Scope For Gold To Extend Much Higher Than $1200 Over Time, Goldman Says

Gold has reached, and so far held, notable resistance around $1200. However, as Goldman notes, there’s scope to extend much higher over time.

The current area includes the 100-wma and the trend across the highs since March ’14 (wedge resistance). It’s formed an exhaustive looking candlestick pattern and oscillators seems to be turning. Basically, it seems a good place to start a corrective pullback. The 100-wma in particular was an important pivot in determining the start of the late-’12 decline.

From a wave count perspective, the market is likely in the initial stages of a counter-trend ABC correction which could eventually retrace ~38.2% of the 5-waves from ’11 to 1,381. From a pure techs perspective, breaking from a declining wedge would initiate a medium-term target back at the start of the pattern ~1,392.

Bottom line, although 1,200-1,202 might hold in the near-term, there’s scope to extend much higher over time.

Source: Goldman Sachs


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A Detailed Look At This Morning’s Major Market Moves

As JPM put it best earlier today, “It’s Hard To Imagine An Uglier Morning.” And while a direct BOJ intervention shortly after 7 am, one which the local government was non-comittal on…

  • JAPAN GOV SOURCE: NO COMMENT IF GOV INTERVENED IN FX MKT: RTRS

… coupled with a modestly better than expected initial claims report, has brought some normalcy back to what initially was a furious selloff, today will likely be one of those days when Yellen will have to come up with a big rabit out of her congressional testimony hat in just over an hour.

For now, here is, courtesy of Nanex, a forensic market-level look at the key events that took place so far this morning:


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Remember the Scandal Over the IRS Targeting Tea Party Groups? Glenn Reynolds Does

It seems like so long ago, but really isn’t. In 2013, President Barack Obama acknowledged that the IRS had in fact been directing extra scrutiny to broadly defined right-wing “Tea Party” groups as they applied for various forms of tax-code recognition. In fact, Obama forced out the acting commissioner of the agency and pledged publicly, “I will not tolerate this kind of behavior in any agency, but particularly the IRS given the power that it has and the reach that it has in all of our lives.”

Paul Caron, a Pepperdine University academic who runs the always interesting TaxProf blog, recently celebrated the 1000th day of the scandal, which he argues (convincingly) has never really been covered or investigated fully. After Obama’s first big statements, interest drifted away for the most part and even the president’s bald acknowledgements that something was rotten at the IRS started to be walked back.

In a new USA Today column, Glenn Reynolds of Instapundit, who’s been linking to TaxProf for the past 1,000-plus days, sums up the social implications of the IRS scandal: 

It’s not just that evidence overwhelmingly points to the IRS having been weaponized in an effort to neutralize Obama’s Tea Party opposition. It’s that ordinary Americans can look at this and conclude that there’s no reason to follow the law if they can get away with breaking it since the people in charge of enforcing the law clearly regard it with contempt.

In an influential essay several years back, Gonzalo Lira warned of the coming middle-class anarchy, when ordinary Americans decide to be no more lawful than they have to be.

There are plenty of nations that work that way — where both the ruling class and the ruled view the law with contempt and obey it only when forced to. Such places are, generally, not as nice as places where the rule of law pertains. But avoiding that kind of outcome requires principles and self-discipline on the part of the ruling class, something that contemporary America conspicuously lacks. Welcome to the era of hope and change.

Read the whole thing here.

Watch “3 MORE Reasons To Fear the IRS”:

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ACLU Identifies ‘Critical Civil Liberties Challenges Facing Our Country.’ Does Not Include First Amendment

Is the ACLU going soft on the First Amendment? That’s the troubling question raised by University of Washington law professor Ronald Collins, who notes that the ACLU just began its annual fundraising campaign and released an accompanying “National ACLU Workplan,” which, in the organization’s own words, “lays out [the ACLU’s] plans for the year ahead [and] always addresses the most critical civil liberties challenges facing our country.”

Yet as Collins reports, “surprisingly, protecting free-speech freedoms is not listed as one of this year’s ‘critical civil liberties’ issues. Neither of the documents contains any mention of the First Amendment.”

