Trading the Trend

[over9k]

They're bickering about what it contains.

Which they will continue to do for **** knows how long, playing the political blame game etc etc. The house sits until next friday but the senate still sits until the 7th.

 

[ducati916]

So just having my first coffee of the morning:

So $VIX jumped a bit (at overall lower levels) and the market is down about 0.5%+/-. Nothing more than a routine fluctuation. Banks are holding up pretty well (relative) to the previously hot areas of the market. Bit of a snooze-fest to the end of the week.

jog on
duc

 

[ducati916]

Gold & Silver:

Silver simply isn't confirming the trend in gold. Historically, it always has. Why not this time? Or is the move in silver just getting underway? Feel free to educate me.

jog on
duc

 

[ducati916]

Sectors currently:

Banks holding up pretty well.

jog on
duc

 

[ducati916]

Lots of Oil news:

Friday, July 24th, 2020

Oil fell back to around $40 for WTI and $43 for Brent – familiar territory for the market over the past few weeks. The EIA’s data for this week was more downbeat, dashing hopes of positive momentum. Still, crude remains stable and steady at around $40, trapped between coronavirus fears on the downside, and improving fundamentals on the upside.

Goldman: More M&A to come. The Chevron (NYSE: CVX) purchase of Noble Energy (NASDAQ: NBL) may spark more M&A activity. Goldman Sachs said more M&A could be positive for the macro outlook for oil because consolidation will translate into slower production growth. “We believe strip prices are too low and are likely to move higher in 2021, a catalyst not only for fundamental upside to E&P stocks but also for potential M&A values,” Goldman Sachs said in a note.

NY seeking bids for 4GW of renewables. New York is seeking bids for 2.5 GW of offshore wind and 1.5 GW of onshore renewables. The state will also invest $400 million in port upgrades to support offshore wind.

Saudi Arabia explores asset sales. Saudi Arabia is accelerating plans to sell off state assets and is considering an income tax in order to shore up its budget.

Equinor posts surprise profit. Equinor (NYSE: EQNR) said that it earned $646 million in the second quarter, down by half from a year ago, but much better than analysts had anticipated. Notably, however, Equinor did not touch its long-term oil price forecasts, so it did not report any write downs.

Schlumberger cuts 21,000 jobs. Schlumberger (NYSE: SLB), the largest oilfield services company in the world, said it would eliminate 21,000 jobs. The company posted a loss of $3.4 billion in the second quarter, including a $3.7 billion dollar impairment. Schlumberger’s CEO Olivier Le Peuch said the company is preparing “for a market of smaller scale and lower growth outlook, but with higher returns.”

ConocoPhillips buys Montney shale assets. ConocoPhillips (NYSE: COP) said it would spend $375 million to acquire 140,000 net acres in the liquids-rich Inga-Fireweed asset of the Montney shale in British Columbia. The acquisition adds over 1 billion barrels of oil equivalent to reserves, with an all-in cost of supply in the mid-$30s.

Tesla announces gigafactory in Texas. Tesla (NASDAQ: TSLA) confirmed rumors that it plans on building a gigafactory in Austin, Texas. The factory will be used to build the Cybertruck, Tesla’s electric pickup.

Congestion at China’s oil ports. Congestion at China’s east coast oil ports are adding costs for shippers and importers, a bottleneck that could stretch into August. China has purchased a record amount of oil in recent months.

U.S. oil production increase likely fleeting. The rise in weekly production to 11.1 mb/d in the latest EIA data will likely be temporary, according to analysts. The steep declines in shale wells are expected to overwhelm the return of shut-in production by the end of the summer, dragging overall output back down.

Russia considers oil hedge. Pemex routinely secures massive oil hedges, but Russia appears ready to follow suit. President Vladimir Putin gave his government the go ahead to consider hedging Russia’s massive oil and gas export revenues to protect the country from drops in prices, according to Bloomberg.

Chevron turns to solar…to produce oil. Chevron (NYSE: CVX) is using solar in California to cut the cost of oil production.

Political strife in Guyana threatens oil future. Months of deadlock over a disputed presidential election has ratcheted up tensions in Guyana. President David Granger is widely interpreted as having lost the election, but has refused to concede. ExxonMobil (NYSE: XOM) admitted in an earnings call that the political conflict has slowed key permitting decisions. Exxon pushed back its oil production goals by six to 12 months.

Malfunctioning flares in Permian leads to high methane emissions. One in every 10 flares in the Permian basin in June was unlit, venting unburned methane into the atmosphere, according to a new report.

