Indeed one might call it a tech oddity. New highs on $NDX? Yes, but check the cumulative advance/decline index $NAAD, it tells a very different story:

What does this chart tell us?

Well, for one, during the run up from the 2016 lows into the 2018 highs $NDX ran in a steady trend higher as did $NAAD. Very clean channel as a matter of fact. Then it all fell apart in Q4 2018. But on the heels of the Fed pivot markets recovered and are now back to all time highs. $NDX made a new all time high again in April and also last week in July.

But note $NAAD did not play along. Far from it. First making a notable lower high in April it made yet another lower high last week. And by doing so it has formulated a new trend line. Instead of a steady uptrend as in 2016-2018 it has formed a line of resistance & is potentially forming topping pattern.

Notable also the relative weakness on the RSI above.

What’s the message here from a technical perspective?

Firstly note that $NDX, despite making new highs remains below the broken 2016 trend line, but new highs are also coming on an ever weakening trend in the cumulative advance/decline index.

Something’s not quite right. This is not your 2016/2017/2018 bull market. This is a different animal, it’s an oddity. A tech oddity.

Ground control to Major Tech: Put your helmet on.

*  *  *

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The slowdown in trading revenue has been due to uncertainty about trade war politics and global Central Bank policy. However, in the past, these types of uncertainties have spurred more trading, not less. This has raised the question of whether or not the slowdown in trading is permanent, instead of temporary.

Morgan Stanley CFO Jon Pruzan said in an interview Thursday: “It’s more of a subdued up than sort of the animal spirits you would generally characterize in this type of environment. We haven’t seen some of the traditional things in a market like this -- we haven’t seen a lot of people repositioning their portfolios, we haven’t seen leverage increase.”

Trading revenue at the five biggest Wall Street banks was down 8% in the second quarter, which followed a 14% slide in the first quarter. European banks are expected to post even larger drop offs next week when they report.

This will likely push revenue from equity and fixed income trading substantially below the $60.8 billion that was posted in the first half of 2017. These major firms generated $77.5 billion as recently as the first half of 2012.

One reason for the shrinkage - hedge funds have suffered outflows, which has also helped slow down trading volume. In addition, new rules that have limited lenders' ability to make principal bets with their own money have acted as a headwind. Technological advancements have also narrowed spreads in many areas of trading.

And over the last couple of quarters, Wall Street firms can’t decide whether or not they want to complain about too much volatility – or too little.

Jim Shanahan, an analyst at Edward Jones said: “I’m not sure what the Goldilocks scenario is for the banks. Part of the problem is that it’s too late to hedge interest-rate volatility, there’s not currency volatility to hedge. Speculators need volatility to hedge and enter the market.”

As a response, banks have cut costs. Front office headcount in trading units is down over the last five years and divisions like consumer lending and wealth management have picked up the slack that have led banks to record profits. As a result, the six biggest US banks set another record with $32.6 billion in (adjusted, non-GAAP) net income in the second quarter.

Go figure.

Citi CFO Mark Mason bemoaned the top-line sluggishness of the trading business: “Many of the investor clients remained on the sidelines,” he said on Monday. 

One can only imagine if equity revenue is slumping when the S&P is at all time high what will happen when the market finally crashes...

The number of investigations, legal cases, class actions and financial headlines involving precious metals manipulation are now so pervasive that it’s hard to keep track of which cases are in motion and which investment banks are under scrutiny at any given time.

But beyond the profit and greed driven bullion bank manipulations gold and silver prices, there is also the issue of central bank policy interventions to suppress the gold price by outright gold sales or using the opaque and secretive gold leasing and lending market. This is a less talked about manipulation given the secrecy of everything to do with central banks and gold, as well as a reluctance of the financial media to broach the subject and a reluctance of regulators to ´go there´ by even looking at central bank gold market activities.

That central bank operations in the gold market have existed is also fact, with such operations covering price smoothing and price stabilization, price pegging, and coordinated gold pools. See BullionStar articles “New Gold Pool at the BIS Basle, Switzerland: Part 1” and “New Gold Pool at the BIS Basle: Part 2 – Pool vs Gold for Oil” and “The Bank of England and the London Gold Fixings in the 1980s” for more background. There is also ample evidence about central bank manipulation documented in various places including on the GATA website. The motivations for such central bank interventions include protecting the existing financial system, engineering low real long term interest rates, and preventing gold acting as a barometer of inflation.

