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Well that escalated quickly…

Catalysts for this shift include Gary Cohn 'out' as Fed head contender (why would he stay?), more dismal wage data from BLS, spike in jobless claims, Trump Jr. possible public hearing, potential carnage from Irma…

Gold and Yen are bid…

 

Bond prices are ripping higher as stocks sink…

 

10Y TSY yields have a 2.04% handle as the dollar index tumbles to its weakest since Jan 2015…

 

10Y Yield pushing close to election lows…

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Following yesterday’s unexpected BoC rate hike, Canadian bond yields have jumped higher, with the 5Y yield now above Treasuries for the first time since 2014.

 

The last time this regime shift occurred was in Q4 2007…

Right before America entered recession.

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With Mario Draghi offering little, US equities gave up their overnight gains rather quickly once US equities opened…

As EURUSD reversed lower so stocks remembered just how much they love Gary Cohn…

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Six years ago this week, the Power of the Pattern shared that “Gold could be flat to down for years to come!” See Why the Power of the Pattern felt this way. See Post Here  

Below looks at the performance of Gold, Silver, GDX and GDXJ since the post on 9/1/11-

CLICK ON CHART TO ENLARGE

Could the struggles of the metals markets be about to end? Mother of all “Bullish Patterns” in play for Gold? Could be, check out the chart below-

CLICK ON CHART TO ENLARGE

Even though Gold has been down hard the past 6-years, it did NOT break below rising support off the 2001 lows, which was tested at last years lows. This is a long-term positive.

Over the past couple of years, Gold could be forming a base, that is taking the shape of a “Bullish Inverse Head & Shoulders” pattern. If the read would happen to be correct, an all important test is in play at this time. The key test in play is this…Gold is testing the underside of the neckline, which is resistance at this time.

Bottom Line– If this read is correct and Gold breaks above the neckline at (1), we could see buying pressure take place, that has been absent for years.

If you are interested in Gold, Silver, Miners or Copper, we would be honored if you were a Premium or MetalsMember.

 

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Having concluded that Draghi’s speech was on the margin dovish, not least of all due to Draghi’s parting shot at Euro bulls, saying that “nothing will derail ECB’s will to deliver inflation”, a refreshed version of “Whatever it takes”, the EURUSD has since slumped from session highs, and was back under 1.20, in fact filling the entire post-Draghi gap, driven in part by the release of the ECB’s currency forecasts, which are far below the spot rate going all the way to 2019.

This is what the ECB now forecasts:

Bilateral exchange rates are assumed to remain unchanged over the projection horizon at the average levels prevailing in the two-week period ending on the cut-off date of 14 August. This implies an average exchange rate of USD 1.13 per euro in 2017 and of USD 1.18 per euro over 2018-19, compared with USD 1.09 in the June 2017 projections. The effective exchange rate of the euro (against 38 trading partners) is 2.1% higher in 2017 and about 4.4% higher over 2018-19 than assumed in the June 2017 exercise.

 

While this is a somewhat paradoxical considering the ECB’s favorable outlook on the European economy, the market has taken this latest indication of what the ECB sees as “fair value” and sent the EURUSD lower, even as Bund yields continue to slide, while 10Y Italian BTPs have slumped back below 2% after the Draghi presser.

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After laying waste to much of the Leeward Islands and leaving most of Puerto Rico without power, Hurricane Irma is continuing its destructive march through the Caribbean which is expected to culminate with landfall in Miami sometime this weekend.

 

As we noted yesterday, Irma’s catastrophic 185+ mph winds left 90% of the dwellings on the island of Barbuda completely leveled, according to Prime Minister Gaston Browne.

First images out of Barbuda from a Facebook broadcast live by ABS Radio & TV.

Widespread destruction has occurred on the island. http://pic.twitter.com/0MGShjxuU8

— TTWeatherCenter (@TTWeatherCenter) September 6, 2017

 

Unfortunately, Irma’s power isn’t expected to subside all that much as it moves over several Caribbean islands over the next couple of days before ending up in Southern Florida.  Here is the latest from the National Hurricane Center:

Maximum sustained winds remain near 180 mph (285 km/h) with higher gusts.  Irma is a category 5 hurricane on the Saffir-Simpson Hurricane Wind Scale.  Some fluctuations in intensity are likely during the next day or two, but Irma is forecast to remain a powerful category 4 or 5 hurricane during the next couple of days.

