T3’s Take 3: Big Dollar, Little Gold


1) Big Dollar, Little Gold

The dollar and Treasury yields rose today as Fed officials continue to sing hawkish songs.

Yesterday, Cleveland Fed President Mester, who voted for a September rate hike, said the case for a November rate hike will likely be strong.

And today, Richmond Fed President Lacker (a non-FOMC voter) said rates should be hiked soon to ward off future inflation.

The surge in the dollar drove a -3.0% decline in gold and a -5.3% drop in silver.

But the real destruction was in the gold mining ETF (GDX), which fell a whopping -9.9% to $23.40.

And the increase in Treasury yields took down rate-sensitive sectors like utilities and real estate.

2) Stocks Sell Down

US stocks saw profit-taking today, and the S&P 500 fell -0.5% to 2150.49.

The Nasdaq Composite did slightly better on relative strength in select large-cap tech names like Apple (AAPL) and Google (GOOGL).

The only green sector was financials, and regional banks were especially strong, even with fresh negative headlines on the troubled Wells Fargo (WFC).

Reuters reported this afternoon that Wells Fargo’s fake account scandal now includes thousands of small businesses, not just consumers as previously thought.

European markets fared better today, with the German DAX and French CAC rising 1.0% and 1.1%, respectively.

Crude oil dropped fractionally after a Bloomberg survey showed that OPEC production hit an all-time record in September. OPEC recently announced a production cut, though the plan remains short on details.

The S&P Energy ETF (XLE) fell -1.0% today.

3) A Gap Down Tomorrow?

This afternoon, my colleague Jeff Cooper issued the following analysis of the S&P 500:

Counting from the September 9 break as wave 1 down, and the backtest of the 50 as a complex wave 2 down, a wave 3 decline may be on the table right now.

A close below 2148 underscores this potential:

If so, it would not be surprising to see stocks gap down tomorrow like gold today, as we are in the eye of the Gann Panic Window and it is October.

Wednesday’s Trading Calendar

US Economics (Time Zone: EDT)

07:00 MBA Mortgage Applications (9/30): prior -0.70%
08:15 ADP Employment Change (Sep): exp. 165k, prior 177k
08:30 Trade Balance (Aug): exp. -$39.2b, prior -$39.5b
09:30 Fed's Kashkari Gives Opening Remarks at Development Conference
09:45 Markit US Services PMI (Sep F): exp. 51.9, prior 51.9
09:45 Markit US Composite PMI (Sep F): prior 52
10:00 ISM Non-Manf. Composite (Sep): exp. 53, prior 51.4
10:00 Factory Orders (Aug): exp. -0.20%, prior 1.90%
10:00 Factory Orders Ex Trans (Aug): 0.20%
10:00 Durable Goods Orders (Aug F): exp. 0.00%, prior 0.00%
10:00 Durables Ex Transportation (Aug F): prior -0.40%
10:00 Cap Goods Orders Nondef Ex Air (Aug F): prior 0.60%
10:00 Cap Goods Ship Nondef Ex Air (Aug F): prior -0.40%
10:30 DOE U.S. Crude Oil Inventories (9/30): exp. 1500k, prior -1882k
10:30 DOE Cushing OK Crude Inventory (9/30): exp. 210k, prior -631k
10:30 DOE U.S. Gasoline Inventories (9/30): exp. 500k, prior 2027k
10:30 DOE U.S. Distillate Inventory (9/30): exp. -1500k, prior -1915k
10:30 DOE U.S. Refinery Utilization (9/30): exp. -1.00%, prior -1.90%
10:30 DOE Crude Oil Implied Demand (9/30): prior 16601
10:30 DOE Gasoline Implied Demand (9/30): prior 9426.6
10:30 DOE Distillate Implied Demand (9/30): prior 5126.6
17:00 Fed's Lacker to Speak at Marshall University

Global Economics

04:30 GBP Services PMI
08:30 CAD Trade Balance
20:30 AUD Trade Balance


Before Open:

AngioDynamics (ANGO)
Constellation Brands (STZ)
Monsanto (MON)

After Close:

Yum! Brands (YUM)