With many people wondering what’s next for the metals markets, one of the greats in the business just said the “blastoff” in the metals is “so close.”
Bulls Surprised Rally To New Highs On Hold
By Bill Fleckenstein President Of Fleckenstein Capital
April 19 (King World News) – The rally back to new highs that the bulls were expecting was interrupted today, as the market was lower from the get-go. The decline was led by the Nasdaq, which lost 0.75% through midday and which was hurt by the drop in Apple shares, its suppliers, and related companies....
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You Half to See the Guidance to Believe It
The proximate cause for this weakness was very negative comments last night by Taiwan Semiconductor, which was forced to cut its guidance because of weakness around Apple and, to some degree apparently, crypto land, although Apple matters far more. One dead fish surmised that, “TSM’s Q2 forecast was very weak, with the iPhone driving a lot of the softness; estimates that the company’s Apple-related revenues may plunge 50% quarter-on-quarter in Q2 after a 30% drop in Q1.”
This should not come as new news to anyone who has been paying attention. There is ample evidence of saturation and excess inventories, particularly in China, as problems have been developing with Apple for well over a year now. But thanks to the muscle memory of stock bulls generically and the blessing of Warren Buffet, the company has been immune to weak demand for its last couple of phones.
That “Thinking” Feeling
The bottom line is, today’s decline is more about psychology and folks not being able to rationalize this problem as they have prior ones — potentially aided and abetted by the fact that the market is in the process of failing (although one day doesn’t indicate that). As I noted yesterday, my plan is still to see how the tape holds up as more big tech companies report (although I did short some Apple and buy some puts today).
Turning back to the action, in the afternoon the market remained weak but didn’t gather any real downward momentum (yet), with the Nasdaq the biggest loser, off 0.75%. Away from stocks, green paper was mixed, oil did nothing, and fixed income was lower again with the long end in particular getting bombed.
Reversal of Fortunes
I might note that I see more and more people finally starting to realize that deflation is not our problem and that inflation has been and will be. Of course, that psychology is only beginning to change a little bit, but it is where we are headed. It is possible that the bond market was weak today (and initially unresponsive to stock weakness) because the combination of QT and potentially more inflation has unnerved a few bond bulls at the margin.
Turning to the metals, silver was slightly higher while gold was a bit lower, as the metals markets appear to be marking time before they finally decide to blast off. However, we can’t rule out the possibility of a nasty setback just to mess with those of us who are bullish.
Included below are three questions and answers from the Q&A’s with Bill Fleckenstein.
Managing Silver Buy
Question: Hello Fleck, how would you manage the downside risk to the recent Silver buy, would you sell it, hedge it, what are the ways of hedging a long Silver or Gold futures position? Thanks
Answer from Fleck: “No hedging, you have to just sell. I was prepared to see it drop to around $16-ish, but now I will raise my mental stop to $16.50-ish.”
Blastoff In The Metals Is So Close
Question: Bill: RE your sudden “interest” in silver futures. For us lay people, is your interest short term like a month or two or longer term or does it depend on how much silver moves? Not a futures person so hope you can maybe give us your price and/or time frame assessment, even in some broad terms. I will take anything you care to dish out. Thank you.
Answer from Fleck: “Good question. I’m really, really bullish on metals NOW. The blastoff move I have been waiting for is so close I can taste it (yet it just won’t happen so far). So I’m trying to put on more exposure and manage my risk, since I already have a lot. I’m long a ton of and very bullish on PAAS (which of course mines silver). I will keep this futures trade for a while I think, though I will also trade it (getting bigger and smaller over time, depending how it moves). Hope that helps.”
Waiting Until The Right Time To Get Short
Question: Hey Fleck, we all know a downturn is coming but who knows when. Do you buy protection for yourself or just stay largely in cash? I’ve used put options from time to time in this bubble but they simply eat me alive.
Answer from Fleck: “I’m just willing to sit on my hands until it seems right to get short.”
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