 

FORECAST POSITIONS AND MAX WINDS

• INIT  07/0900Z 20.0N  68.3W  155 KT 180 MPH
• 12H  07/1800Z 20.7N  70.5W  150 KT 175 MPH
• 24H  08/0600Z 21.7N  73.1W  145 KT 165 MPH
• 36H  08/1800Z 22.3N  75.5W  140 KT 160 MPH
• 48H  09/0600Z 22.8N  77.4W  135 KT 155 MPH
• 72H  10/0600Z 24.5N  80.0W  130 KT 150 MPH
• 96H  11/0600Z 28.5N  80.5W  105 KT 120 MPH
• 120H  12/0600Z 33.0N  81.0W   75 KT  85 MPH…INLAND

 

Hurricane-force winds extend outward up to 50 miles (85 km) from the center and tropical-storm-force winds extend outward up to 185 miles (295 km).

 

STORM SURGE:  The combination of a life-threatening storm surge and large breaking waves will raise water levels ABOVE NORMAL TIDE LEVELS by the following amounts within the hurricane warning area near and to the north of the center of Irma.  Near the coast, the surge will be accompanied by large and destructive waves.

• Turks and Caicos Islands…15 to 20 ft
• Southeastern and central Bahamas…15 to 20 ft
• Northwestern Bahamas…4 to 7 ft
• Northern coast of the Dominican Republic…3 to 5 ft
• Northern coast of Haiti and the Gulf of Gonave…1 to 3 ft
• Northern coast of Cuba in the warning area…5 to 10 ft

 

RAINFALL: Irma is expected to produce the following rain accumulations through Saturday:

• Northeast Puerto Rico and the British and U.S. Virgin Islands…An additional 2 to 4 inches.
• Much of the Bahamas and the Turks and Caicos…8 to 12 inches, isolated 20 inches.
• Northern Dominican Republic and northern Haiti…4 to 10 inches, isolated 15 inches.
• Eastern and Central Cuba…4 to 10 inches, isolated 15 inches.
• Southern Haiti…1 to 4 inches.

Meanwhile, Miami looks increasingly likely to take a direct hit from a massive hurricane packing sustained winds of 150-155 mph.

Here is the latest Calibrated City-level probabilities to see Hurricane force winds (>73mph); Miami leading the way but East Coast %s rising http://pic.twitter.com/TlXFoas9GW

— Michael Ventrice (@MJVentrice) September 7, 2017

 

As we noted yesterday, more than 100,000 Miami-Dade residents have been instructed to leave their homes on barrier islands, including Miami Beach, and in low-lying mainland areas starting Thursday morning which has created a logistics nightmare at Florida’s airports and on highway evacuation routes. 

According to the Washington Post, airlines added flights earlier this week to accommodate a surge in demand but many have been canceled and airports have warned that operations will be halted once winds exceed 55 mph.

To accommodate surging demand of people trying to flee, airlines including American and Delta added flights or brought in larger planes and waived change fees for passengers who need to cancel or rebook their flights.

 

Even so, hundreds of flights were canceled Wednesday, and airlines strongly advised passengers to check before leaving for the airport.

 

Late Wednesday, American Airlines announced it would begin winding down its operations in Florida and had canceled flights at its Miami hub as well as to airports in Fort Lauderdale, Fort Myers, Sarasota and West Palm Beach. In addition, it canceled a handful of international flights from Europe and South American that were scheduled to land in Miami on Friday.

 

Officials at Key West International Airport said they would suspend commercial operations at the end of the day Thursday, and Miami International Airport advised travelers it will halt operations at the airport when winds reach 55 mph. Generally, airlines do not operate in sustained crosswinds that exceed 35 mph, and the Federal Aviation Administration tower ceases operations after winds of 55 mph, the airport noted.

Of course, the added flights didn’t stop Delta from taking advantage of the surge in demand from frightened travelers.

Shame on you @delta. Jacking from $547 to over $3200 for people trying to evacute responsibly? #IrmaHurricane http://pic.twitter.com/O2nfPHQUAh

— Leigh (@LeighDow) September 5, 2017

 

Meanwhile, as the Wall Street Journal points out, those looking to flee by car are facing similar hassles with long lines at gas stations…

 

…at least at the ones that have any gas left to sell.

And, of course, panic hoarding has already left store shelves empty across much of Florida.

#hurricaneirma2017 #Florida Wal-Mart http://pic.twitter.com/MlpyVWBDLs

— #TheResistance (@BoneKnightmare) September 6, 2017

 

But, at least this will all be positive for Ford and GM…

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Authored by Mike Shedlock via MishTalk.com,

In a move many people thought would never happen, the Catalan parliament approved a referendum that would allow a vote on the region’s independence from Spain.

The central government seeks intervention from the Constitutional Court. But short of invasion who is going to stop the vote?

The Spanish government has accused the Catalan Parliament of committing a “constitutional and democratic atrocity” by approving legislation to allow next month’s bitterly disputed independence referendum to go ahead.

