From the HRA Journal: Issue 314
The fun doesn't stop. Waves of liquidity continue to wash traders cares away. Even assassinations and war mongering generate little more than half day dips on Wall St. It seems nothing can get in the way of the bull rally that's carrying all risk assets higher.
It feels like it could go on for a while, though I think the liquidity will have to keep coming to sustain it. By most readings, bullishness on Wall St is at levels that are rarely sustained for more than a few weeks. Some sort of correction on Wall St seems highly likely, and soon. Whether its substantial or just another blip on the way higher remains to be seen.
From the HRA Journal: Issue 313
Santa Claus is coming to Wall Street and many other bourses near you. Clearly, traders have all been nice this year as most charts are very much "lower left to upper right" lately.
The market right now is all about liquidity. There's little point in looking at things like earnings estimates or trailing P/E estimates. None of that matter right now. As long as the US Federal Reserve is pumping "non-QE" money into the repo market it seems prices have nowhere to go but up.
From the HRA Journal: Issue 312
How about that SPX eh? Ever since the start of October it seems Wall St can do no wrong. US metrics have improved some and impeachment is a non-event as the US Senate would never vote for it. Both of those things calmed traders. Calm enough that they suddenly don't seem concerned about the US-China trade deal. That's convenient, since it looks like that deal almost certainly won't happen now. A lot of traders are also bullish because the US yield curve has largely un-inverted. That just tells me a lot of traders don't understand yield inversions as a signal (spoiler alert-sudden steepening after an inversion is not a good thing).
From the HRA Journal: Issue 311
FOMO is back on Wall St, so are positive liquidity flows. Nothing else seems to matter much, as traders know Powell is going to give them the rate cut they want this week. The announcement will take some careful scripting, traders will be saying "what have you done for me lately?" about five minutes after the announcement. I really don't think the FOMC is in the mood to promise or imply more rate cuts, but they'll try not to be too obvious about that.
All that sunny positivity on Wall St hasn't been helping the gold price. It's very much a risk on market, and that doesn't drive traders to want more bullion. Gold's not trading terribly, but it does look like it's going to drop through support so we could have choppy seas for another few weeks. Bullion does tend to do better towards year-end, so there's that.
From the HRA Journal: Issue 310
It's not getting any less weird out there, that's for sure. We saw continued deterioration in several US economic metrics, but some stabilization elsewhere. There was enough "bad news is good news if it keeps bond yields low" vibe to maintain the SPX near its highs. That's impressive given how much traders could worry about if they had a mind to.
From the HRA Journal: Issue 309
We're in the midst of what I think is a fairly minor, and expected, gold correction. Junior resource traders, of course, are acting like the world is coming to an end. Multiyear bear markets are bound to make one defensive.
Major market traders seem pretty calm given so many people are suddenly talking about an impending recession. I still think we will probably see one but, like any good contrarian, I'm not liking how much company I suddenly have in thinking that. There is no evidence markets are trading based on that recession assumption though. I guess comments about it are just lip service for most.
From the HRA Journal: Issue 308
Trade wars and geopolitics, along with signs of decelerating economies around the globe, continue to support bullion prices. The new gold bull market is very much official now. Even if we get some near-term pullback-and we should hope for one-I think the die is cast.
Equities have been fairly calm, given all the craziness at a political level. Falling bond yields have cushioned the stock market, though you can see traders-final--starting to ask themselves WHY yields are so weak everywhere. Expect volatility to be high for an extended period.
From the HRA Journal: Issue 305
Saved by the bell, or the tweet I should say. I was putting this extended version to bed when US President Trump decided he'd go after yet another major trading partner.
That was a little too much for Wall St, and finally generated enough concern to flatten bond yields, again, and generate strong buying that lifted gold prices back through $1300/oz. At this point, it's a bounce, not a trend, but I think gold now goes higher if we don't quickly see a moderation in the multi-front trade war Trump seems committed to.
From the HRA Journal: Issue 304
What, me worry? Wall St continues to be remarkably calm in the face of a blow up of China-US trade talks. Trump is now threatening to raise tariffs on ALL Chinese imports to 25%. No one knows if that is just bluster – Wall St seems to assume it is – but that seems like an over-optimistic assumption with this particular President.
Lack of fear and a less accommodating US Federal Reserve continues to weigh on resources and especially on gold. We may see a little more base metal weakness to go with it if the trade war really heats up, I’m not sure new tariffs will really impact base metal demand in China but a lot of traders surely think it will, which amounts to the same thing in practice, in the short run at least. Most of the biggest Chinese exports to the US (like mobile phones) are relatively light users of metals. The actual impact on base metal demand will be smaller than the feared impact, but it’s the latter that will drive trading I’m afraid.
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