In my previous newsletter, I mentioned the large number of positions whore open to the markets. Here is what I wrote: “A major element nevertheless protects the indices from a decline: the number of bearish positions opened on the SPX has reached a record level. These peaks of pessimism very often coincide with market rebounds. Market makers love this type of configuration to trigger “squeezes” when too many “Put” positions are open.”
I was expecting a market rebound, but not as violent! In the hours following my publication, technology stocks recorded one of the largest daily increases in the history of the index.
The Nasdaq’s 9.4% gain marks a record two-session rise since 2008.
It must be said that the techno sector is still being emulated. The decline recorded since the beginning of the year is seen as an opportunity by a large majority of investors.
This is even truer in China, where a Bloomberg survey reports that 71% of small shareholders and 57% of institutional investors favor technology stocks over other stocks to “play” the rebound in the indices.
In a few sessions, the Put/Call ratio went from 1.3 to 0.6, triggering one of the squeeze shorts the fastest in history!
The renewed optimism on tech contrasts sharply with the still very degraded situation in the crypto-currency sector. The FTX case caused a shock wave that is now spreading to other market players.
Leading cryptocurrency lender Genesis Global Capital is in turn affected by “abnormal withdrawal requests” exceeding its liquidity. Genesis announced on Wednesday “temporarily” suspending redemptions and new loans for its customers. The company must also deal with funds blocked on the bankrupt exchange.
This crisis demonstrates how important it is to know the product and the counterpart of the product in which one invests.
Store your bitcoins in your own cold walletoutside centralized platforms, is now essential: “Not your keys, not your coins”.
This obviously recalls the adage for investors in physical gold: “If you don’t hold it, you don’t own it”.
As with unallocated bitcoins, unallocated physical gold held through an institution can be re-mortgaged. Withdrawing one’s investment during a physical metal rush exposes the same risks seen during the run on cryptos.
Risky investment in a crypto exchange or a secondary token is also reminiscent of an investment in a “paper gold” derivative product (ETF, future contract, certificate): this does not expose to the same level of risk as a purchase of physical gold and even presents an investment risk in the event of the default of the counterparty, namely the issuer of the paper product.
Even if the risks of contagion seem for the moment limited to the cryptocurrency sector, the consequences of this new black swan remain unknown and are hampering the recovery of the markets.
The violence of the rebound triggered by the squeeze shorts does not allow, for the moment, the Nasdaq to completely confirm its downward trend, and the risks of a new “rebound of the dead cat” are becoming more and more felt.
It must be said that the economic indicators continue to deteriorate in the United States.
About 37% of small businesses, which alone employ nearly half of all Americans working in the private sector, were unable to pay their rent in full in October, according to a survey by the Alignable Institute.
According to the same study, about 49% of restaurants were unable to pay their rent in October, compared to 36% in September.
The real economy is beginning to feel the tangible effects of the economic slowdown caused by the Fed’s aggressive rate hike policy.
In this context, fears of recession continue to weigh on commodity prices. Neither gold nor silver managed to continue the breakout of last week.
Silver is consolidating after hitting the top of the downtrend channel that started in 2021, while holding the support broken last week.
Allocation levels on gold ETFs do not signal a return of interest from institutional investors for the yellow metal.
On the other hand, the sentiment on the mining companies finally seems to be improving. It must be said that we had reached a low point in the sector and that seeing it deteriorate further had become impossible!
The financing files of the junior companies that I study are also picking up color. We are still far from the activity of 2020, but it is still better than last summer. Fundraising is even significantly higher on the most sought-after files. Proof of renewed attention for the sector. This bodes well for a medium-term rebound in precious metal prices.
On the physical market, the situation is increasingly tense on COMEX silver stocks which today amount to only 1,000 tons in the “registered” category (available for delivery).
24,000 tons of silver are mined each year, i.e. a very small part of the metals extracted in the world:
When we talk about silver, we often forget this observation: silver is no longer extracted in sufficient quantity to meet the needs of the industry.
In recent years, a very high demand for investment, particularly in India, has swelled demand.
The low level of COMEX inventories demonstrates the narrowness of the physical market and announces shortages of silver metal in the coming months.
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