But beyond even commercial bank manipulation of gold and silver metals prices and central bank policy manipulation of gold, there is arguably another form of manipulation in the precious metals markets which is far more influential in subduing price discovery and which takes the form of the very structure of how these markets trade vast quantities of futures contracts and synthetic and paper gold and silver positions that are completely unconnected with any underlying physical metal. The home of this trading is of course on the US COMEX exchange and the unallocated gold and silver markets in London. Both venues of which are ruled by the LBMA bullion banks.

Blundering Herd – Merrill Lynch Commodities Inc

Turning first to the recent Merrill Lynch case, in late June this year the CFTC announced that it had fined Merrill Lynch Commodities Inc (MLCI) $25 million for manipulating gold and silver futures contracts on the COMEX exchange between 2008 and 2014. This was done ‘thousands of times’ according to the CFTC, by MLCI traders ‘spoofing’, or placing and then cancelling orders before they were executed. By creating artificial demand or supply and thus false prices, this interfered with the (already broken) precious metals price discovery that would have otherwise occurred.

Interestingly though not surprisingly, much of the direct evidence the CFTC used in its verdict was from the myriad log files of trader chat apps which were used to coordinate the spoofing. For example, in one 2010 chat, a trader was quoted as saying “guys the algos are really geared up in here.  [I]f you spoof this it really moves . . .”.

While a lot of money for most people, a $25 million fine is a paltry amount for a global investment bank such as Merrill Lynch and is just a cost of doing business on bank-ruled Wall Street. However, the ruling at least demonstrates that what many always thought about precious metals futures price discovery as being rigged and manipulated is in fact correct. As well as the $25 million fine, Merrill entered into a non-persecution agreement with the US Department of Justice (DoJ), agreed to cooperate with the DoJ investigation into criminal violations, paid a $11.5 million civil monetary penalty to the CFTC, and had indictments against two of its former MLCI precious metals traders, Edward Bases and John Pacilio.

UBS – Precious Metals Spoofers

But the recent case against Merrill is not an isolated event. It follows similar moves by the CFTC in early 2018 where the CFTC chargedinvestment banks UBS, Deutsche Bank and HSBC and a number of their traders for spoofing precious metals futures from as early as 2008, while fining the banks a combined $46.6 million (of which $30 million was levied against Deutsche, and $15 million against HSBC). In those cases, the CFTC worked with the US Department of Justice and the FBI to bring the charges.

Moving forward to this year, in February 2019, the U.S. District Court for the District of Connecticut fined ex UBS precious metals trader Andre Flotron $100,000 for price spoofing and price manipulation in violation of the Commodity Exchange Act (CEA) and CFTC Regulations. In that action, the CFTC found that Flotron had spoofed large orders in the precious metals markets between “at least August 2008 through at least November 2013, while employed at UBS”. This followed the CFTC reopening the case against Flotron in December 2018.

For excellent insights into how these UBS and other investment bank traders operated their spoofing, see the articles by Allan Flynn from April 2018 titled “US Gold and Silver Futures Markets – ‘Easy Targets’” and “UBS and Deutsche Bank gold and silver traders, April 2018”. For example, in evidence at the Flotron trial, Mike Chan, a UBS junior trader to Flotron while they worked in Singapore stated to the court that “during training, I’d seen him spoof and –  enough that I replicated it immediately to do the same thing. And as my career progressed at UBS, the more traders I interact with, the more people I’ve seen spoof.”

Beyond the gold and silver futures markets, but interfacing with the futures, a similar group of bullion bank traders are, not surprisingly, also involved in antitrust court cases alleging that these banks manipulated the London gold and silver fixing benchmark auction prices. While these cases are still winding their way through New York courts, and have not yet been fully ruled on, the chat room transcripts on manipulative price collusion can only be described as shocking, chat transcripts which anyone who bothered to think about it knew they existed from at least 2004.

The cases in question have been brought by groups of precious metals investors against the cartelesque London Gold Fixing and London Silver Fixing companies with allegations that Bank of Nova Scotia and HSBC manipulated silver fixing prices from 2007 to 2013, and that ScotiaBank, HSBC, Barclays and Societe Generale manipulated fixing prices from 2004 to 2013. Noticeably absent is Deutsche Bank which settled its way out of both cases, and UBS which successfully dismissed itself from both cases using cooperation and expensive lawyers.

