It's Settled: Central Banks Trade S&P 500 Futures

Based on the unprecedented collapse in trading volumes of cash products over the past 6 years, one thing has become clear: retail, and increasingly, institutional investors and traders are gone, probably for ever and certainly until the Fed's market-distorting central planning ends. However, one entity appears to have taken the place of conventional equity traders: central banks.

Courtesy of an observation by Nanex's Eric Hunsader, we now know, with certainty and beyond merely speculation by tinfoil fringe blogs, that central banks around the world trade (and by "trade" we meanbuy) S&P 500 futures such as the E-mini, in both futures and option form, as well as full size, and micro versions, in addition to the well-known central bank trading in Interest Rates, TSY and FX products.

In fact, central banks are such active traders, that the CME Globex has its own "Central Bank Incentive Program", designed to "incentivize" central banks to provide market liquidity, i.e., limit orders, by paying them (!) tiny rebates on every trade. Because central banks can't just print whatever money they need, apparently they need the CME to pay them to trade.

So the next time you sell some E-minis, ask yourself: is the ECB on the other side? Or the BOE? Or, perhaps, you are selling S&P 500 futures to Kuroda. Who knows: there is no paper trail anywhere, although a FOIA request and/or the discovery from a lawsuit, class action or otherwise, of the CME's central bank incentive program would likely yield some stunning results.

But the only place where "discovery" would be by far the most interesting, is for the CME to disclose just which central banks provide, or take such as at 8am every morning when one market sell order takes out the entire bid staack, the most liquidity when it comes to central bank trades in "Metals Futures Contracts (Physicals)."

Because imagine the shock and awe if and when it is uncovered that the biggest active manipulators of gold are not some junior-level traders out of Britain's criminal bank cartel, but the central banks themselves.

Finally, while the list above deals with international central banks "providing" ES liquidity, those wondering why the NY Fed is not on the list and just how the Fed's active trading team participates in the market without breaking the law, we have just one word: Citadel.

Source: Modifications to Central Bank Incentive Program. CME/CBOT/NYMEX/COMEX #14-038

JPMorgan Warns Military Escalation In Ukraine "May Lead To A Lehman-Style Shock"

The sudden military escalation in Ukraine in recent days has, according to JPMorgan's Alex Kantarovich, reduced the earlier hopes that the high level meeting in Minsk on 26 August would help to defuse the conflict. As Kantarovich warns, the markets are now bracing for the US/EU responses. In the worst case scenario, now appearing more likely, severe pressure on stocks may extend. As he concludes, "we believe that with the significant deterioration in the Ukrainian situation, markets may treat this as a Lehman-style shock."

Via JPMorgan Cazenove,

Lehman moment. We believe that with the significant deterioration in the Ukrainian situation, markets may treat this as a Lehman-style shock. We note there are substantial fundamental differences between the current situation and the 2008/09 crisis; the oil price is now holding up relatively well and the economic contraction may not be that deep. On the other hand, for traded stocks, the challenges and risks to investability presented by sanctions could be practically open-ended. We demonstrate that revisiting the post-Lehman lows would imply downside of 50% from an index perspective, and ~40% from the forward P/E perspective (Fig. 1 and 2).

Poor visibility. With several false dawns since the start of the conflict, the markets may no longer assume a quick and easy resolution of the conflict and ‘worse before better’ seems a likely sequence to us; we thus recommend reducing exposure to Russia and differentiating carefully among the sectors and names.

Exposure and defenses. We see Financials as particularly badly exposed - both from the sanctions perspective and from the macro perspective. We also highlight the acute pressure on economically sensitive consumers, exposed to the escalating trade wars. We again stress that the best defensive trade comprises exporters with no unwanted political affiliations as these also benefit fundamentally from the weaker ruble. The sell-off on 28 August provides a good illustration of the phenomenon (Fig. 3 and 4).

*  *  *
So Buy US Stocks... because nothing says 'global growth' like a contagious collapse in a major nations markets...

A Map Of The Military Flashpoints In Ukraine

http://mediarnbo.org/

Palladium price sets fresh 13-year high

Platinum futures listed on Nymex were once again trending lower at $1,423.70 an ounce on Friday, but September palladium contracts jumped more than 1% to a high of $909.20 an ounce as an escalation of the conflict in Ukraine saw supply fears resurface.

