The Chinese equity market was flat overnight. The offshore dollar/yuan fell a freckle. Gold in yuan rose a percent.
Elsewhere in Asia, Hong Kong rose half a percent. Japanese equities fell a touch. JGB yields rose 4 bps to 1.53%. The dol/yen surged nearly a percent to a new high for the week.
European equity markets were off nearly a percent this morning. German 10yr yields rose 4 bps to 2.69%. The eur/dol fell a touch and once again attacked its uptrend since March.
Over in the US, the equity futures were off a third of a percent ahead of the open. The dollar was a little firmer vs. other colored paper. Gold was up 20 bucks, and silver was up a couple percent to a new multiyear high. Yields were higher.
The S&Ps opened down about a third of a percent, and after quick dip lower, we rebounded back up to a loss of just a touch, where the S&Ps would basically chop sideways all day until a closing slide sent us out back at roughly the open for a loss of a third of a percent.
Volume was light again. Breadth was over 2 to 1 negative on NYSE and nearly 3 to 1 negative on the NASDAQ. New lows edged out new highs the NYSE (17 to 1), and new highs swamped new lows on the NASDAQ (6 to 3).
Stocks Were Lower:
Stocks were mostly lower in no particular pattern.
The XHB homebuilding ETF fell over a percent, and BLDR fell over a percent.
Positions: I made no other changes to my shorts in SPY, QQQ, MDY, IWM, ARKK, XHB, and BLDR.
Commodities Were Higher:
Brent crude rose over 2 percent. Natural gas was flat. The oil stocks were higher, with the oil and gas ETFs all adding a percent or so. The uranium equities were higher, with the URNM adding over a percent.
Copper slipped just over half a percent. Other base metals were lower too, with the DBB base metals ETF losing over a percent. The copper stocks were lower too, with the COPX losing nearly a percent. The steel stocks were higher again, with the SLX adding half a percent to a new high for the year and getting close to a new 52-week high. The XME metals and mining ETF rose over a percent to a new all-timer.
Palladium jumped 6 percent to a new 52-week high. Platinum rose over 4 toa new 52-week high.
Silver edged higher overnight and then ripped to a new multiyear high during the US session to go out on the best levels of the day with a gain of nearly 4 percent. You will also note in the chart above that silver ended just shy of the top of its rising wedge resistance, which could provide an excuse to come in early next week.
The silver/gold ratio jumped 3 percent to a new high for the move.
The CCI equal-weighted commodity index ETF (GCC) rose over a percent. The energy-heavy DBC commodity ETF rose over a percent. The Bloomberg Commodity Index (DJP) rose nearly a percent.
Gold Treaded Popped:
Spot gold worked higher overnight despite the dollar also firming, and the metal continued to move higher during the US session to eventually print a high of $3368.
From there, the metal would back off to around $3350 before ultimately ending the day up at $3354 for a gain of nearly a percent.
Gold Stocks Clawed Their Way Higher Again:
The GDX gapped up slightly and immediately slumped to fill the gap and test the 5 dma from above. That slide marked the low of the day, and the GDX would then firm up to a marginal new high for the day and just above the 20 dma before going out just below that 20 dma with a gain of a percent.
The GDX recovered the 5 dma for the first time in 3 days, which statistically puts the bulls back in charge, although I'm a little worried that the recovery of the 5 dma could be a head fake given that the GDX failed to take out the highs of the week and recover all the ground that was lost during Tuesday's high volume dump.
The GDX/GLD ratio rose a freckle.
The silver stocks were firmer than the gold names. The SIL rose 4 percent to a new 52-week high. The SILJ rose over 4 percent to a new 52-week high, and the GDXJ rose 2 percent.
Real yields were higher, and nominal yields were higher too. The yield curve steepened per the 2/10 spread. The dollar was a little firmer vs. other paper, although that didn't seem to bother gold and certainly didn't bother silver.
We finally got our pop to a new high in silver as expected, and after some sort of rest for a few days, I think it's certainly possible that silver could pop again up to as high as $40 in the Sep contract (it already printed $39.24 on Friday). You will see below that my gold model, which tracks silver as well, produced a Tier 1 SELL, which is another reason why silver may come in some from today's spike high.
After that new high though, I suspect silver may be in for a more prolonged "rest." We shall see, but we are currently in a wave 5 of what has been a pretty clear 5 wave move since the April low. With sentiment getting punch drunk and swap dealers (banks) with a record short position, it's time to be thinking about the exit door, but not necessarily walking through it. A divergence between silver making a new high and the silver mines not doing so is likely in the next week or two in order to mark a multi-week if not multimonth high I suspect.
Gold remains rangey between $3450 and $3200, and I'm becoming a little more concerned about the GDX potentially attacking this week's low down around $50 if the dollar continues to firm, which has managed to bounce for far longer than I have been anticipating.
Trump has threatened over the weekend 30% tariffs on Canada and Mexico effective Aug 1st if no deals are cut, and while gold has typically rallied on these tariff headlines and the dollar has weakened, that wasn't the case last week. So, I'm not sure how markets will react.
We also get the CPI on Tuesday, which is expected to show some tariff related inflation for the first time.
My gold model spit out a Tier 1 SELL for the first time since the Trifecta SELL (a Trifecta is a T1, T2, and T3 all on the same day) back on 6/13 that marked the high in the GDX.
Positions: I sold my GDX 52 calls for 36 cents, which wasn't a bad trade by any means, and I sold my SLV 34 calls and 34.5 calls for 37 and 8 cents respectively, which weren't great sales considering they traded a lot higher later in the day, So it goes though...
I also sold my AGQ simply because it was up a ton and a pullback is probably due. I also sold my GDXU because I didn't like the fact that the GDX was unable to take out its highs for the week even as gold and silver did.
I'm not exactly sure why GDX acts as poorly as it does, and Tuesday's high volume dump was a little odd too. Perhaps it's nothing, and GDX will take out this week's highs early next week. However, if it doesn't, there's risk that it could break down below this week's lows in conjunction with a further rally in the dollar and a selloff in the equity market as gold perhaps corrects further within its range and silver merely pulls back. I bought some GDX 50 puts for next Friday for any average of 17.5 cents.
The Dollar Was Firmer vs. Other Paper:
The dollar was firmer vs. other paper and continues to bounce. The dollar index rose a third of a percent to another new high for the move. The squeeze continues...
"The" BTC ETF (IBIT) jumped over 4 percent to a new all-timer. MSTR, COIN, RIOT and other BTC derivatives were mixed.
Positions: Long IBIT (last add was to double the position on April 4th at 47.03).
Treasury Yields Were Higher:
Treasury yields rose 7 bps in the long end, which left the 10yr yield at 4.42%.
The 2/10 spread widened and once again bounced off its uptrend since December. As the curve steepens after being inverted for an extended period of time, we typically start to see things go awry in the equity market ahead of a recession (like we are now). That will bring on Fed easing eventually, which is what gold wants, but not just yet.
Yields in the Fed sensitive 2yr rose 2 bps to 3.89%. Junk debt was lower, with the HYG losing a touch. LQD, which is the investment grade corp bond ETF, fell half a percent. MUB, the muni ETF, fell a touch.
To Sum Things Up:
Equities continue to shrug off pretty much anything that might be negative, but let's see how they react to this latest threat from Trump against Mexico and Europe and to a potentially hotter CPI on Tuesday.
REMAIN FLEXIBLE