Again we turn to an article by Allan Flynn from December 2016 titled “How to Trigger a Silver Avalanche by a Pebble: ‘Smash(ed) it Good’ which has a host of excellent quotes from chat room transcripts on how traders allegedly manipulated the silver market, for example:

UBS Trader A: “gonna bend this silver lower”; “i will bend it lower told u”; ”hah cool its gonna get ugly”; “use the blade on silver rg tnow it’ll hold it up”, “gona blade silver now.”

Deutsche Bank Trader B instructing Barclays trader A: “today u smash,”

UBS Trader A: “an avalanche can be triggered by a pebble if you get the timing right” and “silver still here, u can easily manipulate silver”

With the cases against the London Gold and Silver Fixing companies still in discovery in the New York courts, expect further revelations later this year, but given the leniency of the system, not a lot of penalties.

For those readers alert to the way trading of precious metals futures contracts and trading around the London gold and silver fixes works, you will see that the pushing around of prices occurs in both ‘venues’, on COMEX and in the London gold and silver market, especially in the lead up to and during the fixes.

The same investment bank precious metals traders trade gold and silver futures contracts and London OTC contracts, and they trade these in the London and COMEX ‘venues’ at the same time. Price movements in one location instantly are reflected in the other. This is all explained in the BullionStar article “Spoofing Futures and Banging Fixes: Same Banks, Same Trading Desks” from April 2018. At the time I said the following, which is even more apt now given the CFTC’s recent prosecution of Merrill Lynch Commodities Inc (MLCI):

“Prosecuting banks and traders for price manipulation on COMEX futures while ignoring the far larger London market and its gold and silver fixings looks like a job half done. Trading desks and their traders are agnostic to trading venues and with interlinked markets, the COMEX and the London Fixings are two sides of the same coin.”

Who needs real metal when you can trade 'Screen' gold and silver?

Manipulating gold and silver prices by spoofing futures trades and cancelling them is one thing. Central bank intervention into physical gold markets to dampen the gold price is another. But perhaps the most far reaching yet unappreciated method of manipulation is sitting there in plain sight, and that is the very structure of the contemporary ‘gold’ and ‘silver’ markets where prices are established by trading in vast quantities of fractionally-backed synthetic gold and silver credit, be it in the form of vast quantities of unallocated positions that are ‘gold’ or ‘silver’ in name only, or in the form of gold and silver futures which haven’t the slightly connection with CME approved precious metals vaults and warehouses.

By siphoning off demand for real gold and silver and channeling it into unbacked or fractionally-backed credits and futures, the central banks and their bullion bank counterparts have done an amazing job in creating an entire market structure of futures and synthetics trading that is unconnected to the physical gold and silver markets. This structure siphons off demand away from the physical precious metals markets, and in doing so, creates a system of price discovery which is nothing to do with physical gold and silver supply and demand.

Apart from fractional-reserve banking, precious metals market structure is perhaps one of the biggest cons on the planet. So next time you think of precious metals manipulation, remember that in addition to spoofing and secretive central bank gold loans, the entire structure of the precious metals markets is unfortunately one big manipulation hiding in plain sight.

This article was originally published on the BullionStar.com website under the same title "Gold & Silver Price Manipulation - The Greatest Trick ever Pulled".

And here an odd observations: whereas historically, positioning for both discretionary and systematic strategies have typically moved together and were highly correlated with growth indicators, this year however, discretionary investors have steadily reduced their exposure which is now below average, in line with their behavior historically when growth is slowing.

What this means is that not only do broader markets track systematic rather than discretionary flows, but the marginal price setter is no longer of human (discretionary) origin, but rather robotic.

In other words, the good news is that while humans may have gotten cold feet, robots continued to buy... for now.

And now the bad news: whereas global equities have maintained upward momentum for the most part, that momentum seems to be losing steam, and at least one major class of robotic investors may soon seek to exit too.

As Nomura's quant team writes, with the FOMC having now entered the blackout period ahead of next week's potentially historic FOMC meeting (30-31 July) when the Fed is widely expected to restart monetary easing, market participants are converging on the view that the Fed will cut interest rates by 25bp - but not by more - and as a result market sentiment is softening in markets worldwide.

Indeed, it appears to Nomura that, rather than expecting a risk rally once the rate cut decision has been made, the market is starting to worry that a rate cut would be followed by a round of "selling the fact". As a result, given that Nomura sees signs of ebbing risk appetite, the Japanese bank thinks it best to be on the lookout for selling of global equities for profit-taking purposes ahead of the event, particularly among speculative traders. Furthermore, the bank's quant team also notes that "hedge funds have staked out positions that look especially vulnerable to a combination of rising volatility and falling stock prices."