Palladium futures trading on New York's Nymex are now at the highest since February 2001 as news of Russian troops entering the east of the country raises concerns that the West will be forced to tighten sanctions against the number one supplier of the precious metal.

The US and EU have already imposed restrictions on Russian imports of oil technology and have placed curbs on its defence and banking sectors, but so far supply of platinum and palladium have been mostly unaffected.

PGMs are mainly used to clean emissions in automobiles and Europe's car industry is the number one customer of PGMs. Not everyone believes the tensions would affect the fundamentals of the industry.

"In a nutshell, Russia needs the money, the EU needs the metal; it all boils down to politics, but the base case is business as usual," GFMS analyst Johann Wiebe told the Reuters Global Gold Forum on Friday.

South Africa, where a devastating strike kept mined metal off markets for months, and Russia combined account for close to 80% of global supply of palladium and 70% of platinum output.

Russia needs the money, the EU needs the metal

Russia has been stockpiling palladium since Soviet times, but those inventories are now believed to have been largely depleted.

South Africa is the top supplier of platinum but with production slowly returning to pre-strike levels and without the Russian risk premium platinum prices have come under pressure.

While palladium is up 26% this year, platinum has only managed gains of 3.5% in 2014. After a brief period above $1,500 in early July, platinum has also declined 6%.

Expected demand has not materialized either. From expectations of a 6% jump in sales this year, the continent's carmakers only managed to shift around 3% more vehicles in the first half as Europe's largest economies look in danger of sliding back into recession.

A slowing economy in China, the world's largest vehicle market where catalyst use skews towards palladium, is also clouding the outlook.

MCX-Natural gas is showing sign of a reversal

The natural gas futures traded on the Multi Commodity Exchange has risen by about 4 per cent in the past week. The price action over the last one month is suggesting the formation of a double bottom reversal pattern. The key resistance level to watch now will be ₹247 per mmBtu.

A strong break and close above this level will confirm a reversal. The outlook will then turn bullish for the target of ₹257. In such a scenario traders can go long at ₹249 with a stop-loss at ₹246 for the target of ₹255.

On the other hand, inability to breach ₹247 can reverse the contract lower for the targets of ₹240 and ₹235. The outlook will turn bearish if the contract records a strong close below ₹229. The ensuing target on such a break will be ₹220.

MCX-Crude oil: The MCX-crude oil futures contract is stuck in a narrow range of ₹5,650 and ₹5,755 a barrel in the past week. The immediate outlook is not clear. A breakout on either side of this range will decide the next leg of move for the contract. A strong break above ₹5,755 can take the contract higher to ₹5,900 – the 21-day moving average.

On the other hand, decline below ₹5,650 can drag the contract lower to ₹5,500. Traders can stay out of the market for now and wait for a break out to get clear trade signals.

Nickel price rally to continue into 2015: Goldman Sachs

The latest research report published by Goldman Sachs-the American multinational investment banking firm predicts the price rally in Nickel to continue into 2015. The surplus in the global refined nickel market has narrowed in 2014, when compared with the previous year.

The report states that the rise in LME Nickel inventories is the result of shift in stocks from Australian stockpile and Chinese bonded warehouses. The move from Australian stockpiles was witnessed since early-2013. However, the inspections at Chinese Qingdao port have resulted in movement of stockpiles to LME warehouses since Q2 this year.

The shifting of stocks accounted for over 75% of the total rise in LME stocks. The research indicates that almost 50,000 mt out of the LME stock rise of 66,000 mt in 2014 is due to stock shifts. Since beginning of 2013, the LME stockpiles have increased by 180,000 mt. Out of which, nearly 80,000 mt is due to the shift of stocks from Australia and China.

The ban ore Nickel ore exports by Indonesian administration have led to a strong rally in Nickel prices during the year. The prices have surged nearly 35% year-to-date. The ongoing Indonesian ban may deplete the high grade ore stocks in Chinese warehouses. This will act as the major trigger for the next leg of up move in Nickel prices. The turnaround is expected to happen towards end-2014 of early Q1 2015.

The prices have currently stabilized in the range of $18,000 to $19,000 per mt. The investment banking firm predicts the Nickel prices to rise to $22,000 per mt in 2015.

Scotiabank foresees dramatic rise in Zinc and Nickel prices

As per the latest analyst report from Scotiabank, the cyclical recovery in base metal sector is likely to result in dramatic rise in zinc and nickel prices over the next two years.