Baker Hughes sees long road to recovery. Baker Hughes (NYSE: BKR) reported a net loss of $201 million in the second quarter and does not see a swift rebound ahead. “Although the majority of lockdowns have been easing globally and economic activity likely troughed during the second quarter, visibility on the economic outlook remains extremely limited,” said Lorenzo Simonelli, CEO of Baker Hughes.

Slight uptick in LNG prices offer glimmers of hope. LNG spot prices in Asia (JKM) rose to $2.40/MMBtu on improving demand, compared to the record low of $1.85/MMBtu in May. Demand in Asia is rising steadily.

Shale lending contracts. Banks have already cut their reserve-based lending amounts, but the tightfisted approach is showing no signs of loosening. Lack of capital puts a lot of shale drilling in danger. “As long as oil prices stay at $40 or less and gas stays at $2 or less, I think banks are going to continue to be very cautious and continue to pull back,” said Spencer Cutter, an analyst at Bloomberg Intelligence. “It’ll be the end of shale if oil stays below $40.”


jog on
duc

 

[qldfrog]

Gold & Silver:

View attachment 106433 View attachment 106434 View attachment 106435 View attachment 106436

Silver simply isn't confirming the trend in gold. Historically, it always has. Why not this time? Or is the move in silver just getting underway? Feel free to educate me.

jog on
duc

Wish silver is just having a pause and will actually upstage gold going forward.
gold will probably fall on announcement of stimulus and silver jump higher so i suppose people are taking profit and moving to gold until stimulus
Silver rise was pretty abrupt so a pause is expected
In short: i have no clue

 

[qldfrog]

Vix down below 26...no worries it says..
Have all a great week end

 

[Chronos-Plutus]

Gold & Silver:

View attachment 106433 View attachment 106434 View attachment 106435 View attachment 106436

Silver simply isn't confirming the trend in gold. Historically, it always has. Why not this time? Or is the move in silver just getting underway? Feel free to educate me.

jog on
duc

Managed money clearly moving into long future silver positions, taking delivery :

https://www.cmegroup.com/tools-information/quikstrike/commitment-of-traders-agricultural.html

 

[ducati916]

Managed money clearly moving into long future silver positions, taking delivery :

View attachment 106447

https://www.cmegroup.com/tools-information/quikstrike/commitment-of-traders-agricultural.html

Last week's COT:

Commercials leaning against. Not that heavily mind.

Gold on the other hand:

Why has gold so outperformed silver?

jog on
duc

 

[Austwide]

Fairly new to watching metal prices, more so looking to learn based on comments in these threads.
The past 9 years or so the ratio has been steadily rising and had a sharp increase and fall this year.

Gold has risen about 27% since its low in march and silver has almost doubled over that time.

To me on this time frame Silver is the big performer

 

[makteb]

Gold & Silver:

View attachment 106433 View attachment 106434 View attachment 106435 View attachment 106436

Silver simply isn't confirming the trend in gold. Historically, it always has. Why not this time? Or is the move in silver just getting underway? Feel free to educate me.

jog on
duc

The market does what it does. It is our duty to take a piece. If you are after an explanation, I do not have one, but there may be one in hindsight. Of importance is the movement of hedging/asset class change with precious metals as seen from history.
And some here have done just that.

 

[Chronos-Plutus]

Last week's COT:

View attachment 106448

Commercials leaning against. Not that heavily mind.

Gold on the other hand:

View attachment 106449


Why has gold so outperformed silver?

jog on
duc

The silver market is a thin market compared to gold. All it takes is the managed money to take delivery on the long futures and silver should move higher.

 

[ducati916]

Gold and silver are normally proxies for inflation. Silver (to date) has simply not confirmed the move in gold. A further indicator of inflation are Treasury Inflation Protected Securities or TIPS. They and gold are highly correlated.

So certainly 'inflation' is in issue. There was this link placed on another thread: https://themarket.ch/interview/russell-napier-central-banks-have-become-irrelevant-ld.2323

Only partly true. The inflation of the 1970s was caused by:

(a) Nixon defaulting in August 1971;
(b) Two oil shocks;
(c) COLAs within Employment contracts and strong Unions;
(d) Food based commodity shock;
(e) Hot war in Vietnam.

The 'unemployment' was not a cause, it was a consequence of strong labour Unions reducing volume of employment through overpricing the cost of employment. Therefore the current unemployment rate is more likely to lead to disinflationary pressures than inflationary ones, certainly in the US.

This is the question (which has historical precedent and is addressed in the article).