Collins also shared this discouraging comment from Harvey Silverglate, noted criminal defense and civil liberties lawyer, co-founder of the Foundation for Individual Rights in Education, and former board member of the Massachusetts ACLU (and sometime Reason contributor). To say the least, Silverglate is not optimistic about the ACLU’s long-term commitment to securing First Amendment rights:

Sadly, it comes as no surprise that the national ACLU Board and Staff are nowhere to be seen in the increasingly difficult battle to protect First Amendment freedom of expression rights. This is especially so in areas where the ACLU, more and more, pursues a political or social agenda where the overriding importance of the goal transcends, in the eyes of ACLU’s leadership, the needed vitality of free speech principles neutrally and apolitically applied. Fortunately, some ACLU state affiliates still carry the free speech battle flag, but they are a diminishing army in a war that is getting more and more difficult, even though more and more important, to wage.

Read the whole thing here.

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Initial Claims Drop But Goldman Warns “Recent Increase Is More Than Just Noise”

Initial jobless claims dropped notably last week (from 285 to 269k) but the overall trend (away from the noise) appears in tact. The smoother4-week average remains near 12-month highs and as Goldman notes weakness is widespread – "there is only limited evidence that the rise in claims is due to distress in the energy sector." Continuing claims dropped modestly to 2.239mm but, as Goldman adds, "the persistence of the recent move suggests more might be going on, and we are treating the increase as more than just noise."

 

And finally, here is Goldman explaining why it is time to be concerned…

Initial and continuing claims for unemployment insurance benefits have moved steadily higher since late last year. After nearing their respective post-crisis lows of 256k and 2,146k this past October, initial and continuing claims are now higher by 29k and 112k, respectively. Both series can be volatile, and one should be cautious about reading too much into the week-to-week changes. But the persistence of the recent move suggests more might be going on, and we are treating the increase as more than just noise.

And moreover, Goldman warns that they find only limited evidence that the recent increase in claims directly relates to distress in the energy sector.

And looking forward, every 1k increase in claims (relative to the breakeven rate) implies a slowdown in monthly payroll growth of just over 4k. Therefore, a further rise in claims to 300-315k, if sustained, could imply payroll growth closer to a trend-like rate—assuming the benefits take-up rate and other aspects of labor market flows remain unchanged.


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6 Dead After Gunman Storms Saudi Education Department

A gunman has killed at least 6 people in an attack on an education department in southern Saudi Arabia, multiple sources confirm. 

The attacker has been arrested. From Arab News:

A teacher armed with an automatic weapon stormed a Ministry of Education office in the southern region of Jazan and shot dead at least six people on Thursday, local media reported.

 

Three other office staff were injured, online news site 3alyoum.com said, quoting Jazan police.

 


 

The office is located in Al Dayer governorate, eastern Jazan.

 

Police have cordoned off the office compound and were looking for the assailant, who is said to be teaching at a secondary school, the report said.

Disgruntled employee (maybe he was mad that the kingdom rolled back fuel subsidies) or excuse to invade Syria? We’ll see.


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European Sovereign Risk Soars As Systemic Fears Mount

“Whatever it takes” is not enough, it would appear as the fragility and interconnectedness forced upon the European banking/sovereign finance ponzi has rapidly come home to roost for Draghi and his followers. Peripheral bond risk has flipped from “hold your nose” buys to panic sells with Portugal risk exploding 200bps in the last week. As the European banking system’s credit risk rises 2012-crisis-like, it seems belief in a bigger bazooka is fading fast.

It’s not just Deutsche Bank…

 

Smashing European Peripheral risk higher…


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A.M. Links: Hillary vs. Bernie Debate Tonight, Oregon Rancher Cliven Bundy Arrested by FBI

  • “When student reporters at Mount St. Mary’s University, a small Catholic institution in Maryland, published an article in January that quoted the university’s president likening struggling freshmen to bunnies that should be drowned, they knew it might get a big reaction. It finally came this week, it appears—in the form of a pink slip for the faculty adviser of the campus newspaper.”

Follow us on Facebook and Twitter, and don‘t forget to sign up for Reason‘s daily updates for more content.

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Deutsche Bank Is Back: 5 Year Sub CDS Soar To Record High

"Worse than Lehman" is how one European bond market trader described the carnage this week as the brief respite that ECB monetization and debt-buyback rumors provided yesterday have morphed into utter destruction this morning. European (and US) banks are a sea of contagious red with Deutsche Bank the tip of the collapse spear. Credit risk on Deutsche has exploded this morning with Sub CDS trading up 85bps to a record high 540bps… eerily reminiscent of the pre-Lehman bankruptcy week in 2008.