The prices of both these metals has witnessed steady rise during this year, the report noted. The zinc prices have already appreciated by nearly 17% YTD. During past month alone, the prices rose by nearly 11%. Meantime, nickel prices have rallied nearly 37% so far this year. The prices have moved to $8.64 per pound from $6.31 per pound at the start of the year.

The Scotiabank report states that both zinc and nickel are positioned well for a drastic rise, as they are already in or near to supply deficit situation. The world demand and supply balance for refined zinc will turn into deficit in 2014. World Nickel market is also most likely to shift into deficit in 2015.

Zinc prices need to elevate itself to at least $1.13 to trigger new mine development. But only higher prices of the metal could ensure ample supplies to meet the demand. The report states that the metal prices are likely to hit $1.60 towards the end of this decade.

For nickel, the report predicts the price at $10.75 in 2015. The prices are likely to rise further to $12 in the next year. The Indonesian ban on ore exports will keep the supplies tight. As a result, the prices are unlikely to drop in the next two years. The situation may see a change during late-2016 when new Indonesian facilities are expected to come online, Scotiabank noted.

Rusal to keep production volumes low despite high aluminum prices

 Russian-UC Rusal- the world’s largest aluminum company has announced to keep its production below capacities during the rest of the year, despite rising aluminum prices. The company plans to restrict its cumulative aluminum output to 1.8 million mt during July-December period this year. The mills will run at less than 80% of their capacities, Rusal announced.

The company expects aluminum prices to remain positive in the second half of the year. The premiums are also likely to improve. However, Rusal notes that world aluminum producers are seen unwilling to boost production due to several cost factors including power tariff hikes, labour issues and raw material costs. The company plans to persist with the cost-effective production controls. It had implemented a series of production cuts at high cost smelters during the first half of 2014.

The company announced that it will stay away from restarting idled capacities or expanding current facilities. The launch of Boguchansky smelter too is delayed, the company stated.

According to data, primary aluminum ingot, billet, slab and foundry alloys production by Rusal during H1 2014 had totaled 1.7 million mt, down almost 11% when compared with the corresponding six-month period in 2013. The company estimates the full year production for 2014 to reach 3.5 million mt, down nearly 9% when compared with the annual production of 3.5 million mt in 2013.

Aluminum Warehousing Antitrust Suits Dismissed by Judge

Goldman Sachs Group Inc. (GS), JPMorgan Chase & Co. (JPM), Glencore Plc (GLEN)and other firms won dismissal of lawsuits accusing them of restricting aluminum supplies in a conspiracy to drive up prices.

U.S. District Judge Katherine B. Forrest today threw out the antitrust claims by buyers of aluminum and aluminum products, finding they hadn’t shown the defendants acted together to increase prices.

The complaints filed by the aluminum purchasers showed that “this was an unintended consequence of rational profit maximizing behavior rather than the product of conspiratorial design,” Forrest said in her written opinion.

Forrest also ruled that a group of commercial and consumer end-users of aluminum lacked the legal standing to make their antitrust claims, saying they can’t refile them. She gave the other plaintiffs in the case permission to try to file new complaints.

Today’s ruling doesn’t affect a group of antitrust claims targeting alleged price-fixing in the gold and silver markets. In those cases, plaintiffs claim banks manipulated a benchmark used to set prices throughout the gold and silver markets.

Dozens of makers of porch screens, flashlights and other products that contain aluminum sued beginning in August 2013 over claims the metal was being hoarded in Detroit-area warehouses, triggering delays of as long as 16 months in filling orders. Forrest said today that price increases were the unintended result of traders and warehouses trying to maximize their own profits.

Forrest dismissed claims this week against the London Metal Exchange on the ground that it functions as an arm of the U.K. government and is protected by sovereign immunity.

bloomberg.com

Nifty August Series Expiry view

• Nifty  has done nothing from past 6 trading session and closing in range of 7875-7936. Series of Dojis around new high suggesting market participants are confused on next move.Also we have rising wedge forming on daily chart and most of market participants looking to see 8000 on Index . Will market oblige ?

• Nifty Future Aug Open Interest Volume is at 88.5 lakh with liquidation of 16  lakh suggesting long liquidation and 42 lakh got rollovered to September series.VIX being very low suggests bulls are still overconfident and every dip is getting bought into.
  

