A Return To An Old Trading Pattern?

And now… Today’s A Pfennig For Your Thoughts…

February 27, 2018

* Rosengren begins to talk like Chuck!
* Data returns to the U.S. Data Cupboard…

(technical difficulties have this running very late today, I apologize for that, I didn’t get up before the sunrise to write the letter to not have it go out or 6 hours later, for sure!)

Good day… And a Tom Terrific Tuesday to you! What an awful night of restlessness for your truly.. UGH! Oh well, as they say in the military, “sounds like a personal problem”… No Olympics last night, no good games on TV, and the stars weren’t participating in my usual night on the deck singing to them, led to a night where I was searching for things to write about… I found a few, but the findings just weren’t there in numbers! The Beau Brummels greet me this morning with their song from the 60’s: Just A Little…

A few years ago, we experienced a trading pattern where the overnight markets of Asia and Europe sold dollars, and in the U.S. session dollars were bought… And so far in this week’s trading that’s what we’re seeing once again.. And that makes be think about the Plunge Protection Team (PPT) which operates in the U.S. markets. I told you a couple of weeks ago how the PPT, in my humble opinion which could be wrong, had stepped into save the stock market and the dollar, which both were about to fall off a cliff. This trading pattern makes me think the PPT is in each day to ensure that we have none of that stuff from a couple of weeks ago…

Of course I could be caught off base on this thought, but years of experience tells me that traders on different sides of the ocean don’t usually think differently on how assets should be traded, and when you see the dollar getting sold overseas, but bought here, something is awry folks… I’m just saying…

So, yesterday morning we had the currencies and Gold rallying against the dollar, but as the day in the U.S. went along, those rallies were snuffed out. For instance, Gold, which yesterday was up $11.90 in the early morning trading found its way higher by a couple more bucks and the Dollar Index was continuing to drift lower than 89.55, but then they weren’t, just like that the tables had been turned on the currencies and Gold, and the two assets struggled the rest of the day to find a bid.

Gold was able to hold on to $4.70 for an overall gain on the day, but was higher during the day before what I believe was the entry of the PPT in the markets.

The euro also saw some love early in the day after the overnight markets had bought the currency and sold dollars. But soon the 1.2343 level for the euro yesterday morning, was reduced to a figure below 1.23… But overnight, the buying of euros and selling of dollars returned, and the single unit is back above 1.23 at 1.2330…

I told you yesterday about how S&P had upgraded Russia’s credit rating, and how the ruble was looking like it could trade below 56 if the price of Oil continued to rise… And that’s exactly what happened in the past 24 hours… The price of Oil has continued to recover, and the Russian ruble has dropped below 56 to 55.90 (rubles are priced in European terms, which means as the price number drops, the less of the currency it takes to convert to a dollar, and that means it is rallying VS the dollar.

The rest of the Petrol Currencies, like the Norwegian krone, Canadian dollar / loonie, and Brazilian real didn’t really participate in the rise in the price of Oil, but that doesn’t mean they won’t, as sometimes their reaction time is slower, that I would think it to be.

The Mexican economic data, has really taken a nosedive in recent months… Yesterday, Mexican Retail Sales printed a 2% plunge, the biggest drop since 2013.

It is perhaps no coincidence that Mexico’s retail sales peaked in November 2016 — the month President Trump was elected — and have fallen ever since. This marks the 5th straight month of annual declines in Mexico retail sales… I was reading this on www.zerohedge.com and agree with the writer that both Mexico and Canada are seeing major downturns and disappointments in their macro data in recent weeks, as NAFTA negotiations get critical.

In China yesterday the leaders said that they would change their “one man rule” that limits the President to two terms.. This means that Chinese president Xi will remain in power and continue his drive to bring China out of the dark and into the Capitalist world… The Chinese renminbi was allowed to appreciate by a wide margin overnight, and there hasn’t been much uproar over this change, which I thought there could very well be some…

The Chinese political arena is completely different than ours, so this lifting of the two-term limit isn’t as bad a thing for the country as it would be here…

Speaking of here in the U.S. I think the debt is beginning to get on people’s minds, and we’ll start to see those that don’t think accumulating debt is a Big Deal, and those, like me, that think it’s not going to lead to good things… Yesterday, we had Boston Fed President, Rosengren, talking about debt, and apparently he’s leaning toward the way Chuck thinks, as he told an audience that, “Large deficits now may make future actions difficult” for the government. He added it was “difficult to depend on” fiscal policies in the face of a recession “given political pressures and uncertainties.” – Eric Rosengren…

And this note was found here: www.reuters.com “Since mid-December the Republican-controlled Congress and U.S. President Donald Trump aggressively cut taxes and boosted spending limits, two fiscal moves that are expected to push the annual budget deficit above $1 trillion next year and expand the $20 trillion national debt.”

