The Stock Market
Gold Sector Outperforms Broad Market
The gold sector is in an uptrend since September 2018. The initially rather labored move accelerated after a secondary low was established in May 2019 and the 50-day and 200-day moving averages were breached for the second time. Last week the two moving averages were once again overcome in the course of the post-crash rebound. Here is a chart showing the entire move since 2018:
After a rather harrowing decline in sympathy with the February-March stock market crash, the HUI has swiftly moved back to its previous high for the move and is now trading above its 50- and 200-day moving averages again.
Containment Fail
We want to share a few observations about the growing COVID-19 epidemic, based on what we have seen so far. It has been obvious for a while now that the attempt to contain the spread of the virus has essentially failed. Ever since case numbers started to soar in South Korea, Italy and Iran, it was clear that hopes that the outbreak would remain confined to China were misplaced.
Doubleplus-ungood micro-organism COVID-19 looking for cells to infect
Post Hoc Fallacy
On Tuesday, at the precise moment Federal Reserve Chairman Jay Powell commenced delivering his semiannual monetary policy report to the House Financial Services Committee, something unpleasant happened. The Dow Jones Industrial Average (DJIA) didn’t go up. Rather, it went down.
The Fed chair and His Magnificence, God Emperor, Field Marshall & Stable Genius, POTUS Donald J. Trump: a complicated relationship. [PT]
An Example of Strong Single Stock Seasonality
Many individual stocks exhibits phases of seasonal strength. Being invested in these phases is therefore an especially promising strategy.
Danish drug company Novo Nordisk
Bonanza Season
In the 18 December 2019 issue of Seasonal Insights I discussed the strong seasonal advance in precious metals around the turn of the year. In silver it begins in mid December and continues until the end of February. A roughly similar pattern can be observed in platinum and palladium, while seasonal buoyancy is at least to some degree evident in gold as well.
Long-term silver and platinum seasonal charts from the late 2019 issue of Seasonal Insights : the seasonally strongest phase lasts from mid December until late February. [PT]
Market Drivers
The recent outbreak of a dangerous respiratory illness caused by a new Corona virus in China was widely blamed for the stock market sell-off on Monday last week. It is undoubtedly true that the epidemic has the potential to severely disrupt economic activity, although it is too early to come to a definitive conclusion about that. Be that as it may, the event actually serves as an excellent example illustrating that the news of the day are incidental to market action rather than causing it.
S&P 500 Index, 10-minute chart. A fairly strong sell-off on Monday last week, a vigorous rebound on Tuesday.
Disrupted Disruptor – Legal Setback Sweepstakes
It seems Uber just can’t catch a break these days. First its license to operate in London was revoked. At issue was apparently that 43 unlicensed drivers were able to take an estimated 14,000 “unauthorized trips” due to a flaw in the Uber app (note that 45,000 licensed Uber drivers are working in London) .
Uber’s service has become an important part of London’s transport infrastructure – and a thorn in the side of established taxi services. [PT]
Photo credit: uber.com
Beta-driven Fantasy
The decade long bull market run, aside from making everyone ridiculously rich, has opened up a new array of competencies. The proliferation of ETFs, for instance, has precipitated a heyday for the ETF Analyst. So, too, blind faith in data has prompted the rise of Psychic Quants… who see the future by modeling the past.
Gandalf, quant of Middle-Earth, dispensing sage advice. [PT]
The Strongest Seasonal Stock Market Trend
Readers may already have guessed: when the vibrant colors of the autumn leaves are revealed in all their splendor, the strongest seasonal period of the year begins in the stock market – namely the year-end rally.