• Total Future & Option trading volume was   at 2.83  lakh core with total contract traded at 2.2  lakh. PCR @1.02

• 8000  CE  OI at 1.04 Core  suggesting wall of resistance , 7800 CE  liquidated 5.3 lakh  suggesting bears cutting down positions  . 7900 CE liquidated 6.7 lakh suggesting bulls are making support on 7900 . FII’s bought 7.8 K CE longs and 21.7 K  CE were shorted  by   them. FII are shorting 7900/7800 CE, so is this an indication of expiry below 7900 ?
  

• 7900 PE OI@ 59.5 lakhs so strong base @ 7900 .FII’s bought 8.7  K contract  PE longs and 5.2 K shorted PE were covered  by them.

• FII’s bought 290  cores in Equity and DII bought 237 cores in cash segment.INR closed at 60.43.FII’s have bought 3.3 K cores and DII’s

• Nifty Futures Trend Deciding level is 7934 (For Intraday Traders). NF Trend Changer Level (Positional Traders) 7778 and BNF Trend Changer Level (Positional Traders) 15340 .

Buy above 7950 Tgt 7963,7980 and 8000 (Nifty Spot Levels)

Sell below 7933 Tgt 7919, 7902 and 7880 (Nifty Spot Levels)

Upper End of Expiry:7988      Lower End of Expiry:7879

Forget Geopolitical De-Escalation - Here's The Real Reason Why Oil Is Tumbling

As with  every other asset-class in the world now, fundamentals have taken a very distant back-seat to both liquidity (flow) and positioning (technicals) as traders are increasingly (in one way or another) on the same side of the same trade. Mainstream media will proclaim US energy "independence", US sanctions 'winning' over Putin, or US airstrikes 'calming' down Middle East uncertainty; but the real reason oil is plunging is... the biggest mass liquidation of speculative longs in recorded 30 year history over the last few weeks...

Obviously speculators remain massively - unprecedentedly long oil futures still...

MCX-Lead (₹136.9): BUY

The price of the metal lead, which finds its major usage in batteries, has risen sharply since May. The lead futures contract traded on the Multi Commodity Exchange (MCX) has surged 10 per cent from ₹123/kg in May to ₹137 now.

According to the data from the International Lead and Zinc Study Group (ILZSG), the market for lead ran into a deficit in 2013 for the first time in the last few years. The deficit is expected to widen in 2014 to 50,000 tonnes from a deficit of 1,000 tonnes in the previous year. Slow-down in mine production, increase in demand and widening deficit could limit any fall in the lead price and keep the current up trend intact. This provides a good opportunity for both the short- and medium-term traders to go long in the MCX-lead futures contract.

Short-term view: The short-term outlook is bullish. The fall from the high of ₹140.75 recorded on August 5 found support at ₹133.5, the 38.2 per cent Fibonacci retracement level. The contract has reversed higher from this level thereby reversing the downtrend. Resistance is at ₹139. A strong break above this level can take the contract higher to ₹142.

Traders with a short-term perspective can initiate fresh long position now. Stop-loss can be placed at ₹134 for the target of ₹141.

Immediate support for the contract is at ₹135 and then the key short-term support is at ₹133.5. The outlook will turn bearish only on a strong break below ₹133.5. Such a break can take the contract lower to ₹130 in the short-term.

Medium-term view: The medium-term outlook is also bullish for the MCX-lead futures contract. The recent rally since June has decisively reversed the strong downtrend that was in place since the August 2013 high of ₹155.4. Also this reversal has happened upon forming a double bottom reversal pattern. The neckline support of this pattern is at ₹130. As long as the contract trades above this level, a rally to ₹148 looks likely in the medium-term.

Traders with a medium-term perspective can hold the long position with a wide stop-loss at ₹129 for the target of ₹147. Intermediate declines to ₹134 and ₹130 if seen can be considered for accumulating more long positions.

The medium-term outlook will turn bearish if MCX lead futures contract declines below ₹130. The ensuing target will be ₹120.

Business Line

Aluminum Trades Near 18-Month High as U.S. Outlook Improves

Aluminum traded near an 18-month high on speculation demand is rising amid signs a recovery is gathering pace in the U.S. and before data forecast to show the country’s economy expanded for the second quarter.

