Buckle up because the world runs on both of these.
Crude Oil
October 13 (King World News) – Michael Oliver, Founder of MSA Research: MSA issued a long-term buy signal for oil at the January close of $65 (circled on price). We hold with that.
However, due to headline-chasing longs, who primarily act upon near-term and intermediate “news,” that emotional surge to the March highs needed to be purged. Too much, too fast, and based on what will be considered in hindsight a transitory event. We argued the likelihood of such a downside flushing in our reports. And sure enough those headline-chasers were skewered. Oil’s price has since gone into a congestive up/down mode.
Here we look at intermediate-trend via 3-mo. avg. momentum. That headline excess surge in March then produced a collapse in price back down to near our original January buy point. Now action has rebounded sharply. Basically violent up/down coiling at levels above our primary point-of-entry buy signal.
Will there be another drop in price within that violent range of action (measured from the March high to the June low)? The 3-mo. avg. this month is $86.13. So far the low of this month/this week was $86.86, just in front of that zero line. Probably even a weekly close below that average will produce another drop in this up/down coil. But again, we consider the major trend positive with likely much more to go in the next year or two. So if oil provides another intermediate break (and we bet, if that occurs, that it will be based on a possible end to the Iran situation), that could provide a secondary buying point. MSA will update if such a break begins.
But for now, from an investment-grade perspective, oil emerged in January into a major uptrend again, after its up/down years of action well below its prior price highs ($147 in 2008 and $130 in 2022). So, yes, while oil is “high” vs. the past two years of action, in no way is this component of BCOM at high levels versus its own history…
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Fiat Money
Peter Boockvar: Maybe we don’t get another rate increase from the Bank of Japan in October and they will do what the Fed seems to be leaning towards, waiting until December to do so again. Bloomberg News is reporting that “Bank of Japan officials are leaning against a rare back-to-back interest rate increase this month while still eyeing the possibility of another move as soon as December, according to people familiar with the matter.”
Further, “The BoJ officials see little need for consecutive rate hikes in the absence of signs that upside inflation risks will increase abruptly, the people said. The central bank will instead carefully examine economic data to see if another hike is warranted as early as the December gathering, the people said.”
The story came out after the Japanese close but the yen is actually higher rather than lower vs the USD but the dollar is weaker across the board. Coinciding with the things ‘people familiar with the matter’ said, September PPI in Japan unexpectedly fell .3% m/o/m vs the estimate of up .5% because of a drop in ag prices. Though it was still up 6.8% y/o/y.
Speaking of the US dollar
Speaking more on the US dollar, outside of its move up against the euro in response to the French budget situation, I think what also explains the strength this year has been the continued rally in the AI trade. Foreigners aren’t interested in US Treasuries but they still love US tech stocks. Here are two charts, one comparing the DXY to XLK, the tech ETF and the second showing DXY vs the Mag 7 ETF.
Historic Opportunity In Silver Stocks
To listen to Tavi Costa discuss the huge opportunity in silver and gold mining stocks, energy, gold, silver and much more CLICK HERE OR ON THE IMAGE BELOW.
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To listen to Alasdair Macleod discuss gold, silver, crude oil and much more CLICK HERE OR ON THE IMAGE BELOW.
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