Time to panic now?

 

We've seen this kind of stress before for a financial institution…

 

and it did not end well…


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Frontrunning: February 11

  • Gold Roars to One-Year High as Turmoil Drives Safe Haven Demand (BBG)
  • Banking Stocks Pummeled in Europe (WSJ)
  • Dollar, stocks plunge sparks scramble for safety (Reuters)
  • Nymex Crude Slips Below $27 a Barrel (WSJ)
  • No Respite for S&P 500 as U.S. Stock Futures Join Global Selloff (BBG)
  • Walgreens Threatens to End Theranos Agreement (WSJ)
  • Next Task for Clinton, Sanders: Securing the Minority Vote (WSJ)
  • Yen Advances to 15-Month High as Korean Tensions Stoke Haven Bid (BBG)
  • Meet the Man Who Helps Trump Be Trump (WSJ)
  • FBI tightens grip on final occupiers at Oregon wildlife refuge (Reuters)
  • SocGen Slumps as Quarterly Profit Hurt by Securities Drop (BBG)
  • HSBC CEO Gulliver Said to End Pay Freeze After Staff Revolt (BBG)
  • Donors urge Clinton to sharpen message ahead of debate with Sanders (Reuters)
  • Dark Pools’ Market Share Drops for First Time in Europe: Chart (BBG)
  • Russia says U.S. planes bombed Syria’s Aleppo on Wednesday (Reuters)
  • Benghazi Panel Nears Final Report Examining Clinton’s Response (BBG)

 

Overnight Media Digest

WSJ

– Theranos’ main retail partner Walgreens threatened to terminate its relationship with the blood-testing company unless it quickly fixes the problems found by federal inspectors at a laboratory in California, people familiar with the matter said. (http://on.wsj.com/1QsIXxI)

– Federal Reserve Chairwoman Janet Yellen hinted to Congress Wednesday that the central bank had increased trepidation over the path of interest-rate increases, pointing to accumulating risks to the economy in recent weeks.(http://on.wsj.com/1QsJ1NK)

– Twitter for the first time failed to show any user growth in an earnings report, pushing its shares to new lows and fueling investor anxiety that the company doesn’t have a turnaround plan.(http://on.wsj.com/1QsJ6kF)

– Bernie Sanders’ resounding New Hampshire victory over Hillary Clinton, facing the twin questions of whether his appeal is broad enough to replicate his performance elsewhere, and whether her support is strong enough to reverse the tide.(http://on.wsj.com/1Si1XEY)

– A top North Korean general was executed this month after being charged with corruption, the latest in a series of purges by leader Kim Jong Un, according to South Korean intelligence officials. (http://on.wsj.com/1Si8LCs)

 

FT

* Worldpay Group Plc is launching into Canada partnering with Peoples Trust Company, which gives Worldpay a domestic licence for its customers to accept card payments in Canada. It looks to replicate this deal with other customers that it has previously been unable to serve in Canada.

* Four cases of Zika have been reported in the UK since January and the number is likely to rise as travellers return from endemic areas of Latin America. Public health officials said seven UK cases had been diagnosed in the past three years and most had occurred since the start of 2016 as the virus.

* BP Plc said oil producers in the United States will recover from the collapse in crude oil prices and pump millions of barrels a day more over the next two decades even though there is resilient growth in energy demand.

* According to official data, productivity in NHS hospitals has fallen for the third year now. This will now intensify the debate over whether the service can survive without more funding.

 

NYT

– The U.S. Supreme Court’s surprise decision Tuesday to halt the carrying out of President Obama’s climate change regulation could weaken or even imperil the international global warming accord reached with great ceremony in Paris less than two months ago, climate diplomats say. (http://nyti.ms/20WMGea)

– On Wednesday, after many quarters of slowing user growth, Twitter said its monthly visitors in the fourth quarter totaled 320 million – exactly the same as the company reported in the previous quarter. While the number was up 9 percent from a year ago, when monthly active users stood at 288 million, the figures showed that Jack Dorsey’s recent moves have made little impact in attracting users. (http://nyti.ms/20WCX7I)

– The Fed chairwoman, Janet Yellen, testifying before Congress, reiterated the central bank’s gradual approach to interest-rate increases. (http://nyti.ms/1ott9UW)