Of course when the tax cut reform passed and the budget deficit was announced I went all DEFCON 4 on our leaders for increasing spending and cutting revenue at the same time, but usually it takes “others” to repeat what I’ve said to really get what I’ve ranted about to sink in with the masses… And this is one of those cases…

The U.S. Data Cupboard finally gets a chance to get in the game today when it will show us the color of the January Durable & Capital Goods Orders… I told you yesterday that I see Durables printing like Retail Sales.. Negative… And Capital Goods should follow suit…

Yesterday’s Data Cupboard was not kind to New Home Sales, which saw January’s numbers crashed 7.8%, following December’s awful fall of 9.3%… This housing stuff is beginning to worry me folks. How about you?

To recap, The first two days of trading this week reminds Chuck of a trading pattern we saw a couple of years ago, he believes the PPT is behind it all. Gold gained a bit yesterday, but had a better gain during the morning session, and the Price of Oil continued to ratchet higher, allowing the Russian ruble to rally to the 55 handle overnight.
For What It’s Worth… Since I was talking about the PPT above, that when I saw this on the Daily Reckoning I thought it would be good to follow up, with some else, and that’s what I have for you today… This was written by Nomi Prins at the DR, and can be found here: https://dailyreckoning.com/secret-force-behind-todays-rigged-markets/

Or, here’s your snippet: “Markets were up again big today and volatility was down. But we haven’t seen the last of rising volatility, nor of the central banks’ attempts to thwart it. This week, new Fed Chair Jerome Powell will be giving his first congressional testimony, and you can be sure that markets are waiting on his words with bated breath.

Before his testimony, the Fed will be releasing its Monetary Policy Report, which will also give an indication to the direction of Fed policy.

Because these will be his first official comments as Fed chair, Powell will want to both make a personal mark and make sure markets don’t panic over his remarks.

I believe he will temper his comments to neutralize any negative market impact the report could have.”

Chuck again… I read a lot of stuff that Nomi Prins writes and I find her to be quite good… I’m just saying…

Currencies today 2/27/18… American Style: A$ .7843, kiwi .7283, C$ .7880, euro 1.2330, sterling 1.3968, Swiss $ 1.0680, … European Style: rand 11.6285, krone 7.8174, SEK 8.1764, forint 254.38, zloty 3.3816, koruna 20.59, RUB 55.90, yen 107, sing 1.3188, HKD 7.8264, INR 64.91, China 6.3152, peso 18.65, BRL 3.2347, Dollar Index 89.79, Oil $64.76, 10yr 2.87%, Silver $16.65, Platinum $996.59, Palladium $1,060.93, and Gold… $1,334.20

That’s it for today…. After two awful game last weekend by our Blues, the GM tried to shake things up by trading a popular player yesterday… I find that these late season trades in hockey usually upset the chemistry in the locker room. I guess we’ll have to wait-n-see what happens here… Another beautiful day here in S. Florida yesterday… March will be my last month here, so I sure hope it moves slowly, and not as fast as February did! I don’t see another baseball game until Thursday. UGH! Pink Floyd takes us to the finish line today with their song: Learning To Fly… And with that, I’m going to hope you have a Tom Terrific Tuesday, and also hope you remember to Be Good To Yourself!

Chuck Butler
Creator & Editor of:
A Pfennig For Your Thoughts

 

) The Daily Pfennig is no longer published by EverBank and it is now published by Aden Research Group.

Chuck Butler recently joined the Aden Research Group, a research center led by writers and market analysts Pamela and Mary Anne Aden. The Aden Research Group publishes three newsletters:
  • THE ADEN FORECAST. The flag-ship. Covering major markets and providing specific investment recommendations for over 36 years, written by Pamela and Mary Anne Aden. To subscribe, click here.
  • DOW THEORY LETTERS. A daily newsletter published for over 50 years, originally created by legendary investor and writer Richard Russell. Currently, it provides commentary written by in-house market specialists, including Pamela and Mary Anne Aden, Matthew Kerkhoff, Jon Strebler, Chuck Butler and Carla Pasternak. To subscribe, click here.
  • GOLD CHARTS R US. A weekly trading service started by legendary investor and trader Sir Harry Schultz. GCRU is written by trader and market strategist Omar Ayales. To subscribe, click here.