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September 22, 2017
 
     
  More NoKo Threats Pop Gold $5  
     
 

The Chinese equity market fell a touch overnight. Hong Kong fell a percent, and Japan fell a touch. JGB yields were unch at 3 bps above the BOJ’s target of zero.

European equity markets were up a touch this morning. Meanwhile, German government 10yr yields were unch at 0.45%.

Over in the US, the equity futures were off a touch ahead of the open. The dollar was weaker vs. other paper. Gold was up about $3 after having been up as much as $7 overnight after some “war buyers” chased it on some NoKo headlines about potentially testing an H-bomb over the Pacific. Bond yields were also a little lower.

We opened down a touch in the S&Ps and after some bouncing around between the opening lows and the unchanged mark, the S&Ps eventually firmed in the afternoon to go out near the best levels of the session with a gain of a freckle.

Volume backed off a little (0.7 bln on the NYSE and 1.7 bln on the NASDAQ). Breadth was nearly 2 to 1 positive on both exchanges. New highs swamped new lows on both exchanges (149 to 18 on the NYSE and 123 to 25 on the NASDAQ).

Stocks Were Mostly Higher:

Stocks were mostly higher in no particular pattern, although I do find it interesting that the largest stock by market cap in the galaxy (AAPL) was off a percent and continues to roll over from what appears to be a significant top on the charts. Where AAPL goes, the S&Ps generally follow…

Commodities Were Mixed:

Brent crude rose half a percent a new 5-month high. Copper bounced half a percent. Palladium bounced a percent, and platinum fell half a percent to a new 2-month low. Silver bounced a freckle. The CCI equal-weighted commodity index ETF (GCC) fell a freckle.

Gold Bounced:

Dec gold popped nearly $7 overnight in Asia to as high as nearly $1302 on some headlines out of NoKo about threats to detonate an H-bomb over the Pacific, but the metal rolled over in Europe and gave most of that back by the time the US session began, leaving the metal only up about $3.

Following a brief pop back up to $1301 that failed to take out the overnight highs, the metal rolled back over again and retested the lows before eventually going out back near the mid-levels of the equity session at $1300 for a gain of half a percent on a spot basis.

Gold Stocks Bounced:

The GDX opened higher inside of yesterday’s trading range, and after rallying up to just under the 5 dma, which has been closing resistance every session since the recent peak, the GDX rolled back over and tested the 50 dma from above before bouncing into the close to go out roughly in the middle of the day’s trading range with a gain of over a percent. Volume was light once again.

As expected, we seem to be getting a bounce in the metal and GDX, but I can’t say I am too impressed thus far, especially since it took “war buyers” on NoKo headlines to get the rally going in the first place. Thus, I expect we could see the correction continue into the end of the month next week if the dollar continues to firm.

The prior two Mondays haven’t been too kind to gold or the GDX, and if NoKo doesn’t reward today’s “war buyers” with some mischief over the weekend, the coming Monday may well disappoint as well. Then on Tuesday we’ll get the COMEX option expiration and a luncheon address from the Hobbit, which should include some monetary policy comments.

The Dollar Was Mixed vs. Other Paper:

The dollar began the day lower but firmed to end mixed vs. other colored paper. The dollar index fell a freckle.

Treasury Yields Were Roughly Flat, As Was The Yield Curve:

Treasury yields fell 1 bp in the long end. Yields in the Fed sensitive 2yr rose 1 bp to 1.46%. Junk debt was higher, with the HYG picking up a hair.

To Sum Things Up:

September seems to have been an unusually good month for the stock bulls this time around, but in the past when that has been the case, October often times will be a far more negative surprise than most expect. And don’t forget that both the Fed and Treasury will both be sellers of US debt in October, with the Treasury being the far more aggressive seller at probably around 80x what the Fed will be allowing to run off its balance sheet over the next couple months if past debt ceiling increases are any guide. How interest rates respond to that increased supply could be the big surprise that nobody is presently expecting.

 
     
     
 
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