This is different (this time). The Fed has gone outside of its mandate, 1913 Act, and loaned directly to businesses, rather than being simply the 'lender of last resort' to the Banking system. Therefore, while in the GFC, the QE programmes never ignited the inflation torch, possibly, lending directly into the non-financial world, the effects could be different.

Disinflation was created by China and improving and increasing technology in the production process, much like the Industrial Revolution was disinflationary. In addition we had the end of the Cold War (Soviets) that was also disinflationary.

So inflationary pressures:

(a) Cold War II (if it escalates will be inflationary) as the forces of globalisation will be stunted;
(b) The news from the oil patch is not great. While it may/may not represent an oil shock to the upside yet, it may;
(c) Significant money creation world-wide. The US creates more because it is the primary Reserve Currency, which paradoxically can be disinflationary as it keeps zombie companies alive adding to supply;
(d) Employment costs is a non-issue, Trade Unions are (pretty) powerless currently;
(e) What will the Fed do?

Actually the Fed. has been pretty hot on inflation (Bernanke and Powell, Yellen slower) raising the discount rate. It is however a risk that inflation gets away for a period of time until it is recognised.

In part the other thread was pondering what could be done to protect the portfolio from rising/rampant inflation. The general theory was gold/silver. Which is fine for silver, it is nowhere near its previous highs, but gold has already moved to its all time highs.

The question and the big risk is: what happens if the Fed. finds another Volcker? Gold and silver will be absolutely crushed. They perform really woefully in a rising interest rate environment. We also know (highly likely) that in a similar way to the gradual exit from the GFC, rates rose, so again, will rates rise. Bonds and PMs will fall. Due to duration, long dated bonds have greater volatility. Going short 20yr Treasury will pay if rates rise.

This is TTT the x3 inverse of TLT. There will be some bang for the buck as rates normalise (over time). If there is inflation and rates move like they did in the late 1970s, well, this will explode. Further, this is pretty much the bottom. Powell has signalled very strongly that the US will not go negative. If so, welcome to the bottom.

Dr Copper is signalling that world trade is on the mend. Which means that oil consumption will rise. POO is largely driven by China or was previously, due to the US shale production. That looks crippled for the near term. As economies re-open there is the possibility of an oil shock (higher) due to the reduction in supply. There could also be a war in Libya for control of its oil. Depending on what the US dollar does, that could be inflationary to the US. Rising rates attracts foreign capital flows: stronger dollar, but weaker Bond prices at the long end.

Commercials positions from last week.

jog on
duc

 

[ducati916]

The silver market is a thin market compared to gold. All it takes is the managed money to take delivery on the long futures and silver should move higher.

There has been a disconnect 'twixt physical and paper for quite some time though. Has something changed?

jog on
duc

 

[Chronos-Plutus]

Gold and silver are normally proxies for inflation. Silver (to date) has simply not confirmed the move in gold. A further indicator of inflation are Treasury Inflation Protected Securities or TIPS. They and gold are highly correlated.


View attachment 106470

So certainly 'inflation' is in issue. There was this link placed on another thread: https://themarket.ch/interview/russell-napier-central-banks-have-become-irrelevant-ld.2323

View attachment 106464

Only partly true. The inflation of the 1970s was caused by:

(a) Nixon defaulting in August 1971;
(b) Two oil shocks;
(c) COLAs within Employment contracts and strong Unions;
(d) Food based commodity shock;
(e) Hot war in Vietnam.

The 'unemployment' was not a cause, it was a consequence of strong labour Unions reducing volume of employment through overpricing the cost of employment. Therefore the current unemployment rate is more likely to lead to disinflationary pressures than inflationary ones, certainly in the US.

View attachment 106465
This is the question (which has historical precedent and is addressed in the article).

View attachment 106475

This is different (this time). The Fed has gone outside of its mandate, 1913 Act, and loaned directly to businesses, rather than being simply the 'lender of last resort' to the Banking system. Therefore, while in the GFC, the QE programmes never ignited the inflation torch, possibly, lending directly into the non-financial world, the effects could be different.

Disinflation was created by China and improving and increasing technology in the production process, much like the Industrial Revolution was disinflationary. In addition we had the end of the Cold War (Soviets) that was also disinflationary.

So inflationary pressures:

(a) Cold War II (if it escalates will be inflationary) as the forces of globalisation will be stunted;
(b) The news from the oil patch is not great. While it may/may not represent an oil shock to the upside yet, it may;
(c) Significant money creation world-wide. The US creates more because it is the primary Reserve Currency, which paradoxically can be disinflationary as it keeps zombie companies alive adding to supply;
(d) Employment costs is a non-issue, Trade Unions are (pretty) powerless currently;
(e) What will the Fed do?

