A Healthy Consolidation Ahead of Powell, Day Two!

Overnight, Precious Metals are higher after yesterday’s flat but positive session.

In my opinion, the market needed a session like that for two reasons.

1. The market consolidated, allowing traders to “catch their breath.” Let’s be honest: Trading volatility is fun, but having a crazy girlfriend named Silver driving you up the wall with $1.20 moves every day is not suitable for one’s mental health, which brings up an important point: From the May 31st “peak” until the June 10th washout, Silver maintained a $1.25 average true range. Since then, we have declined to 75 cents per day. That’s healthy.
2. Both Gold and Silver survived Jerome Powell’s testimony. Three-fourths of the questions asked were complete garbage, but one-fourth was relevant. He takes a very hard stance, and as the testimony comes to an end, he gives hints of a cut. My trader instinct tells me he’s not going to cut as a courtesy; it has to be something substantial—either a collapse in Inflation or a crisis in the economy.

Addressing Inflation: Forget the grocery store; those companies need to make a profit. Some of the commodities have definitely come down. Look at Ags. The farmer is borderline on edge if the grains head lower. Going to Energy, I had three television requests to cover crude, gas, and natural gas prices as hurricane Beryl headed this way in the past 48 hours. That generally marks a top. Since then, Crude Oil prices have declined.

Addressing the Economic Crisis: We have to watch the labor data and see how the government is “massaging” the numbers.

The reminds me, when it comes to natural disasters, from my experience, I’ve done this 20+ years, most of the price movement is in anticipation of the event. For example, Natural Gas its cold, inventories are drawing down, futures begin a rally, and you buy (use mini’s or multiple option contracts). The word “polar vortex” is spewed out of every reporter’s mouth, people will begin to pile in, that is precisely the time you sell 1/3 of the position. You speculated on the top for the second third, “A reporter calls Phil, that’s ME, to cover the market, so sell the second third, the last third you sell, before it tests your original entry point. Then brag to your friends at the company holiday party that you “killed it” and are flying to the Bahamas the following day. So, if you see me on Fox, Bloomberg, and CNBC in a 48-hour period covering Silver, which I did on Sunday back in 2011, you know what to do.  

One last thing – China’s consumer price inflation in June from a year ago missed expectations, while producer prices aligned with forecasts.

Basically – That data was a bust and didn’t move markets.

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