SD Midweek Update: Score Tied at Halftime but Gold & Silver MUST STEP-UP THEIR GAME

The fundamental news is all over the place this week. On the one hand, we have Hurricane Harvey coverage 24/7. On the other hand, we have North Korea and everything else. This week everything else does not include the sharp political, racial and social divides that are wreaking havoc in the streets on America. We speculated this would be the case last Friday.

Either way one looks at the fundamental news on the week, none of it is good. Lives and property are ruined out west, and tensions are heating up in the far East. If the fundamental news was not bad enough, it is about to get even trickier. On the economic calendar, we have the ADP Employment Report, the first revision of Q2 GDP, and the EIA Petroleum Status Report. Rest assured all eyes will be on the petroleum report today as analysts are all offering their $.02.

The rest of the week is full of data releases as well. Friday is September 1st, so we are getting the earliest release of a Nonfarms Payroll Report as possible. If the fundamentals have moved the markets so far, they will move them even more as this data is released. While we will not see the effects of Harvey on employment until at least next month, how the disaster affects the employment situation in the US is just as significant as how it affects oil. One could even argue this is more important, because with oil we are discussing a commodity, but with employment, we are talking about people.

Also stated last Friday, we posed the question if Harvey was the black swan the analysts have been up early every morning bird-watching for? Seeing as how Harvey is still doing damage, and the fact that damage assessment hasn’t even started, it looks more and more with every passing day that it is, and if this is the case, it would be more like a flock of black swans in a flyover more than one single bird swooping in.

Since Texas is Oil Country, let’s start with crude. We can throw copper in for good measure. We are going to take it way back this week and throw up a 3-year, weekly chart:

Since the end of 2014 crude oil has gone nowhere. It has been drawing out a long, multi-year bottom and it looks like it is finally turning up, based on the performance of other commodities. If this is the case, and if the new bull run in commodities has begun, crude needs to catch up to copper, and we could be staring down much higher oil prices as the weeks play out.

Copper is on a tear. Most do not believe in the start of a new bull market, though trying to fight it could be costly. It is hard to find a nicer, rounded bottom (on a chart) than on copper. It almost has a reverse head-n-shoulders forming on the weekly. Copper is right up at 3-year highs going back to September, 2014. If the bull run in copper is not the case, copper would fall down to crude on the cart above, however, does anybody really think crude is going back to $26? Especially considering dollar weakness all year?

Speaking of the dollar:

On the daily we can see that the US dollar and the Japanese yen are severely decoupled. If USD/JPY falls on the chart, that means the Japanese yen is strengthening against the dollar. Do dollar bulls really think the dollar is about to turn the corner and strengthen? We have a debt ceiling to look forward to, and now, how many hundreds of billions in federal aid is going to be borrowed to pay for Harvey damages? Well, apparently Goldman Sachs thinks it is going to turn. So we know there is at least one dollar bull left. Just be careful. He could be a wolf in sheep’s clothing looking to sell dollar with nobody wanting to buy them.

Our stellar performer in the precious metals is our good friend Palladium:

Palladium has a very nice, round bottom of its own too. Palladium is back at 3-year highs. Hmmm. Kinda makes you wonder doesn’t it? Copper is at 3-year highs, palladium is at 3-year highs, the dollar has been falling all year, but still, nobody is ready to call the turn in gold, silver or copper.

It would be fun to throw a trick question out there and ask an analyst if palladium is in a new bull market.If the answer is “yes”, that would be admittance of a new precious metals bull market, because palladium is a precious metal, and it would also be admittance of a new base metals/commodities bull market, because palladium is also an industrial metal. Write that question down on a 3×5″ note-card and put in in the back pocket for later.

GOING FOR GOLD!

We are all pleased with the performance of the yellow metal in the month of August. You can rest assured, however, there are forces at work trying to make sure gold does not put in a weekly but more importantly a Monthly close above $1300.

TODAY AND TOMORROW MIGHT BE GUT-WRENCHING.

The is also this nasty little issue to deal with all the way from $1310 to $1350. Last Friday we said gold needs to break-out BIG-TIME. This is as true going in to the rest of the week as it was back then. What we really need is to bust through $1350 very heavy-handily, but we must not count ourselves in the clear just yet. Gold is still trying to tread water above $1300 on the week. There are many things that could happen over the next three trading days, so we all really need to keep a solid head on our shoulders and not get too far in front of our skis.We’ve been let down so many times this year, or pushed down, however you want to call it, but that does not mean we are not confident.

Then there’s silver:

There is actually good news in silver. Silver is right back to punching through that early June high on the daily. Silver is now well above the 50-day and the 200-day moving averages. The immediate need is for silver to close out the week strong, and higher than the June 6th close of $17.70. It seems like we have gone through so much junk this year that it almost seems like a feat of strength, and I won’t even mention the fact that last year in September, the white metal was sitting over $20. Oops. I just did.

Last and certainly least is every central banker’s favorite stock market bubble, the S&P 500. Dow can come along too. Here they are for your enjoyment:

From the looks of the rounding up there in the nose-bleed section of the stadium, I would not want to be a buyer here. The only question is how far and how fast? I’ll let you decide the direction.

So get ready for the second half. We are going to need an even better performance than the first.