Beware Of Dead Cats

Whether we like it or not, the markets made history with yesterday's 1000+ point swing in the Dow. We've also never seen three days in a row where this index has lost 300 points each and every day. So what does all this mean? What it underscores is just how fragile the world markets are at the moment and the general uncertainty and concern that investors have in the U.S., Europe and Asia.

At the moment, China is writing the script and with today's announcement of yet another cut in interest rates I don't see how China can win no matter what it does. It is very hard to bring back investor confidence and trust to the markets once it has gone. I think the loss of confidence has already happened in China and no matter what the government does, it is not going to be enough to bring it back any time soon.

The fact is, the government of China is in a lose-lose position no matter what they do and they have just brought this upon themselves. I do not expect the Shanghai index to rebound in a sustained manner anytime soon.

I'm not sure who created the phrase "dead cat bounce" and how it relates to the market, but it goes like this. When a market has had a pronounced move down like we've just seen in all the major indices and in many stocks, it's not unusual for the market to rebound. Professionals call this a "dead cat bounce" and it is not to be trusted as it does not change the previous negative direction of the market. It is simply a rebound, possibly caused by news or a short covering rally. Continue reading "Beware Of Dead Cats"

Copper Points At Weaker Economy?

Aibek Burabayev - INO.com Contributor - Metals


Reddish Metal Disagrees With GDP Readings

World GDP abd Copper Price Growth Dynamics
Chart: Aibek Burabayev; Data: World Bank, CME group

Copper is a core element of our everyday life and it will only grow to be even more important in our digital life as we strive for comfort. The diagram above shows it without saying a word.

The 10-year dynamics of the GDP and Copper growth had the same trajectory, at least until 2014 when the ratios diverged. In 2005-2007 the metal had fallen ahead of the GDP with a steeper curve in 2007 and then both indicators met in the collapse of 2008-2009. And then, amazingly, the ratios proceeded to keep together on the graph showing ideal matching from the bottom to the top in 2010. Continue reading "Copper Points At Weaker Economy?"

Supply and Demand Will Rescue Gold Soon

The Gold Report: The gold sector entered full-blown panic mode in July with the Bloomberg analysts forecasting a dip below $1,000 per ounce ($1,000/oz) this year, and Deutsche Bank forecasting $750/oz. Is this just fear feeding on fear, or is there something else going on?

Jeffrey Mosseri: It is fear feeding on fear, but there are two other things going on. The first is the strength of the dollar, and the second is the weakness in the price of oil. Combined, these two factors have greatly and negatively affected the prices of all metals in U.S. dollars. Over the past year, gold is up 2040% in many currencies.

TGR: In the last couple of years, the idea that the price of gold is being manipulated downward is no longer dismissed entirely as a conspiracy theory.

"Commerce Resource Corp. recently announced excellent drilling results at its Ashram rare earth deposit."

Douglass Loud: I wouldn't want to use the word "manipulation," but you could have an analyst predicting a gold price of $1,050/oz, followed by someone on the trading desk shorting it down to $1,050/oz, without any collusion.

TGR: How big a role does China have in setting the gold price? Continue reading "Supply and Demand Will Rescue Gold Soon"

China Devalues The Yuan: Now What?

Lior Alkalay - INO.com Contributor - Forex


It was less than a week ago that we pinned down the growing possibility that China would move to devalue the Yuan. Then – Bang! Since this morning, it's a done deal. Or is it? While China's move to devalue the Yuan (by roughly 1.9%) in a single day is the most aggressive Yuan devaluation since the "roaring" nineties, chances are this is only the beginning.

China Must Regain its Competitiveness

The core of the matter here is that China is trying to maintain the facade that this was a one-shot deal. However, it really has more to do with the government's attempt to free the Yuan rate. Beijing, it seems, may have finally bowed to the realities of market economics. Even as it enacts reforms to liberalize its financial markets and change its economic model, China must regain its competitiveness when it comes to exports. Continue reading "China Devalues The Yuan: Now What?"

Dollar's Fate To Be Decided In Beijing?

Lior Alkalay - INO.com Contributor - Forex


Last week's GDP growth figures proved that US economic performance is still pretty mediocre, bordering on mildly tepid. While the Hawks were eyeing a 2.6% growth figure, actual GDP fell short of expectations and posted a rather dismal growth rate of 2.3% annualized.

Yesterday, we got the Fed's favorite inflation indicator, Core PCE, the inflation barometer that's extracted from the GDP release. And what we got was a dismal 1.3% inflation rate (YoY). This validated, once again, that the US economy failed to reach escape velocity that would necessitate several rate hikes a year. Rather, it suggested that anything beyond one or two rate hikes was unnecessary. Hardly a hawkish sign, yet Dollar demand keeps on rising while US yields move lower. It is this very combination that suggests that Dollar demand is being stirred by the demand of US Treasuries. Some say that this is investors moving into safety amid the rout in Chinese markets. Well, that's probably true, at least, in part. But the rest? There's a big bet on what China will do next. Continue reading "Dollar's Fate To Be Decided In Beijing?"