Shorting Oil: A trade!

We continue to be long-term bulls on oil; but we went short this afternoon for a trade.  We are targeting down to the mid-50's for oil on this EW chart setup.  We have overlaid the US dollar index (inverted in blue) so you can see the correlation.  (I.E. because the dollar index is inverted, when the blue line goes down it means the US dollar is actually increasing in value.  Thus, oil and the dollar are actually negatively correlated, as you likely know.)  The dollar staged a strong reversal rally this afternoon and looks as if it has more to run, even if this is not the major move we are expecting at some time.  Either way, we think oil short here is a good trade idea.  

022118 oil setup 240.png

Comment

Path of the dollar = Path of commodities?

Click here to view the PDF

Quotable

“There are as many styles of beauty as there are visions of happiness.”

--Stendhal (aka Marie-Henri Beyle)
 

Commentary & Analysis

Path of the dollar = Path of commodities?

zen_wave_web.jpg

It’s not easy trying to forecast future prices from chart patterns; nor is it any easier to do so no matter how much fundamental information you possess, or believe you possess (see Frédéric Bastiat’s famous essay: “What is seen and what is not seen”).  Said forecasting difficulties prove the axiom, so succinctly stated by the late great Mark Douglas: “Every moment in the market is unique.” 

That being said, because decision-making and forecasting skills of the average human have not changed much since the beginning of time; i.e. we continue to see similar reactions across a fractal time frame which shows up as price patterns; albeit some differences which may be the result of high frequency trading a la algos.  (As an aside, it seems despite individual’s attaining no better skill in forecasting, they have attained much higher confidence-levels.  We can thank the dramatic increase in access to technology—producing vast amounts of data—for the spike in confidence levels.  But, arguably, this fact has led to even less critical thought across the body of players who make up this thing called a market.  And it may be a contributing factor for the next major market debacle.)

From that summary, I share one premise and two thoughts about market price action derived from chart patterns I watch day in and day out...READ MORE

Comment

Dollar bears multiplying; be careful!

Click here to view the PDF

Quotable

“Where is all the knowledge we lost with information?”

--T. S. Eliot
 

Commentary & Analysis

Dollar bears multiplying; be careful!

121817 bull bear.png

As I scan the papers, and the web, I have noticed bank analysts and newsletter writers are becoming increasingly bearish on the US dollar.  Effectively, the dollar downtrend will continue in 2018 is the view.  This seems the consensus thinking to justify a dollar bearish view:

·         All good news is already priced in the US dollar, for instance:

    1. Three rate hikes by the Fed in 2018
    2. Tax cut legislation will have only a minimal flow-through beneficial on the US economy in 2018.
  • Given the synchronized global recovery, other central banks will start to play catch-up on interest rates and that will be bad for the dollar.

It makes sense.  But lots of things make sense in the investing world until Mr. Market decides to prove rationales flawed...READ MORE

Comment

Will May’s Capitulation Sink the Pound?

Click here to view the PDF

Quotable

“The real voyage of discovery consists not in seeking new landscapes, but in having new eyes.”

­­--Marcel Proust

 Commentary & Analysis

Will May’s Capitulation Sink the Pound? 

uk eu flag.png

Either Prime Minister May skipped class at Oxford when they were discussing the art of negotiation, or she never liked the idea of Brexit in the first place (we know the latter applies).  One only need witness the jubilation from the European Union after the “deal” was announced Friday morning to infer PM May caved in a very big way. READ MORE...

Comment

Gold quiet period about to end?

Click here to view the PDF

Quotable

“It is better for you to be free of fear lying upon a pallet, than to have a golden couch and a rich table and be full of trouble.”

--Epicurus

 Commentary & Analysis

Gold quiet period about to end?

120517 gold.png

From today’s Wall Street Journal:

“Major U.S. stock indexes have been historically quiet this year. Now, that inactivity has spread to the precious metals market.

Gold stayed in a $34.50 trading range in November, the lowest gap between its high and low in any month since October 2005, according to the Journal’s Market Data Group.”

We believe this low volatility period is about to change for the shiny metal.  

Gold pays no interest. Thus, gold prices tend to be negatively correlated to interest rates; i.e. higher interest rates and lower gold prices, vice versa. So, if one accepts as probable the following we gleaned from this week’s Barron’s magazine…READ MORE

Comment

Market cooling; global cooling? Buy commodities.

