With stocks soaring, here is what is really exacerbating causing today’s gold and silver plunge.
From top Citi analyst Tom Fitzpatrick: The CCI (Continuous Commodity) Index is testing important levels that extend down to 407.21…
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For many months it has been in a broad range. A weekly close below that level would have to be taken as a bearish break as it would complete a double top and indicate a move back down to just below 380.
The 407 – 409 area has been pivotal over the past 2+ years.
It was the low in March 2015 from where we bounced to a high of 439 before turning down again.
When the, then, support zone finally gave way, we saw that it opened the way for much further losses. The area was also retested as resistance in October 2015 before the last leg down for the remainder of that year. …As a consequence a weekly close below 407.21 would be seen as a bearish development that would point towards a move down to 378 which would be the double top target.
King World News note: This weakness in the broader commodity index, which threatens more downside action, is creating additional selling pressure in the gold and silver markets today. KWN will keep readers updated as the situation changes.
Here is today’s note from Art Cashin:
From legend Art Cashin: On this day in the year 1507 A.D., an enterprising author published a hit book. While he was not the John Grisham of his day, he did hope to benefit from two recent events of interest to move his book. First was the discovery of moveable type, which had occurred some 60 years before. (That meant he could print his tome in volume…so to speak.) Then, of course, there was that other curiosity, not about past clandestine lunches or curious shifting of funds; rather it was a public curiosity about a variety of sea voyages in the previous two decades.
The author, a German named Martin Waldseemuller, decided to publish makeshift maps of the new lands reached by these explorers. He dutifully researched all the reports and drew the assumed designs and locations of the new areas. Of course, he had to name them, so in his massive “Cosmographics Introductione” he applied a name to a large landmass in the Southern Hemisphere. He used the name of one of the men who had claimed to have visited it. No, it was not Christopher Columbus (he was busy renegotiating with the Spanish Court). Rather the budding cartographer used the name on a certain self-promotional pamphlet by a certain Italian merchant named Amerigo Vespucci. The author called the potential continent – Amerigo. Unfortunately for Columbus, Waldseemuller’s book was an instant hit.
And so the continent became known as America (later, South America when another continent further north was also discovered). And the other guy, Columbus, well he remained in litigation over Spanish rights to the treasures of this New World until he wound up in jail.
Traders didn’t need a map to tell them where to go. Long before the opening bell, European markets made it very clear that a sigh of relief reaction to the French election would instead be a roar of relief.
Opening Spike Turns Into Daylong Celebration – The reaction in markets to the French election was nothing short of tumultuous.
The euro soared as did European stocks, particularly those in France.
Pre-election hedging was undone. Bonds sold off and risk spreads in other assets widened smartly. Gold and other precious metals fell.
One of the sharper moves was the virtual collapse of the so-called volatility index, the VIX. It stunned traders by plunging below 11 even though other geo-political hot spots, like North Korea, remained a concern.
Since the early action was so heavily Euro-centric, traders felt the action might adjust after European markets closed, as I noted in an email to some friends:
Traders will watch to see if there is a mood adjustment when Europe closes at 11:30. A good deal of action so far is unwinding of hedge positions.
Focus will soon shift to Washington where quick fixes look unlikely and the House appears unable to act on anything.
Instead, the close in Europe brought no noticeable change, stocks continued to trade near the highs in action that looked like the EKG on a Maine potato.
The only change that occurred after Europe closed was that volume faded a bit but bidding remained steady.
The buying was fairly broad with over 250 new 52 week highs on the Big Board although advances only beat declines a little better than 2.5 to 1. That argued that the rally was not as frothy as some were portraying it.
That having been said, the action was solid and took many of the small caps and mid-caps out of their recent stupor.
Overnight And Overseas – Asia decided to join the party albeit not with the full enthusiasm seen in Europe. Japan, India and Hong Kong all saw smart rallies, while Shanghai sputtered to a small uptick close as concerns about leverage cutbacks linger.
European markets not only managed to hold onto Monday’s gains but put a little icing on the cake with advances of about a quarter of 1%.
Gold is off slightly while crude holds steady around $49.50. The euro is flat against the dollar, holding yesterday’s sharp gains. Bond yields are up a smidge.
Consensus – So far the markets seemed to shrug off North Korea’s largest live fire exercise in history as a U.S. cruise missile sub docks in South Korea. It was enough to prompt a cautionary phone call to both sides from China’s President Xi.
In a somewhat unusual move, President Trump is expanding a planned review of the North Korea situation from the Senate leadership to all 100 senators (that’s tomorrow).
Focus likely to return to Washington and things like tax reform and the debt ceiling. Earnings helping bulls but politics likely to take over.
Stick with the drill – stay wary, alert and very, very nimble.
***KWN has released the powerful audio interview with Gerald Celente and you can listen to it by CLICKING HERE OR ON THE IMAGE BELOW.
***ALSO JUST RELEASED: About The Action In The Gold Market, China, And Europe… CLICK HERE.
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