Will Santa wake up this year? Last year he was clearly missing in action – but that is actually the exception, not the rule [PT]
The Future and the Past
Securities and Exchange Commission Rule 156 requires financial institutions to advise investors to not be idiots. Hence, the disclosure pages of nearly every financial instrument in the U.S. are embedded with the following admission or variant thereof:
“Past Performance Is Not Indicative of Future Results”
“Buy and hold”… “The market goes always up”… “No-one can time the market”… “Buy the dip” “With what? You said not to sell anything”… “Simple, mortgage the farm…” The image above shows roughly what happens right after everybody feels the warm & fuzzies due to the fact that the market has been going up without a hitch for quite some time. Once the conviction that it can only rise further is widespread and firmly embedded in investor psyches (who cares about valuations?), this is often what the next scene looks like… [PT]
Listless Nikkei
On 24 July 2020 the Olympic Summer Games will begin in Tokyo, the capital of Japan. Olympic Games and Soccer World Cups are among the largest sporting events in the world. Do you perhaps also think that these events may affect the performance of local stock markets?
Olympic Summer Games 2020 – official logo (left), and a fan-made logo (right) by designer Daren Newman [PT]
Bad Hair Days Are Back
We recently discussed the many divergences between major US indexes, which led us to expect that a downturn in the stock market was close (see The Calm Before the Storm for details). Here is an update of the comparison chart we showed at the time:
The divergences between various indexes seem to be resolving as expected.
Most read in the last 20 days:
Silver “Scarcifies” – Precious Metals Supply and Demand
On Monday, Silver got Scarcer – and Simpler On 23 July, we said: “Well, it’s complicated.” The action on 27 July was not. Silver spot price vs. September basis Notice the big drop in the basis starting around midnight (London time). It falls from over 7% to under 2%. To refresh: Basis = Future(bid) - Spot(ask) For the first two and half hours, the spot price is not moving. So, the only way the basis can drop is if the price...
Silver Explodes — But Why? Precious Metals Supply and Demand
Explosive Days in Silver The silver market witnessed another explosive day! At midnight (in London), the price of the metal was $26.90. By 9pm, it had rocketed up to $28.95, a gain of 7.6%. This is not normal. But then, we are not in a normal world. After several years of going nowhere and a downside fake-out in March this year, silver has come to life rather dramatically... [PT] The Republicans are spending like drunken Modern Monetary Sailors. And...
Best Laid Schemes
A Really Neat Bridge But, Mousie, thou art no thy-lane, In proving foresight may be vain; The best-laid schemes o’ mice an’ men Gang aft agley, An’ lea’e us nought but grief an’ pain, For promis’d joy! – Robert Burns, To a Mouse, on Turning Her Up in Her Nest With the Plough (in extract), 1785 Installation of the final cable support pipes on the Gerald Desmond bridge replacement. Here is a drone video of the project. [PT] Photo by...
The Dollar Is Dying
Insulting the Captive Audience This week, while perusing the Federal Reserve’s balance sheet figures, we came across a rather curious note. We don’t know how long the Fed’s had this note posted to its website. But we can’t recall ever seeing it. The note reads as follows: “The Federal Reserve’s balance sheet has expanded and contracted over time. During the 2007-08 financial crisis and subsequent recession, total assets increased significantly from $870...
Austrian Theory and Investment
Realtime Charts
Gold in USD:
![[Most Recent Quotes from www.kitco.com]](http://www.kitconet.com/charts/metals/gold/t24_au_en_usoz_2.gif)
Gold in EUR:
![[Most Recent Quotes from www.kitco.com]](http://www.kitconet.com/charts/metals/gold/t24_au_en_euoz_2.gif)
Silver in USD:
![[Most Recent Quotes from www.kitco.com]](http://www.kitconet.com/charts/metals/silver/t24_ag_en_usoz_2.gif)
Platinum in USD:
![[Most Recent Quotes from www.kitco.com]](http://www.kitconet.com/charts/metals/platinum/t24_pt_en_usoz_2.gif)
USD - Index:
![[Most Recent USD from www.kitco.com]](http://www.weblinks247.com/indexes/idx24_usd_en_2.gif)
