Monday, October 3, 2016

Gold sinking, breaking supports

Wall Street October Focus

Wall Street starts the week with relatively flat indices with a downward trend, due to today's economic data and the fall of Deutsche Bank in its stock of Wall Street, given that today is Germany holiday. At this time DB is trading down more than 2%, and SPX is down -0.11%.

 This October that begins, the focus of Wall Street will be on five issues, to follow day by day, if you want to trade in the right direction:
- probable rebound in the price of crude oil.
- the comments of Yellen and the members of the FED on the increase of rates.
- the eve of elections in the US
- the start of the 4th season of business results, the Earning Season.
- the outcome of the Deutsche Bank theme and its repercussions

ISM and Construction Spending, diverge data

The relevant ISM index of manufactures, which is given at the beginning of each month, gave a value of 51.0, higher than the previous one of 49.4 and greater than the expected of 50.2, which puts the US economy in expansion zone. Point in favor for the hawkish of the FED. Good data for the dollar, and inversely, bad for gold.

And on the other hand, Construction Spending gave an opposite data: it was expected +0.2% and it was reported -0.7%. As several months ago, the index only rose in the multifamily buildings category, not in non-residential constructions, nor in single-family units. It is known that construction is the initial driver in the reactivation of an economy and this data of falling spending gives a signal of weakness. Although they measure different aspects, this data was expected to be aligned with the rise of ISM.

The ISM Manufacturas can resume the momentum that it lost last August in the following months.

As usual, I share the summary of US economic data that moves the week on Wall Street, taken from Keep in mind that just next week begins the attractive Earning Season.

Today's ISM stand out, on Wednesday ADP, the weekly crude oil data, and the key employment data on Friday.

Soon recover in Gold /GC ?

Tremendous fall of gold /GC today, closing at $1,269.70 and therefore of its popular etf GLD: up to -3.5% (!), With double volume of transactions than its average, making this its worst daily session since 2013.

This abnormal sell-off has not been for technical reasons as some traders speculate. The outcome has begun with the statements of Theodora May, the English Prime Minister, in the sense that is willing to apply a 'hard Brexit', i.e a clear departure from the European Community, abruptly and without contemplation, since March. This against currents within your government that prefer a 'soft Brexit' ...

That single statement drove the English pound to new historical lows of 31 years, and therefore reinforced the North American dollar. And we already know that the dollar and the gold move inversely. If we add to this the statements today of Jeffrey Lacker, hawkish official of the FED, who commented on the next strategies of the FED on the increase of rates, because it ended up giving more impulse to the impressive fall of today that ended up breaking several technical barriers , like the psychological level $1,300.

What can happen these days with the price of gold? As often happens in a sell-off, many see it as a great investment opportunity. I see very high volatility in these coming days and I prefer to play it safe: wait this Friday for results. Let me explain: technically I will see if today's fall still has field to continue falling, observing in /GC $1,210 level and see if there is a rebound, otherwise if that support is broken it can trigger a fall to 1,100 levels, which were its minimum in January. In the fundamental aspect, gold has the result of Friday's Job Report to recover its price, if a lower data than expected is given. The analysts' consensus for nonfarm payrolls (nonfarm payrolls) is at 169K for September, compared to 151K in August, while the unemployment rate is set at 4.9%. To be alert that day to that key fact.

Since 2013, whenever gold goes into oversold with good volume, it has had prompt recovery and rise. Today those two requirements were met ...

The Recommended Reading

It is difficult to find any federal official from the banking or governmental sector who openly commented that we are in a bond bubble. They deny it, disguise it, and as long as it does not burst, everyone happy. It is even more strange that a official of a Hedge Fund says it. We know hedge funds are the US risk bank that moves within the limits of what is allowed and that bases its existence on high-risk operations, but very lucrative when they prosper.

And if who says is the CEO of Tiger Management, one of the most popular in the US, is because the issue worries. I recommend this short article where they interview Julian Robertson. Comment on the nefarious negative interests and the unrealistic prices of bonds in the world today. To take note.