MacroEdge Tuesday Special: Circus Circus, Short Market Update, Global Labor Cooldown, Dr. Copper
In this special Tuesday MacroEdge release - Don and John prepare for the 'Circus Circus' FOMC casino mania, discuss weakening global labor data, the market, commodities, and more.
Circus Circus, Short Market Update, & Global Labor Cooldown
Hopefully you all have had a nice start to your week. It’s been a busy start to the week for us at MacroEdge with lots of new data coming in and plenty of market action to follow and keep you all informed about. We’ll be releasing our next monthly labor market report this Saturday to all MacroEdge Ozone members in the dashboard, here, and via email, so make sure you have access to it:
There is a rampant obsession about tomorrow’s FOMC event (which I do not understand given the fact that policy decisions have already been made) - and the NBA-game nature of how these are covered/followed highlights the absurd continued gambler’s casino-style market that we’re currently living through (Circus Circus, really).
There will probably be some volatility as a result of whatever Powell says tomorrow either way - but I wanted to briefly turn our attention back to the larger technical formation that has been quite concerning to me over the last two months. We first started to discuss this pattern back in late March and things have progressed as expected thus far:
It’s hard to say what this market has been trying to sniff out (a long-end blowout with higher yields, weakening labor data, or a combination of things). Overall this trend remains one to be respected and things look quite bearish going into the FOMC. As I always note with charts like these - a bounce may occur with whatever Powell says - but we could experience a very unusual statistical event of a larger selloff if comments are made about something like a recession on the horizon/higher rates with higher unemployment etc that investors panic about. It’s quite unusual to see charts with downside potential, technically, like the one setting up presently. We’ll watch all of the data the rest of the week to see if the market might be signalling the start of something larger (such as labor market downturn) - so keep an eye out for our updates on these items. Be agile and smart about it.
Turning globally briefly - New Zealand released their latest unemployment update. Notably, New Zealand has yet to cut rates and unemployment has begun to make a very recessionary move to the upside as the RBNZ remains restrictive and in a bind with a weakening currency:
Concerning labor market trends in Canada and New Zealand need to be followed closely - as they may point towards a broader global labor market slowdown as policy starts to go in the other direction around the world. Remember that the policy transmission lag is slow and long for rate hikes, and employment is the slowest element of central bank policy:
(10/31/23)
Dr. Copper and Precious Metals Display Normalcy (@RealJohnGaltFla)
For once I can say the title of this article for the first time since the Great Financial Crisis and not spew my cocktail all over my computer screen.
Amazing, isn’t it?
Gold has been under the gun since kissing $2500 plus during the perceived threat of an open and all out war between Iran and Israel. Yet the pullbacks have been normal, healthy, and well within target prices for those are long term buy and hold players in this market.
As I postulated a few weeks ago in A Gold Correction is Coming the correction would be sharp, sudden and deep and thus far it has been.
Nothing has changed in this author’s view and if one looks at a longer term view, this time since the GFC, it provides some much needed perspective instead of the usual media hysteria.
As CRE, housing, and the threat of stagflation hanging like the executioner’s blade over America’s political and central banker’s heads, the idea of a return to QMeh, aka do nothing and pray, will not return.
Dr. Copper seems to confirm this idea with it’s usual technical volatility as it approaches new all times high in US trading.
As long as the good doctor doesn’t revisit the patient below the $4.00 area, this move should rise to new all-time highs also in parallel to gold.
The odd soldier out once again is Nurse Silver and she’s just playing the ugly duckling for now.
Revisiting the short term support between $24.90-$26.00 seems likely as gold and copper drop in the weeks ahead, but odds are geopolitical events will drag the entire complex higher.
That and our incompetent combo of Powell and the Politicians deciding to inflate their way out of their own self-made mess.
Enjoy the opportunity, because in markets like these, this price action only comes around a few times in a generation.