There is a general lack of aggressive buying of equities today in a continuation of what we saw yesterday, especially in the tech sector and in the Nasdaq.

The semiconductors, which until last week has been grinding steadily higher has seen a serious round of profit taking ahead of year’s end. The selling has erased the entirety of the gains made in November and then some. As of this time, the SOXX is showing no buy signal but it is managing to attract some dip buying above 164. If it cannot hold here, it stands a good chance of erasing all of the gains made in October as well.  The key will be whether or not fund managers will want to continue booking profits before the year is out or reloading in anticipation of faster growth prospects in the US economy next year. As of now, the jury is still out as to what they are going to do.

In looking at the Nasdaq itself, there are two very strong bearish candles on the daily chart both originating in the vicinity of 6900. That confirms this region as a layer of significant overhead resistance which the bulls will need to best if they are going to take the index higher into year end. For now, while dip buyers are at work, there is not a great deal of aggressive buying in here as of yet.

I should note here that we have a US payrolls report coming out this Friday AM which could prove to be a market mover.  So much of what I can see behind the interest rate hike probabilities lies with the wages component of this report that I suspect nearly everyone and their dog is going to be very closely scrutinizing that aspect to see whether or not we are still experiencing slack in the labor force or if things are tightening enough to begin forcing employers to compete for available workers.

Today we are watching the infernal safe haven trades back in play once again ( maybe someday, just maybe those things will go away) which has pushed the yield on the Ten-Year lower again. I did want to post this chart to point out where the yield was when 2017 started and where it is as of the first week of December. Pretty amazing is it not? If you had asked me back in January of this year whether I expected longer term yields to be lower at the end of this year than they were at the start of this year, especially considering that Trump had won the election and was poised to come into office on a business-friendly policy plan, I would have looked at you as if you were living on some other planet. I guess that I am the idiot and the skeptics were the geniuses!

As consumers I guess we should be happy because it keeps rates low meaning houses, real estate, autos, etc, are all much more affordable since the cost of borrowing money to fund such purchases remains very low by any historical standard of measurement in modern times. However, it still makes life incredibly difficult for senior citizens and those in retirement living off of fixed income and their investments. Call me nostalgic but I miss the days when parents and grandparents who are either retired or nearing retirement could put their life’s wealth into very conservative investments, with little to no risk whatsoever, and make a decent rate of return, say 6% or maybe 7% and go into those golden years without having to wonder whether or not the fees that the banks are charging them for savings deposits, or checking accounts are higher than the interest that they are earning. Many of our seniors are genuinely worried that they are going to outlive their savings!

Obviously this is great stuff for the millenials who can load up on debt until they are buried underneath of mountain of the stuff but for others it is very frustrating especially when attempting to build and position an investment portfolio. Can any of you readers even imagine what financial planners active back in the late 1990’s, early 2000’s, must be thinking when they look at where long term interest rates are at today? I doubt seriously that there was a single one of them who expected, much less even contemplated that interest rates would remain in the toilet for this long. So many of their models drawn up for their clients to show them what kind of monthly income they could expect in their retirement years were based off rates in the 5, 6, or even 7% range. Every one of those assumptions have been blasted into the nether regions.

Quite frankly, if the tax reform package does not get through this Congress and signed into law before the year is out, I wonder if we are going to see the yield on the Ten Year even reach 3% any time soon.

 

In looking across the board at the various sectors, the Defense and Aerospace sector is among the firmest at this time.

It did put in a Bearish Engulfing pattern last week but so far it is remaining above the spike low made on that same day. Maybe it will defy the general selling trend and move sideways into year end.

The XLE continues to disappoint as the sellers who have been active above $70 remain firmly entrenched. Notice how strong that level of chart resistance is on the strong and how it has been reinforced. So significant a level is this in my opinion that if/when it is breached to the upside, it will indicate a solid uptrending move in energy is now in place. The question is whether or not we will see that, at least before this year is out. With crude oil unable to clear $58-$59 and change handles to a “6”, it is doubtful.

We’ll have to see whether or not oil can hold above $56. If not, down to $55 it goes.

I for one would be very surprised if it closed below $55.

Silver has puked in a big way as it continues to attract momentum based selling. Losing the October low was a big deal from a pure TA perspective. There should be some light psychological support at the $16 level. We will have to see whether or not it can CLOSE below there or not. If it does, it is easy to envision it testing $15.75 and even $15.50. Notice how ALL THREE major moving averages shown are trending lower together; that is a strongly bearish signal.

On this particular chart of silver, this time incorporating the ADX/DMI , notice the ADX line is rising while the -DMI ( red) is also rising. Silver is very close to beginning a trending move lower. Obviously the chart is already negative but I am referring to a potential for a move extended move down in price. We’ll have to see where support shows up in this market. The levels listed above are the last stop before the July lows.

Gold bulls managed to thus far dodge a bullet in today’s session as that safe haven bid enable the metal to hold above that $1264-$1263 support zone I mentioned in yesterday’s comments.

You can see the spike off of that key level for now but the bounce is looking tenuous at best. The Yen move higher is propping it up but the Dollar is generally stronger on the crosses and that is keeping buyers somewhat at bay for now.

The HUI sucks… nothing else needs to be said about that dog.

I seriously believe that many of those poor souls who were duped into loading up on the shares of the miners because they rashly read those gold and silver RA-RA sites, will kick themselves in the rears and wonder why they ever allowed themselves to be so seriously deceived by the many false soothsayers that infest the precious metals sector.

The HUI now has the dubious distinction of being down nearly 1.4% this year even while gold itself is actually up on the year. OUCH!

Comments (3)

Author’s gravatar

Thanks Dan. Seems gold has deviated somewhat this week with the correlation to the flattening yield curve. Gold has actually weakened as the long bond has strengthened. Wonder how much longer this anomaly will last?

Author’s gravatar

trinity- yes, I have noticed that as well buddy… not sure what is going on and why to be honest… there seems to be a divergence of the usual relations right at this moment. we have to see how long that will last. Might be some traders also getting flat or reducing position sizes ahead of that Friday payrolls report.

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