We are now in the eye of the storm as we see complete panic in the metals and mining sector.
In The Eye Of The Storm
By Bill Fleckenstein President Of Fleckenstein Capital
September 4 (King World News) – Most everything was under pressure overnight, and the early going saw our stock market weaker, led by the Nasdaq, which fell about 0.5%, while the S&P and Dow were a fair bit stronger. In the afternoon, the indices staged a modest rally and with an hour to go, when I had to leave, the Nasdaq was off just 0.25%. (For trivia buffs, I should note that Amazon joined the $1 trillion club today. It is difficult to comprehend how Apple and Amazon can sum to over $2 trillion, but they do!)…
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Away from (the United States stock market) was once again where much of the carnage was. Green paper was stronger, although when I say that I’m usually referring to the dollar index, which of course doesn’t do justice to the damage that has been done to weaker currencies.
Out of Focus
On that topic, while much of said damage is a consequence of QT by the Fed, perversely the U.S. market has remained relatively immune so far, while weaker economies, markets, credits, and currencies have all been under a good deal of pressure. The dollar index is what gets referenced a lot, but it doesn’t really reflect what has taken place and it is really not the right focus in any case (nor has it done all that much), as the real issue is QT.
I imagine many would be surprised to know that most world stock markets are in the red for the year, apart from the U.S., Scandinavia, Australia, New Zealand, and a couple of other countries. Moreover, I don’t see why the weakness and chaos won’t spread and feedback into various other markets and economies as well.
In any case, the carnage and the strength in the dollar did little to help the bond market, which was under pressure, oil had a small loss, and the metals were hit hard, led by a nearly 4% smashing of silver — that after we found out Friday that for the first time in history the commercials were net-long silver (as of last Tuesday; I suspect this Friday we will find out they have added to their positions). When I left, silver was 2.5% lower to gold’s 0.75%.
Cents and Sensibility
The lesson here, is that sometimes markets do the seemingly impossible, which I think this last bit of weakness in the metals demonstrates. At some point we will see the stock market impacted by a change of attitude and when the computers get loose on the downside that will be a sight to behold, but obviously that isn’t today’s business.
The miners were roughed up pretty good today as well. It looks to me like we are seeing complete panic in the metals and mining sector, but that is not an investible idea just yet (though that could change quickly).
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