View attachment 106476

Actually the Fed. has been pretty hot on inflation (Bernanke and Powell, Yellen slower) raising the discount rate. It is however a risk that inflation gets away for a period of time until it is recognised.

In part the other thread was pondering what could be done to protect the portfolio from rising/rampant inflation. The general theory was gold/silver. Which is fine for silver, it is nowhere near its previous highs, but gold has already moved to its all time highs.

The question and the big risk is: what happens if the Fed. finds another Volcker? Gold and silver will be absolutely crushed. They perform really woefully in a rising interest rate environment. We also know (highly likely) that in a similar way to the gradual exit from the GFC, rates rose, so again, will rates rise. Bonds and PMs will fall. Due to duration, long dated bonds have greater volatility. Going short 20yr Treasury will pay if rates rise.

View attachment 106466

This is TTT the x3 inverse of TLT. There will be some bang for the buck as rates normalise (over time). If there is inflation and rates move like they did in the late 1970s, well, this will explode. Further, this is pretty much the bottom. Powell has signalled very strongly that the US will not go negative. If so, welcome to the bottom.

View attachment 106469

Dr Copper is signalling that world trade is on the mend. Which means that oil consumption will rise. POO is largely driven by China or was previously, due to the US shale production. That looks crippled for the near term. As economies re-open there is the possibility of an oil shock (higher) due to the reduction in supply. There could also be a war in Libya for control of its oil. Depending on what the US dollar does, that could be inflationary to the US. Rising rates attracts foreign capital flows: stronger dollar, but weaker Bond prices at the long end.

View attachment 106471 View attachment 106472 View attachment 106473 View attachment 106474

Commercials positions from last week.

jog on
duc

"The Fed has gone outside of its mandate" I laughed when I read that. That is an understatement.
The Fed are going Bank Of Japan style; they will eventually directly buy on market.

You don't seem convinced with silver Mr Duc. I think we need to keep in mind that we are comparing a trillion dollar market, which is gold; to a hundred billion dollar market, which is silver.

As sure as the sun rises in the morning, silver will have its time to shine.

 

[Chronos-Plutus]

There has been a disconnect 'twixt physical and paper for quite some time though. Has something changed?

jog on
duc

I think what has changed recently is the managed money taking long future positions and increasing over the month or so. You can see it on the green bars that I posted above. This is a very good sign for silver, in my opinion.

 

[ducati916]

"The Fed has gone outside of its mandate" I laughed when I read that. That is an understatement.
The Fed are going Bank Of Japan style; they will eventually directly buy on market.

You don't seem convinced with silver Mr Duc. I think we need to keep in mind that we are comparing a trillion dollar market, which is gold; to a hundred billion dollar market, which is silver.

As sure as the sun rises in the morning, silver will have its time to shine.

Which surely means that silver should be through the roof, if only a fraction of the money is required to create a rise in price.

jog on
duc

 

[Chronos-Plutus]

Which surely means that silver should be through the roof, if only a fraction of the money is required to create a rise in price.

jog on
duc

Well the forces that attempt to keep the gold and silver price suppressed have been relentless over the last decade. This order has been weakened recently and is disintegrating; as such bullion banks have been withdrawing from the market because of the insurmountable losses they have occurred over the last year.

 

[Chronos-Plutus]

Which surely means that silver should be through the roof, if only a fraction of the money is required to create a rise in price.

jog on
duc

Are the bullion banks ready to fight the Green Army that want to electrify the world with electric vehicles and solar panels? Silver is the ultimate industrial metal for electrification with the greatest electrical conductivity and thermal conductivity. Silver is also the preferred monetary metal over millennia.

I will buy silver, get my popcorn out, and put my feet up to watch the slaughter of the bullion banks over the next few decades

 

[ducati916]

Are the bullion banks ready to fight the Green Army that want to electrify the world with electric vehicles and solar panels? Silver is the ultimate industrial metal for electrification with the greatest electrical conductivity and thermal conductivity. Silver is also the preferred monetary metal over millennia.

I will buy silver, get my popcorn out, and put my feet up to watch the slaughter of the bullion banks over the next few decades

All of the various conspiracy theories (whether true or false) have been around forever. Nothing new there. What is new is gold going (went) off on its own. It has been pointed out that one can lag, but we are only talking a couple of weeks. We are now 4 months into this and silver has only just woken up.

Why?

jog on
duc