Will May’s Capitulation Sink the Pound?

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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? 

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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...

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Gold quiet period about to end?

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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?

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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

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Market cooling; global cooling? Buy commodities.

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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.

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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...

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Yields going higher? That’s our guess.

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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.

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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

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

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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…

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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

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Hawks unleashed could rock the markets

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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

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US $: It ain’t over till it’s over.

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Quotable

“It is in the nature of the human being to seek a justification for his actions.”

― Aleksandr Solzhenitsyn

 Commentary & Analysis

US $: It ain’t over till it’s over.

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Despite the rising probability, along with increasing sentiment and real positioning, suggesting the US dollar cyclical bull market rally is over (ending with the peak in early January 2017 labeled 5 of III below), the jury is still out.  Why do I say that?  Well, below are some rationales to consider:

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Mr. Market, what are you telling us about the dollar?

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Quotable

“Be ready to change your strategy with the environment. (The environment, not your strategy, is the data).”

__Mark Weinstein

 Commentary & Analysis

Mr. Market, what are you telling us about the dollar?

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Watching the currency market over the past couple of days has been akin to watching paint dry.  In my case the paint drying analogy is probably because I have a few different scenarios in my mind and find all of them plausible (see, Orwell’s Doublethink lives in the minds of traders).  My continuous question as I watch currency price action: Mr. Market, what are you telling us about the dollar? 

Three simple scenarios now rattling in my head....READ MORE

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