– The federal judge overseeing hundreds of claims against General Motors related to a defective ignition switch has rejected an effort to replace Robert C. Hilliard, one of the lead plaintiffs’ lawyers on the case. (http://nyti.ms/1mtVbhu)

– HBO’s stand-alone video streaming service has attracted about 800,000 paying subscribers since starting last April, the premium cable network said Wednesday, the first time it has disclosed numbers for the service. (http://nyti.ms/1PEfJvP)

 

Canada

THE GLOBE AND MAIL

** Canada has competitive advantages when it comes to car manufacturing, but falls short in marketing itself and needs to change a key element of the incentive package offered to global auto makers, says Ray Tanguay, the special auto adviser to the federal and Ontario governments. (http://bit.ly/23YCCnw)

** Canadian Pacific Railway Ltd CEO Hunter Harrison has signalled he will abandon his four-month push to form North America’s biggest railway if Norfolk Southern Corp shareholders reject his latest move. (http://bit.ly/1XkRl7C)

** Pacific NorthWest LNG’s project in British Columbia would likely harm harbour porpoises and contribute to climate change, but the export terminal could be built and operated without causing major ecological damage, the Canadian Environmental Assessment Agency has ruled. (http://bit.ly/1V5TD9i)

NATIONAL POST

** Hudson’s Bay Co could be bulking up even further. The Toronto-based owner of Saks Fifth Ave. and Lord & Taylor is in the running to buy bankrupt department store chain V&D of the Netherlands, according to multiple Dutch media reports. (http://bit.ly/1SJXco5)

** Canada’s second-largest dairy producer, the farmer-owned Agropur Cooperative, says it sees the company’s growth not here in the country, where it has defended the protectionist supply-management system when threatened with free-trade deals, but in the U.S. where it can import to international markets including north of the border. (http://bit.ly/1PnEMoZ)

** Canada’s Superintendent of Financial Institutions has taken temporary control of the assets of the Canadian branch of Maple Bank GmbH, which is headquartered in Germany. (http://bit.ly/1Ta1rYD)

 

Britain

The Times

The Bank of England and Paul Tucker have been drawn back into the Libor scandal amid claims that Barclays Plc used what it believed was a confidential instruction from a former deputy governor to lower rates to buy billions of pounds of debt in rival British lenders at the height of the financial crisis. (http://thetim.es/1QsvC8A)

HSBC Holdings Plc’s directors will meet on Sunday to decide whether to continue to base the bank’s headquarters in London or move abroad, with an announcement on the eagerly awaited question likely to be made that day. (http://thetim.es/1QsvE00)

The Guardian

BP Plc has predicted a bright future for the oil and gas industry with crude prices spiking at $100 a barrel again, huge increases in shale output and new production from Canadian tar sands. (http://bit.ly/1QsvLsC)

Mark Price, managing director of Waitrose, is to be made a Foreign Office trade minister as David Cameron continues to try and bring more businesspeople into his government. (http://bit.ly/1Qsw8Ds)

The Telegraph

Johnston Press is in advanced talks with the Lebedev family to buy the i newspaper in a deal that will raise questions over the future of its stable mate, The Independent. It is understood both sides are brokering the sale of the tabloid, with talks expected to run into the night. (http://bit.ly/1Qswqu5)

The Telegraph understands the Competition and Markets Authority, the consumer regulator, is finalising plans to take action against Britain’s biggest supermarkets, which stand accused of using unlawful pricing and promotional practices, designed to encourage customers to spend more. (http://bit.ly/1QswxWG)

Sky News

Sky News understands that Royal Bank of Scotland Group Plc is working with bankers at Lazard to examine options for its 3 billion pounds ($4.37 billion) shipping finance operation, which could be run off, sold or hived off in chunks to potential buyers (http://bit.ly/1QrWMMP)

The UK is blocking a European rule change that could help combat the flood of cheap Chinese imports that is crippling the steel industry, Business Secretary Sajid Javid has admitted. (http://bit.ly/1QswASe)

The Independent

The fashion giant Gap Inc is the latest U.S. household name to face major questions over its use of complex financial engineering that minimises its tax bill in Britain. The multinational retailer has paid almost no corporation tax – once rebates are taken into account – since 2011 despite sales of more than 1 billion pounds, according to a new analysis of its “opaque” accounts. (http://ind.pn/1QswSIK)


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