The metal in London was little changed after rising 1 percent yesterday. The U.S. economy grew 3.9 percent in the three months through June, according to a Bloomberg survey of economists before government data tomorrow. Orders for goods meant to last at least three years climbed by a record 22.6 percent in July, the Commerce Department said yesterday. Consumer confidence unexpectedly rose in August to the highest level in almost seven years, a separate index showed.

Aluminum for delivery in three months on the London Metal Exchange was at $2,084 a metric ton, up 0.1 percent, at 8:38 a.m. in Hong Kong. It closed at $2,083 yesterday, the highest since February 2013. Also on the LME, nickel fell while copper was little changed. Lead, zinc and tin price unchanged .

Russia's Rusal back in black as aluminium market moves into deficit

* Q2 recurring net profit climbs to $129 mln

* Core earnings jump 26 pct but miss forecasts

* Rusal sees aluminium market moving into deficit

* Rusal shares up 73 pct this year (Adds CEO comments)

MELBOURNE, Aug 27 (Reuters) - Russia's United Company Rusal Plc returned to profit in the three months to June for the first time in five quarters due to higher aluminium prices, cost cuts and smelter closures, and forecast further gains.

The aluminium giant, which last week completed a restructuring of $5.15 billion in debt and has no payments due until January 2016, said it expects its margins and profits to improve in the second half of the year.

"In the first half of 2014, we witnessed some important trends which signaled that the global aluminium industry has turned a corner," Chief Executive Oleg Deripaska said in a statement on Wednesday.

Aluminium prices have jumped 24 percent off a 4-1/2-year low hit in February. Global demand increased by 6 percent to 27 million tonnes in the first half of this year, while producers outside China have cut output, Deripaska said.

Premiums that aluminium buyers pay over London Metal Exchange prices have also increased to record levels this year, with Rusal seeking a premium of $460 per tonne for shipments to Japan in the December quarter, three sources told Reuters ahead of quarterly price talks.  

For the September quarter, Japanese buyers mostly agreed to pay a record premium of $400-408 a tonne PREM-ALUM-JP.

Rusal's recurring net profit, defined as adjusted net profit plus the company's share of Norilsk Nickel's earnings, jumped to $129 million for the June quarter, up from a loss of $203 million a year earlier.

Core earnings jumped 26 percent to $220 million, but that missed analysts' forecasts for earnings before interest, tax, depreciation and amortisation (EBITDA) of $255 million, according to a Reuters poll of six brokers.

Rusal, which has a primary listing in Hong Kong and secondary listings in Paris and Moscow, said it expected EBITDA to top $600 million in the second half of this year at current aluminium prices.

"Looking at the rest of the year, we expect the LME spot aluminium price to remain around its current level and view potential upside for physical premiums," Deripaska said.

Rusal said it expected a global supply deficit of 1.5 million tonnes in the global aluminium market this year.

Rusal's shares have surged 73 percent this year on the back of the rebound in aluminium prices and a sharp jump in nickel prices. Rusal owns a 28 percent stake in Russia's Norilsk Nickel.

Weekly Economic Data for the week 25-Aug-14 to 29-Aug-14

India Top Court Rules Mines Illegal in Setback to Billionaires

India’s highest court ruled giving away coal mines to companies since 1993 was illegal, spurring concern mining permits may be canceled and deprive power and steel projects of fuel.

The policy of allocating 218 mines for captive use to companies including Hindalco Industries Ltd. and Jindal Steel & Power Ltd. without auctioning them didn’t follow transparent norms, a three-judge bench headed by Supreme Court Chief Justice R.M. Lodha said yesterday, after a report by the nation’s main investigating agency. The court on Sept. 1 will hear arguments regarding termination of the mining licenses.

Annulment of mining rights may lead to fuel shortages at several factories, including power plants, cement and steel mills, undermining Prime Minister Narendra Modi’s aim to revive economic growth and curb blackouts in Asia’s third-biggest economy. Inadequate coal output has prompted companies to seek supplies overseas, as state producer Coal India Ltd. battles slow land acquisition and government approvals.

“The ruling has brought in uncertainty and if the situation prolongs, it could severely strain coal supplies to customers,” said Deven Choksey, managing director at K.R. Choksey Shares & Securities Pvt. in Mumbai. “I would expect the government to act on this matter in urgency and allow companies to retain coal mines on the basis of merit.”

