A More Calm Day

45
Wed, Jul 21, 2021 - 10:25am

As discussed in yesterday's podcast, there is really no news today to move the markets. There are no economic datapoints and we're into the usual 10-day "quiet period" the precedes an FOMC meeting.

So this is a very quiet day. Unless something unexpected happens, we'll likely see lower-than-usual volume and a lot of AlgoHell trading where CDS move inversely with the POSX.

And you can see this pretty well, so far. Over the past hour, the POSX has slid back to UNCH on the day and CDS has bounced from near $25.

But I'm not going to complain too much as I'm just glad we're still holding above $25. That may not sound like much but in the grand scheme of things, it's more important than it may seem. Why? Because even though we're all frustrated by the lack of follow through so far this year, the proper way to view the long-term chart is through the eyes of consolidation.

After spending SIX YEARS trapped between $14 and $18, Comex Digital Silver finally surged in from $20 to $30 in just THREE WEEKS last year. That quick of move has led to what is now a consolidation phase as the "market" digests and recalibrates to a new price range that is more than 50% above the previous range...again, a range that had persisted for over six years!

Looked at it that way, perhaps this year's frustrating grind sideways is more understandable? Look, I'm not letting off The Banks, the CFTC and everyone else involved in allowing the manipulation to persist. However, if we look at the past 10 years on a weekly chart, we see a breakout and a flag/consolidation. That flag is a range bounded by $22 at the bottom and $28 at the top. What is the median or middle? $25. And that's why holding above $25 is so important to me.

CDG is having its own issues today with the bond market selling back off a little and the 10-year note back up to 1.27% from the early Tuesday low of 1.12%. But CDG, too, can/will benefit from an AlgoHell trade IF the POSX can fall backward and we're seeing a bit of that today, too.

Off of an earlier low of $1794, CDG is back to $1800 and trying to reclaim and hold that level. This is important because below $1800 brings the double bottom lows of March into view and we definitely DO NOT want to make new lows versus those. We're OK for now, though, so let's just hope we can continue to get some help from the POSX and then grind back up toward $1820.

As for news the rest of the day, I guess we'll wait to see what happens with this infrastructure business. Perhaps this possible "deal" is the driving force behind the small POSX decline this morning?

DEMOCRATIC U.S. SENATOR TESTER SAYS EXPECTS TO HAVE LANGUAGE ON BIPARTISAN INFRASTRUCTURE BILL BY NOON, 'THINGS ARE TEED UP TO BE SUCCESSFUL'

— *Walter Bloomberg (@DeItaone) July 21, 2021

And again, in this light-volume, doldrum type of day, as long as the POSX reamins down, we don't run the risk of a sudden smash that drives CDG decisively below $1800 and CDS under $25.

Just two other things...

Something else to look forward to in the weeks ahead is another episode of Kabuki Theater where the "Debt Ceiling Debate" is acted out for all to see. What a massive scam and joke this is.

The U.S. federal government is on the precipice of a battle over increasing the $28.5 trillion debt ceiling, which could lead to a government shutdown https://t.co/R6aD5KSICe pic.twitter.com/YVfBypepoT

— Reuters Business (@ReutersBiz) July 21, 2021

And here's our pal Tavi making the point I'm been driving home for weeks. The Fed owns 24% of all outstanding TIPS. This gives them the ability to enforce the "transitory" narrative through sales that keep a lid on price.

Off the radar.

Last week the Fed bought the largest amount of TIPs in over a year.

It now owns 22% of all TIPs outstanding.

My view on this:

There is a chance policy makers want to have significant control over the TIPs market in case inflation ever becomes a bigger problem. pic.twitter.com/T5xmvcjtzO

— Otavio (Tavi) Costa (@TaviCosta) July 21, 2021

That's all for now. Have a great day!

TF

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Key Economic Events Week of 8/2

8/2 9:45 ET Markit Manu PMI
8/2 10:00 ET ISM Manu PMI
8/3 10:00 ET Factory Orders
8/4 8:15 ET ADP Jobs report
8/4 9:45 ET Markit Service PMI
8/4 10:00 ET ISM Service PMI
8/6 8:30 ET BLSBS

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