alternative rock

extra credit: Mike Benz: essential insights in Musk

Have a wonderful weekend…

JJ

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Charts and data CQG and Bloomberg

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