Shares Tumble

Shares of metal and power producers tumbled in Mumbai yesterday after the ruling. New Delhi-based Jindal Steel plunged 14 percent to 253.45 rupees, the lowest close since May 13. Hindalco, the nation’s largest aluminum producer led by billionaire Kumar Mangalam Birla, dropped 9.7 percent to 164.85 rupees, the biggest decline in almost five years.

The policy of giving away coal mines to non-state companies caused a loss of 1.86 trillion rupees ($31 billion) to the state exchequer, the federal auditor said in August 2012. The Comptroller and Auditor General’s report on the estimated losses added to a series of corruption charges on the Manmohan Singh- led United Progressive Alliance government and prompted the Supreme Court to order an investigation by the federal investigative agency.

“We see significant downside for metal and power stocks if allocations are ultimately canceled,” said R.K. Gupta, managing director of New Delhi-based Taurus Asset Management Co., which oversees about $686 million. “This has the potential to hurt the India growth story as power companies are reeling under huge coal shortage.”

Bringing Clarity

The ruling may bring clarity in the mines allocation process and will be beneficial to the industry in the long term, Coal Minister Piyush Goyal told reporters in New Delhi yesterday. “I hope the work to deliver coal to increase generation and reduce imports will be expedited and the court’s judgment will go a long way in helping us achieve our goal of providing 24x7 power to people.”

Jindal Steel is evaluating the impact of the ruling on the company and wouldn’t comment further, it said in an e-mailed statement. Chanakya Chaudhary, Tata Steel spokesman, declined to comment on the ruling saying he hadn’t yet seen the court order. Pragnya Ram, spokesman at Hindalco, didn’t respond to an e-mail seeking comments.

“The news is negative for Jindal Steel and Hindalco,” Kunal Agrawal, analyst at BNP Paribas Securities (Asia) Ltd., said by phone from Hong Kong yesterday. “Hindalco was expecting to get a final clearance and start mining at Mahan coal mine and for Jindal Steel it’s Gare Palma coal mine.”

Thermal Coal

Jindal Steel is also counting on a final permit for its Utkal B1 coal block that will fuel its steel project in eastern state of Odisha, the first in the country to use gas produced from thermal coal to run a steel mill. Essar Power, controlled by billionaire brothers Shashi and Ravikant Ruia, and Hindalco have invested about $3.8 billion to build power plants and an aluminum smelter to be fueled by coal from Mahan coal mines.

A panel of retired judges may be formed to probe the case, the court said in a 163-page ruling.

To increase coal production, the federal government in 1993 started allocating mines to companies for their own use. The discretionary process of allocation would later come under criticism, forcing the government to amend the mining laws and adopt a policy of auctioning coal mines. The nation has yet to auction its first coal mine.

The Coal Ministry allocated 218 coal blocks between 1993 and 2011, of which it has canceled 80 permits for failure to meet production milestones, according to the ministry.

www.bloomberg.com

Gold should be $1,400/oz: Global Investors's Holmes

Frank Holmes, CEO and CIO of US Global Investors, a company known for its focus on the natural resources sector, says he believes the price of gold should be $1,400 per ounce, according to an interview on Ceo.ca.

Holmes mentions several reasons for his bullish stance on the yellow metal, including economic concerns in Europe and China that trigger stimulus.

"We saw, three weeks ago, Germany go to a negative real interest rates. Well, when that happens all of a sudden you start seeing gold rise in euro terms," Holmes tells interviewer Shannon Nelson.

"I think that is important to witness, that we could see gold, based on negative real interest rates in the US, the CPI numbers this week based on the fear in Europe, gold should be trading around $1,400 an ounce," he says.

Holmes discusses a number of other subjects in the podcast, from what it takes to get him to invest to his favorite websites, and gives entrepreneurs some advice.

To listen to the podcast, click here 

Gold and Oil on the Verge of Something Big

Gold and Oil on the Verge of Something Big - Hero's Rarely Win

Everyone has been calling for a bottoming Gold the last year. But the fact is that gold and gold stocks are still clearly in a bear market. Just look at the 200 day moving averages. The previous trends were down and prices have been moving sideways for the past year.

A lot of newsletter and analysts are calling a bottom. Technically it's just a consolidation pattern. Consolidation patterns are a continuation pattern, meaning if the previous trend was down, which it was from 2011 till now, the odds favor price will continue lower after this consolidation.

If this consolidation does happen to be the bottom then we can classify it as a stage I base. Gold and gold stocks will start a new bull market, but price needs to break to the upside of this consolidation pattern. Until it breaks to the upside, it is still in a down trend.