 

On Wednesday night, the region’s ruling, pro-sovereignty coalition – which has a majority in the Catalan Parliament – managed to get the referendum law passed despite angry objections from opposition MPs, who complained that usual parliamentary procedures had been disregarded.

 

The legislation passed by 72 votes after 52 opposition MPs walked out of the chamber in Barcelona in protest at the end of an ill-tempered, 11-hour session.

 

The move was denounced by the Spanish government, which once again said it would do everything in its legal and political power to stop the vote from going ahead on 1 October.

 

The Spanish prime minister, Mariano Rajoy, ordered government lawyers to file a complaint with the country’s constitutional court so that the vote could be annulled.

 

The public prosecutor’s office also said it was preparing a case against Catalan parliamentary officials – including the speaker, Carme Forcadell – for disobeying previous court orders forbidding legislative steps towards independence.

 

Catalan separatists insist the wealthy north-eastern region has a political, economic and cultural right to self-determination.

 

But Madrid is opposed to independence, arguing that it is a violation of the constitution, and has refused to offer a Scottish-style referendum on the matter.

 

Three months ago, Puigdemont announced that the referendum would be held on 1 October and that voters would be asked: “Do you want Catalonia to be an independent country in the form of a republic?”

 

More than 80% of participants opted for independence in the 2014 poll – although only 2.3 million of Catalonia’s 5.4 million eligible voters took part.

 

The Catalan government insists that the results of the October vote will be legally binding. If successful, the regional government will declare independence from Spain 48 hours after the result is in and set about building a sovereign state.

 

According to a poll at the end of July, 49.4% of Catalans are against independence while 41.1% support it. However, a poll this week found that, were the referendum to go ahead, the yes campaign would take 72% of the vote on a turnout of 50%.

 

The Catalan government has not set a threshold for minimum turnout, arguing the vote will be binding regardless of the level of participation.

Spain Moves to Block Catalonia Referendum

The Wall Street Journal reports Spain Moves to Block Catalonia Referendum on Independence.

The Spanish government on Wednesday asked a top court to block the Catalan regional government’s bid to hold a referendum on independence, the latest clash in what has become Spain’s most pressing political issue.

 

“The government has asked the Constitutional Court to declare null and void the adopted agreements,” Deputy Prime Minister Soraya Sáenz de Santamaría said. “We are defending the rule of law in Spain and democracy in Catalonia,” she added.

 

The clash between the central government in Madrid and regional leaders in Barcelona, the capital of Catalonia, has been building for decades and began to accelerate when a financial crisis hit Spain several years ago. The economy has since recovered and support for independence in Catalonia has flagged somewhat. A majority of Catalans, however, still support a vote on whether the region should separate from Spain.

What It All About?

1. Tax Collection – Catalonia is the industrial superstate of Spain. Catalonia sends far more to Madrid than it gets back. Secession would cost Spain approximately 20% of tax revenue.
2. Language – Catalan is not a dialect of Spanish, but a language that developed independently out of the vulgar Latin spoken by the Romans who colonized the Tarragona area. It is spoken by 9 million people in Catalonia, Valencia, the Balearic Isles, Andorra and the town of Alghero in Sardinia. Since the early 1980s, the imposition of a system known as “immersion,” with Catalan as the only vehicular language in state schools, has guaranteed everyone educated in the past 30 years has a command of it. However, thanks to the presence of Spanish in daily life and the media, virtually all Catalans are perfectly bilingual.
3. History – Dating back to 1150 and 1707 Catalonia was not part of Spain. Numerous kings tried with no success to end the Catalan language. Those attempts ended in 1931. The Telegraph has a nice historical perspective on Why Catalonia wants independence from Spain.

Map

Eurozone Implications

The independence referendum is not a vote to leave the EU or the Eurozone.

As an independent country, Catalonia would have to apply for membership to the EU and to the Eurozone.

Mish Take

It’s certainly easy enough to draw a map of Spain without Catalonia.

I am in favor of just that. Short of invasion who is going to stop the vote?

Moreover, Catalonia could adopt the euro as its national currency whether or not it was officially part of the Eurozone by treaty.  It would not have the ability to print euros.

Inability to print money at will is an ideal setup.

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After a kneejerk move lower in the Euro, tumbling briefly as low as 1.1930 when Mario Draghi made an explicit reference to the strength of the Euro in his prepared remarks, stating that “the recent volatility in the exchange rate represents a source of uncertainty which requires monitoring with regard to its possible implications for the medium-term outlook for price stability“, the EURUSD has since surged more than 100 pips, and was up to 1.2050, nearing the 2017 high of 1.2070 during the Q&A part of today’s press conference which has been dubbed “pretty agreeable” by several sellside desks, even as the yield on the 10Y Bund has tumbled with Draghi suggesting that no discussing of tapering has taken place yet, indicating QE will likely remain unchanged for longer than even the skeptics imagined.