Click here to view the PDF

Quotable

“The friend of the present order of things condemns all political speculations in the gross.”

--Thomas Malthus

Commentary & Analysis

Market cooling; global cooling?  Buy commodities.

111817 global cooling cart.gif

I don’t want to jump into the debate whether or not there is “global warming,” the old phrase; the new doublespeak phrase is “climate change.”  (Gee gosh, the climate changes? Shocking!) I realize even suggesting there is a debate identifies me as a “climate denier,” one who should be burned (ironically) at the stake. As much as Europeans hate to hear this, there some uncultured rubes such as me who remain skeptical of “climate science.”  And in fact, even a Google search will show there are “accredited” scientists who also remain skeptical (I am sure Google will do what is right and expunge such heretics from its search engine as quickly as possible. Winston Smith, truly a model of efficiency at the Ministry of Truth, would have already taken care of that).

But by some accounts, Martin Armstrong’s summary below to be exact, the globe is cooling.  And that factoid, should it be a factoid, means this: long-term investors should be buying commodities. READ MORE...

Comment

Yields going higher? That’s our guess.

Click here to view the PDF

Quotable

“A well-thought-out story doesn’t need to resemble real life. Life itself tries with all its might to resemble a well-crafted story.”

― Isaac Babel

Commentary & Analysis

Yields going higher?  That’s our guess.

111117 interest rates.jpg

As a trader considering the fate of interest rates it pays to remain open to all “well-crafted stories.”  Why?  Because, based on many years of empirical evidence in the bag, we agree with the old saw: No one can forecast interest rates.

This is not to suggest many market mavens do indeed get the rate call correct; but most employ the gift of hindsight and the magic of publishing to make it happen.  I’m still looking for a way to open a trading position on hindsight--that would be the Holy Grail. 

The lead narrative for Black Swan Capital is interest rates are headed higher, at least over the near-term (one- to three-month time frame months).  The inputs for this narrative include the usual mix of fundamentals, sentiment, and technical factors.  That being said, I thought comments by Lena Komileva, chief economist at G + Economics, printed in today’s Barron’s magazine summed it up well; in two concise sentences she explains why we are long rates, or short long bonds...READ MORE

Comment

Time to sell gold? The Mr. Elliott we know thinks so…

Click here to view PDF version

Quotable

“Nothing whets the intelligence more than a passionate suspicion, nothing develops all the faculties of an immature mind more than a trail running away into the dark.”

― Stefan Zweig, The Burning Secret and other stories

 Commentary & Analysis

Time to sell gold?  The Mr. Elliott we know thinks so…

110717 gold falling.jpg

Our rendition of an Elliott Wave chart shown on the next page says it’s time to sell gold; i.e. once minor corrective rally Wave ii completes—that may be today). Targets lower are 1,210; then 1180-level.  And if the US dollar catches a major bid, there is scope to test the swing low of 1,123 from mid-December 2016 (gold vs. dollar weekly chart page 3).  Note: The 55-week gold to US dollar index correlation is a whopping -84.3%; i.e. as gold goes up, the dollar goes down, and vice versa...READ MORE

Comment

Hawks unleashed could rock the markets

Click here to view the PDF

Quotable

“For theories and schools, like microbes and corpuscles, devour one another and by their strife ensure the continuity of life.”

­__Marcell Proust

Commentary & Analysis

Hawks unleashed could rock the markets

       Run pug run; hawks are in the house!

       Run pug run; hawks are in the house!

The chief hawk in this narrative is Stanford Economics Professor John Taylor (JT); aka the creator of the Taylor Rule for monetary policy.  Should President. Trump pull a surprise out of his hat this week (Would it be a surprise if President Trump didn’t surprise?), and appoints JT head of the US Federal Reserve Bank market will most likely get rocked in a big way as the monetary hawks emerge from their well-guarded cages. 

According to the Taylor Rule, the current target for the fed funds rate should be about 2.94% instead of the paltry 1.15% it is now.  Mr. Taylor’s appointment wouldn’t suggest an immediate 200 basis point rate hike from the Fed; but it would suggest future rate hikes will be faster and more furious than now anticipated.

Thus, here is how the market would likely react: ....READ MORE

Comment