Gold topped out over three years ago. And I am in no rush to try to pick a bottom and be a hero here. I'm just going to continue waiting on the sidelines until price confirms either a new bull market has started or for price to breakdown and we get another leg lower.

Oil Outlook

Taking a look at the big picture of crude oil the chart looks bearish. It too has been trading in a range since 2011 and the price is nearing the apex of a consolidation pattern.

It's important to know that a pennant formation which is what crude oil has formed are the most predictable when price breaks out of the pattern within the first 1/3rd of the formation.

The longer price consolidates and gets squeezed into the narrowing apex of the pennant pattern, the more unreliable. The trend breakout will be, and it becomes at best a 50/50 bet.

Crude oil's previous trend was up, but it's been consolidating for such a long time that price is now squeezed into the apex. This negates that bias for the previous trend to hold true so we have no idea which why it will breakout but when it does expect an explosive move.

A breakdown in crude oil will send price to the $70 or $75 per barrel range, and that will hammer on the Canadian dollar also. I can see $1 USD being equivalent to $1.20 Canadian in a year.

My Gold and Oil Conclusion

Looking at the US dollar, it has been rising partly due to the euro falling. This strong dollar will put a downward pressure on commodities overall.

Gold and oil have not been that exciting for investors since 2011 when they topped out, but both are setting up for massive moves that should last month, if not year or more. Once these new trends emerge expect to see them in the headline news every hour.

It does not matter which way these commodities breakout of the consolidation patterns. With the dollar continuing to rise and the bearish chart patterns for both gold and oil there is a good chance much lower prices are ahead.

This will catch most investor's off guard. It's human nature to try to predict tops and bottoms in the market. But this is why most investors get caught on the wrong side of the market. The market always has a way of catching the majority of people on the wrong side of a position.

I am happily sitting in cash with some of my investment capital waiting for gold and oil to breakout of these large patterns. I would not be surprised if we see $900 gold, gold stocks like the gold bugs index $HUI to be at $150, and $70 per barrel for crude oil. I am not saying this is what I want, but you should be mentally prepared so you can get back into cash position and so you can take advantage of falling prices with me.

Big money will be made on the next price movements in these commodities. Whether we have to go long the market or short sell the market. Either way, we can make money. So don't be a hero and try to pick a top or bottom, just wait for confirmed breakout then invest with the trend.

By Chris Vermeulen

China’s Reaction: America Is A “Disgusting Thief Spying Over His Neighbor’s Fence”

China’s Reaction: America Is A "Disgusting Thief Spying Over His Neighbor’s Fence"

Only hours ago the US government announced that a Chinese fighter jet had intercepted an American military patrol plane over international waters east of China’s Hainan Island.

A Pentagon spokesman called China’s actions “unsafe and unprofessional”, and blasted such unprovoked aggression.

There was no mention as to why a US surveillance plane was just off the Chinese coast to begin with. They’re just playing the victim… and rather loudly at that.

Needless to say, the Chinese government has a slightly different story. I asked one of our Sovereign Man team members in mainland China to translate the following article from Sina News.

The first part of the article praises the pilot’s skill and boldness, as well as the efficiency and superiority of Chinese aviation technology.

The Jian-11B fighter, in fact, is 100% Chinese. There is no foreign engine or major component.

As for the rest of the article– I present it below with only one comment– it should be obvious to anyone paying attention that the US is no longer the world’s dominant superpower. It’s certainly obvious to the Chinese.

——–
From Sina News

Stop thief: China rejects the U.S. government calling our aircraft “dangerously close”

Sure enough, it is the American government who stamps its foot first after a similar event.

First the famous anti-China military scholar Bill Gertz played his “danger close” speech for the Washington Free Beacon.

And then the Pentagon also followed and said that it was a “dangerous intercept”. The White House called it “deeply worrying provocation”.

Adm. John Kirby, the Defense Department spokesman, said Washington protested to the Chinese military through diplomatic channels, and called the maneuvers “unsafe and unprofessional.”

Deputy National Security Adviser Ben Rhodes said it was “obviously a deeply concerning provocation and we have communicated directly to the Chinese government our objection to this type of action.”

Such remarks are laughable. As we all know, the United States is the world’s largest hegemonic force and biggest rogue country.

