DEAD CAT BOUNCE: But Only so High

On November 28th the Dow closed up 617.70 thanks to two comments made by Fed Chair Powell, in an about face cheered by Wall Street. What could make them so euphoric? The indication that he might slow raising interest rates and leave the cheap money punch bowl available for a while more.

Some think the pressure from the president and a dramatically dropping stock market may have pressured him into that about face, even though his speech said otherwise saying, “The economy is growing at an annual rate of about 3 percent, well above most estimates of its longer-run trend.” And “From the financial stability perspective, however, today we do not see dangerous excesses in the stock market.”

Interesting since on the very same day, the first Financial Stability Report from the Federal Reserve was published and stated, right off the bat, that “Overall, asset valuations and risk appetite are elevated” and “valuations appear high” specifically in the following asset classes; High yield and leveraged loans (riskiest debt), Stock P/E are “above their median values over the past 30 years despite recent price declines” and all forms of real estate (Commercial, residential and farmland). To summarize, bonds, stocks and real estate are all over valued. Perhaps the central bankers did not think anyone would read the report.

Though the markets are telling the same story, the economy is in trouble. GM is closing 5 plants and laying off 14,000 people, probably not a good this for the local economy where those plants are. New home sales fell 8.9% vs the anticipated 4% decline, a trend that’s been escalating for nine months now and market momentum is on a downturn because buyers are just not showing up. But you need to know that the NASDAQ Index has now exhibited a “death cross”, a very negative sign likely indicating that November 29th was simply a “Dead Cat Bounce” for the markets and there is probably a lot more pain ahead.

Interestingly, while most admit to slowing global growth, few see signs of an economic downturn. I am not in that camp. Pattern shifts tell me the opposite. But they also tell me there is a flight to the safety of physical gold that is quietly happening.

We know that central bank demand has increased 22% YOY with a broader base of central banks buying, but we also know that bar and coin demand increased 28% YOY in the 3rd quarter of 2018. And yet, even with all the increases in physical demand, the spot price is lower YOY.

You can take Wall Streets word on gold and silvers value if you want to, but I say that actions speak louder than words. Are you listening?

  1. https://www.cnbc.com/2018/10/03/powell-says-were-a-long-way-from-neutral-on-interest-rates.html

https://www.federalreserve.gov/newsevents/speech/powell20181128a.htm

https://stockcharts.com/h-sc/ui

https://www.nbcnews.com/business/markets/trump-attacks-fed-chair-jay-powell-will-he-do-more-n941196

https://www.marketwatch.com/story/euro-slides-on-report-ecb-considering-new-round-of-long-term-bank-loans-2018-11-02

https://fred.stlouisfed.org/series/DFF

  1. https://www.federalreserve.gov/publications/files/financial-stability-report-201811.pdf

https://www.reit.com/news/blog/market-commentary/low-cap-rates-are-flashing-signal-it-yellow-red-or-green

  1. https://www.bloomberg.com/news/articles/2018-11-25/grim-stock-signals-piling-up-as-wall-street-mulls-recession-odds
  2. https://www.cnbc.com/2018/11/14/wells-fargo-turns-positive-on-gold-heres-how-high-bull-sees-it-going–.html?recirc=taboolainternal

https://www.stockcharts.com/h-sc/ui

https://www.gold.org/goldhub/research/gold-demand-trends/gold-demand-trends-q3-2018/central-banks-and-other-institutions

 

 

FOR YOUTUBE

11-29-18 PSM  DEAD CAT BOUNCE: But Only so High By Lynette Zang

On November 28th the Dow closed up 617.70 thanks to two comments made by Fed Chair Powell, in an about face cheered by Wall Street. What could make them so euphoric? Will it last?

You can take Wall Street’s word that you should buy into the dip. But actions speak louder than words and the insiders have been selling into rallies.

You can take Wall Street’s word on gold and silvers value if you want to, but I say that actions speak louder than words. Central bank demand is up 22% YOY and bar and coin demand is up 28% YOY. Are you listening?

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