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Silver fell more than 3 percent Tuesday as a strong dollar put pressure on commodity prices across the board. And according to one top technician, the selloff is just a foreshadow of what could be a major correction for the white metal.
"If you look at the price action in silver from the start of the year, we've been in a very tight range and haven't been able to break any meaningful topside level," said technical analyst MacNeil Curry on CNBC's "Futures Now." Silver is up roughly 8 percent on the year, but still hasn't managed to reclaim its year-to-date high of $18.50 hit in mid-January. The metal is also down more than 20 percent from its 52-week high of $21.63 hit in July 2014. Silver settled at $17.09 on Tuesday.
Curry notes that the inverse relationship between precious metals and the dollar should have given silver prices a more significant boost as the greenback has fallen 7 percent from its high.
"The fact that it hasn't been able to make any kind of headway despite a weakening buck in the last two months speaks volumes to the fact that the path of least resistance is still significantly lower here," said Curry, head of global technical strategy at Bank of America Merrill Lynch
The specter of deflation is haunting more than New England Patriots quarterback Tom Brady. The whole U.S. economy is now grappling with its effects.
As growth splutters, the world's largest economy is facing the real possibility of a spiral in prices. On Thursday, the Producer Price Index for Final Demand showed that prices fell by 0.4 percent in April compared to March, and by 1.3 percent versus last April. The readings according to the previous-used PPI data series, known as PPI for finished goods, looked even worse, with a monster 4.4 percent year-over-year drop.
Steep price drops can be perilous for the growth of an economy that's comprised of nearly 2/3 consumer spending. While falling prices may sounds attractive from a consumer standpoint, they are bad for the overall economy since deflation encourages people to save, rather than spend, money. After all, why spend a dollar today when it will be worth the equivalent of $1.05 tomorrow?
However—and perhaps unlike the Patriots' embattled quarterback—the U.S. has a good excuse for the potential deflationary shock: Oil.
Crude's slide over the past year has reduced macro price metrics tremendously. And indeed, when energy and food prices are stripped out to produce what's known as the "core inflation" measure, PPI for Finished Goods actually rose by 2 percent over the course of the year. On the other hand, the core PPI for Final Demand number still fell 0.2 percent from March to April.
Simultaneously, some maintain that no matter how noisy the inflation reading may be, there are still bad signs embedded in it.
"The PPI came in well below expectations and trying to pin the drop in wholesale prices on any one component would be a mistake," wrote Steven Ricchiuto, Mizuho's unconventional chief economist. "The loss of upside momentum in prices is broad-based."
Stocks snapped back from a three-day losing streak on Thursday, with the Dow rising 1 percent and the S&P 500 closing at a record high. And while many market participants question how long stocks can maintain their momentum, one top technician says the rally is just getting started.
"There are two ways of looking at the market, you can anticipate a move or react to it," technical analyst Ralph Acampora said Thursday on CNBC's "Futures Now." "I think people need to react more because so far there hasn't been a major correction."
As of Thursday, the market hasn't seen a correction in 740 trading sessions, or since late 2011. But according to Acampora, head of technical analysis at Altaira, the broad market trend is still quite healthy. "Until you see the major moving averages broken, until you see the trends broken," there is no need to worry, he said. "We can stay in this range for a while and so far, the leading averages look just fine."
They say the wait is the hardest part, and that's certainly been the case for both the bulls and the bears with stocks this year.
Despite the fact that the S&P 500 is sitting near record highs, one top technician sees a storm brewing for stocks, and the root of that concern comes not from how much stocks have moved, but rather how little.
"The S&P 500 is trading within its tightest range to start of a year in almost a decade," technical analyst Carter Worth said Tuesday on CNBC's "Futures Now." "It's almost as if they closed the market."
Worth noted that since the start of January, S&P 500 has traded within a 125 point range, or roughly 6.3 percent. That's the smallest peak-to-trough range for the start of a year since 2006.
While it was almost certainly not her intention, one ancillary effect of her comment has been to soundly disprove one of the biggest conspiracy theories about the Fed's easy-money policies.
In recent years, it has been popular for Fed skeptics to claim that the true goal of massive bond buying and low benchmark interest rates has not actually been the stated claim of bring the economy back from the brink and decreasing the unemployment rate to normal levels—both of which appear to have been accomplished.
The true goal of the Fed's policies, some suspected, has been to send stock prices higher as part of a surreptitious plot to create the "illusion" of economic growth.
Over the years, comments from Fed officials have made it plain that they watch asset prices carefully. Now, the idea that the Fed is a cheerleader of ever-rising prices has been cast into doubt.
"I don't really know why she chose to say that," said Euro Pacific Capital's Peter Schiff, one of the Fed's loudest doubters. "I mean, I don't really put much stock in anything she says."
However, when pressed by trader Scott Nations on CNBC's "Futures Now" Thursday, Schiff sounded a bit befuddled about how to interpret Yellen's words.
"I doubt she's trying to convince people to sell stocks, when you know that the very goal of quantitative easing... was to lift asset prices. So why would they intentionally undo what they deliberately set out to do?" he asked.
Fed chair Janet Yellen spooked investors Wednesday when she warned against sky-high equity values. And in a strange turn of events, she's finding an unlikely ally in her assessment in the form of her biggest critic, Peter Schiff.
On CNBC's "Futures Now," the outspoken Schiff said that the stock market is "more than just a little overvalued, it's extremely overvalued." But rather than defending Yellen's call, Schiff instead blamed the Fed's policies for the frothy valuations that Yellen was warning about.