Their various reconnaissance aircraft have been wandering around foreign airspace for decades and watching the military secrets of other countries like a disgusting thief spying over his neighbor’s fence.

However, when the neighbor comes back with a big stick, the thief will turn tail and run away, blaming the neighbor.

When you show people weakness, they will bully you. When you show people strength, they will respect you.

We [the newspaper] believe the Chinese Air Force and Naval aviation should maintain a high level of vigilence and morale in southeast coastal region to prevent the further US action.

America has lost face and does not want to show the world they are sick. They have been lording over other countries for so long, and they will never let it go after they eat this loss.

Sourced from Simon Black of Sovereign Man

World refined copper market ended in 69,000 mt deficit in May '14: ICSG

According to figures released by the International Copper Study Group (ICSG), the global refined copper market ended in an apparent deficit of 69,000 mt in May this year. The figures are exclusive of adjustment for changes in Chinese bonded stocks.

The refined copper balance after adjustment to changes in Chinese bonded stocks ended in a deficit of 305,000 mt during Jan - May ‘14, compared to deficit of 65,000 mt during the corresponding five-month period in 2013. The Chinese bonded stocks increased by nearly 160,000 mt during the initial five-month period of the year.

The data also indicates that the refined copper balance for the initial five-month period in 2014 ended in a deficit of 466,000 mt. This is when compared with the production surplus reported during the same period last year, ICSG noted.

The Copper body also notes that the Chinese apparent copper demand increased by 29% during the period. The net copper imports by the country surged 65% year-on-year during Jan-May ’14. The strong demand growth in China elevated the world apparent copper usage by 15.5% during the five-month period when compared with 2013.

The global production of refined copper increased 7% in the initial five months of 2014. During this period, primary production saw growth of 6.5%, whereas secondary production was up by 7%. The ICSG data points out that world mine production is estimated to have increased by 5% during this period.

NIFTY FUTURE HOURLY CHART

THE RALLY STARTED FROM 7560 TO 7940.
IMPORTANT LEVEL 7940 7883 & 7835 (Blue Line)
LEVELS ON CHARTS ARE OF FIBONACCI RETRACEMENT LEVEL

All you want to know about Jackson Hole Summit

The Jackson Hole Summit is set to take place starting Thursday to Saturday this week, and traders are already buzzing about its potential impact on the financial markets. Allow me to break down what the event is all about, why it matters, and what might happen.

What is the Jackson Hole Summit all about?

While the symposium is held in a ski resort in Jackson Hole, the world’s financial leaders and central bankers won’t just be cruising down the icy slopes for three days. Instead, they are set to discuss current economic issues, potential action steps, and their global outlook… over steaming mugs of hot cocoa around the fireplace inside a log cabin.

This annual forum has been held since 1978 and has been sponsored by the Federal Reserve Bank of Kansas.

Why is this event important?

The fact that this economic event is held only once a year makes it a pretty big deal. Apart from that, this forum is also an opportunity for economic decision-makers to coordinate their plans for monetary and fiscal policies. With that, any announcements made during this summit tend to have a strong impact on longer-term Financial market price action.

Just to give you an idea of how this event rocked the markets in the past, remember that former Fed head Bernanke first dropped hints on QE2 back in 2010′s Jackson Hole Summit before actually implementing this policy change a few months later. Last year, the main topic discussed during the symposium was the Fed’s taper plans.

What could happen this time?

For the upcoming summit, market participants are expecting to hear clearer clues from Fed Chairperson Yellen on when the U.S. central bank might start hiking interest rates. After all, the U.S. economy has been showing consistent progress across most economic sectors yet the FOMC appeared hesitant to disclose any details on potential policy tightening. Many are expecting to hear dovish or cautious remarks from the Fed head, which could lead to dollar weakness and a surge in risk-taking.

Aside from that, the slowdown in employment trends might also be a hot topic. As seen in some major economies like the U.K., headline figures haven’t been so bad yet underlying components such as average earnings have reflected a concerning degree of economic slack.

Geopolitical tensions could also stir up a lot of conversation among economic heads, as the conflicts in Russia, Gaza, and Iraq could pose a huge threat to global growth. In line with this, leaders could also assess the potential repercussions of the sanctions imposed on Russia and by Russia.

As I’ve mentioned earlier, this event could set the tone for longer-term price action so make sure you keep your eyes and ears peeled for any important announcements. Do watch out for potential gaps if you’re keeping trades open over the weekend though!