Ironically, in a comment by Danske Bank analyst Jens Peter Sorensen released shortly after the ECB announcement, the strategist said that “If [the ECB] had removed the part of scaling up, then the euro would have become stronger, and he is trying to avoid that,” Sorensen says adding that “the ECB is trying to kill volatility in the markets.” So far the ECB has failed to do that.

Commenting on Draghi’s remarks, ABN Amro’s Nick Kounis summarizes the speech (in short) as follows: 1, More concern about euro strength 2. QE re-calibration in the fall (Oct) 3. 2019 inflation a little lower

#ECB in short (so far): 1, More concern about euro strength 2. QE re-calibration in the fall (Oct) 3. 2019 inflation a little lower

— Nick Kounis (@nickkounis) September 7, 2017

Elsewhere, in Draghi’s speech there have been no explicit mentions of links between the currency and QE decision, with Draghi taking a patient approach on inflation, saying it will eventually converge, both EUR positive.

Among the other soundbites, Draghi briefly touched on the future of QE and tapering, saying that “ECB discussion on QE was very preliminary. Various scenarios were discussed as well as various pros and cons. The ECB discussed the QE covered length, size of plan.” When asked to comment on financial conditions, Draghi merely said that they are still broadly supportive, and that Euro gains mean that financial conditions have tightened.

Draghi also answered a question on recent deviations from the capital key, which he said “don’t indicate anything.” Draghi also said that the ECB didn’t discuss widening asset classes in QE, although that is certainly hard to believe with the central bank almost running out of Bunds to purchase.

So even as the EUR has interpreted Draghi’s speech as hawkish, while the bond market and Stoxx 600 see it as delightfully dovish, FX strategists note that Draghi will have to make express hawkish signals, i.e., a mention of the taper, for the currency to move above 1.21.

And like that, Draghi has kicked the can one more month, confirming that the bulk of QE decisions will be taken in October.

Commenting on the latest Draghi mishmash, Bloomberg writes that the market will be quite jumpy before the October ECB meeting, adding that “Draghi does not like the characterization of the euro zone being in a state of “high uncertainty” as we await the new plan, and he certainly isn’t going to fall into the trap of discussing what euro levels he’d be worried about. Even so, markets are going to be jumpy before the October meeting presumably, and if he attends the World Bank and IMF meetings in Washington, any comments there will be scrutinized.“

And now that the market is supremely confused, we expect the ECB to lob the next Reuters trial balloon any moment to punish all those who keep buying the EUR. Here is a start: a rehash of “Whatever It Takes“:

• DRAGHI SAYS NOTHING WILL DERAIL ECB’S WILL TO DELIVER INFLATION

Which, incidentally, is euro negative…

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The market bubble has become so massive that even Wall Street is nervous.

To be clear, investment banks do best when stocks are in a bull market. And they love bubbles because it means more M&A, IPOs, dead offerings, stock issuance and other deals from which they derive their revenues.

So for Wall Street CEOs to openly start warning that the market is in a bubble… they have to be really REALLY nervous about what they’re seeing… and know that a stock market crash is coming

On that note this week, not one but TWO major bank CEOs warned about the markets.

First was Deutsche Bank CEO John Cryan with the following nugget:

“We are now seeing signs of bubbles in more and more parts of the capital market where we wouldn’t have expected them," Cryan said, adding that the interest-rate policy has been partly responsible for the decline in earnings at European banks. “I welcome the recent announcement by the Federal Reserve and now also from the ECB that they intend to gradually bring their loose monetary policy to an end.”

Source: Bloomberg.

This, in of itself, is extraordinary. But then we have Lloyd Blankfein, CEO of Goldman Sachs stating the following during the same week:

“When yields on corporate bonds are lower than dividends on stocks, that unnerves me," the Goldman Sachs chief executive said during an interview Wednesday that was broadcast at a European banking conference in Germany and on the internet.

Source: CNBC

So we have not one, but TWO Wall Street CEOs warning that the market is in a bubble. And we all know how those end: in a stock market crash./ This is truly staggering. And it indicates that those at the top of the financial system are actively preparing for what's coming.

A Crash is coming…

And smart investors will use it to make literal fortunes.

We offer a FREE investment report outlining when the market will collapse as well as what investments will pay out massive returns to investors when this happens. It's called Stock Market Crash Survival Guide.

We've reopened this report to the public for 24 hours based on the warnings from Wall Street CEOs.

But today is the last day this report will be available.

To pick up one of the last remaining copies…

CLICK HERE!

Best Regards

Graham Summers

Chief Market Strategist

Phoenix Capital Research

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