According to Schiff's logic, the sky-high valuations for equities are a direct result of the Fed's easy money policies over the past couple years. Schiff said that "artificially low rates" have forced investors to buy stocks and in the process have made them more expensive.
"Janet Yellen was half right when she said the stock market was overvalued," Schiff, Euro Pacific Capital CEO on said on Thursday.
After falling to near record lows this year, U.S. bond yields are rising fast, leaving many investors fearing that we could be witnessing the end of a historic run in U.S Treasurys. But while bond watchers focus on economic data for clues on where rates are going next, one well-known strategist says not to look at the U.S. economy, but rather overseas.
On CNBC's "Futures Now," bond expert Ira Jersey suggested on Tuesday that Europe, specifically the German bund, holds the key to where U.S. rates will go next. And by his work, the selling might be over.
"When we were at about 10 basis points on the German 10-year yield, the consensus was it was going to go to zero," said Jersey, head of U.S. interest rate strategy at Credit Suisse. "But once we started to see crude oil rise and some positive data out of Europe, people thought maybe things weren't right."
Rates in the U.S. have fallen despite rising stock prices and falling unemployment, typically two things that weigh on bond prices. And according to Jersey, the move higher in U.S. treasurys has been fueled by heavy buying of foreign bond yields. The benchmark German 10-year yield is at 50 basis points, considerably lower than the U.S. 10-year bond.
However, in a sudden turn of events, German bonds have been selling off, and that has hurt prices for U.S. bonds. Bond prices and yield move inversely.
According to Jersey, the selling pressure in German bonds may soon abate, spelling relief for U.S. investors.
We suspect there may be some stabilization [soon], but there certainly could be some [continued short-term] weakness on the horizon, given how many people played along with the ECB and started to buy a lot of German and other core European yields."
And despite increased fears of more selling pressure at home, Jersey said the U.S. is the safest place for investors to look for yield.
"The correlation between Europe and the U.S. over the past 12 to 13 months has been quite astounding," said Jersey. "The fact is the U.S. is, ironically, the high yielding of the major bond markets. If you look at where Japanese yields are and you look at where German yields are, the U.S. is the liquid market when you need some type of yield," he added, noting that compared to 50 basis points in Germany, U.S. yields are quite substantial.
Economic data always threaten to bear us back, like "boats against the current" in the closing line of F. Scott Fitzgerald's The Great Gatsby, ceaselessly into the past.
Such was the case this past week, when a surprisingly weak initial gross domestic product report showed that the American economy grew at an annualized rate of just 0.2 percent in the first quarter. Fresh concerns about the economic recovery ensued, sending stocks on a roller-coaster ride and recalibrating expectations about the economy.
But the most important use of backward-looking data is to sketch out what the future may bring. And the outlook for the American recovery may be bright indeed.
Thursday brought two very encouraging signs about the labor market. Initial unemployment claims fell to 262,000 for the week ended April 25th, the lowest reading in 15 years. And in the more backward-looking employment cost index, U.S. wages were shown to have risen by 2.6 percent in the first quarter versus the year prior.
On Friday, investors should get a decent flavor of how the past month shaped up, when the April employment report is released. Many economists are expecting to see positive signs in the report.
"Given the sturdy trends in jobless claims and tax receipts, we expect a meaningful rebound in April employment," wrote Joe LaVorgna, chief US economist at Deutsche Bank, in a Friday note.
More generally, the fact that GDP has tended to disappoint in the first quarter—only to bounce back substantially in the second—is a trend that has been lost on few.
For instance, final GDP in the first quarter of 2014 (which fell considerably from the initial reading) came in at negative 2.1 percent; the Q2 reading that followed showed 4.6 percent annualized growth.
An analysis by CNBC's Steve Liesman found that over the past 30 years, annualized first-quarter GDP growth has come in at 1.87 percent while the economy has grown 2.7 percent. That was statistically significant enough to lead the GDP tabulators at the Bureau of Economic Analysis to remark to CNBC that "BEA is currently examining possible residual seasonality in several series."
The S&P 500 is 2 percent from its all-time high, but one top technician says there's more to the charts than meets the eye.
On Tuesday's "Futures Now," Altaira's director of technical analysis, Ralph Acampora, said the market is in a "stealth correction."
"The market is frenetic here. What I see is a two-tier market," said Acampora. "Under the surface there are some issues not doing well at all."
He noted the performance of large-cap stocks has trailed that of small- and mid-cap stocks. The Russell 2000 is up nearly 5 percent year to date, while the S&P 500 is up 1 percent over that time.
But most troubling to Acampora is the underperformance of the transports, which have badly trailed the S&P this year. "The Dow Jones transportation average peaked in December of 2014 and hasn't made a new high this year," he said. "For those who follow the old theory, the market is on hold."
To note, the "Dow Theory" is an old technical indicator in which investors believe that if the industrial or transportation average were to make a new high or low, the other would follow suit. According to Acampora, the Dow Jones industrial average would need to fall below 17,089 in order for this theory to come to fruition, and it could lead to a 5 to 10 percent correction.
While crude oil has surged nearly 40 percent from its recent lows, natural gas has remained in the dumps, falling 4 percent on the year despite Thursday's sharp 5 percent rise. But according to one highly regarded technician, a confluence of seasonal factors and overly bearish sentiment could set the stage for an even bigger rally to come.
On CNBC's "Futures Now," Jonathan Krinsky said natural gas is on the cusp of experiencing a major "short squeeze" that could send the commodity up another 10 percent to $3 per Btu.
"While the structural chart is firmly bearish, we think a countertrend rally could be underway," said Krinsky, market technician at MKM Partners, on Thursday.
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