Global stock market sentiment has continued to soften, most obviously in the US, as the perceived likelihood of a 50bp rate cut has dropped off. Although sentiment is still slightly on the risk-taking side of neutral, we would expect investors to remain fairly unenthusiastic if the July FOMC meeting ends innocuously with a 25bp rate cut.

Hedge funds, meanwhile, are still positioned in a way that would lead one to believe that they:

1. expect volatility to remain consistently low; and


2. see little downside risk for equities.

For example, the overall performance of hedge funds as measured by the HFRX Global Hedge Fund Index (HFRXGL) is still closely correlated with returns on an S&P 500 put write strategy, which leads Nomura to believe that speculative traders are by and large not taking profits on this sort of high-risk, bullish position in equities.

At the same time, the growth in VIX futures shorts is another manifestation of this risk-taking behavior on the part of speculative traders. According to latest data from the CFTC (dated 16 July), the net short position of non-commercial traders has grown to around 140,000 contracts, which is to say that the outstanding net position of hedge funds is now highly vulnerable to a rise in volatility paired with a drop in stock prices.

Which brings us to the proverbial "robots", or CTAs, which after bidding up stocks for much of the past month are preemptively taking profits on long positions in US equity futures.

As mentioned above, US stock market sentiment has softened somewhat. Even if the Fed were to go through with a 25bp rate cut at the July FOMC meeting, the appetite for risk may continue to fade unless the Fed pairs the rate cut with some additional dovish surprise. And, as the charet below shows, trend-following CTAs have already begun preemptively taking profits on long positions in US equity futures.

And as Nomura's Masanari Takada writes, "trend-following CTAs are in the process of scaling back their net long position in US equity futures." Specifically, CTAs have been shrinking their net position in S&P 500 futures in increments since 17 July.

Finally, because the outstanding net long position of CTAs breaks even at around 2,955 (based on what Nomura calculates the average cost of their net buying since the beginning of June), this selling is still mostly a matter of preemptive profit-taking commensurate with what the market is actually doing.

Said otherwise, should the S&P dip below 2,955 ahead of next week's FOMC, the Fed may have no choice but to cut 50bps as the market will be delighted to once again force Powell's hand.

On the other hand, discretionary traders (global macro hedge funds and equity long/short funds) following aggressive selling for much of 2019, are slightly on the side of adding to their net exposure and BTFD, or as Takada notes, "the buying of US equities by global macro hedge funds sticks out here."

Nomura's conclusion: "The US stock market is currently the scene of a head-on collision between selling by technically minded CTAs and buying by fundamentals-oriented global macro hedge funds."

Whether this collision will result in an acceleration in the market's meltup, or a painful reacquaintance with gravity will depend on what the Fed does next week.

NOTE - Trannies and Small Caps notably decoupled at around 1400ET only to see a mysteriously large buy program strike at 1500ET

Small Caps continue to dramatically diverge from big caps (and mega cap tech)...

Small Caps also closed below their 100DMA...

Volume was low - around 20% below average...

There were two 'failed' attempts at yet another short-squeeze today...

Semis soared on the day following Goldman's upgrade on Micron...

But while Semis spiked, FANG stocks were flat...

Bonds and stocks remain in their own - buy all the things - worlds...

Treasury yields traded in a narrow range today, with yields down across the curve led by the belly...

10Y Yield dropped to 2.02% intraday but the yield curve (3m10Y) remains inverted (41st day in a row)...

The T-Bill curve remains kinked around potential debt ceiling X-date...

The dollar index managed very modest gains, holding above last week's Williams' speech plunge levels..

Cryptos were mixed over the weekend with Bitcoin Cash holding gains but ETH and BTC lower after a leg lower this morning...

Bitcoin continues to hover between $10,000 and $11,000...

Dr.Copper is lagging as silver resurges...

Oil prices managed some gains today as Iran tensions resurfaced in the narratives...

Silver continues to rise...

Silver has outperformed gold for six straight days (longest streak since June 2018), erasing most of the relative gains for the year...

Finally, don't forget, it's different this time...

Except it's all about liquidity, stupid...

She was also procuring young, often underage girls, to feed Epstein's sexual urges according to Epstein accusers and witnesses. 

According to court filings, Maxwell was said to have hired, supervised and fired household staff, while directing the visits of dozens of "massage therapists" to Epstein's residence, according to a Wall Street Journal report earlier this month. 

In depositions taken in 2009 and 2010 as part of civil lawsuits against Mr. Epstein, household employees said Ms. Maxwell was a central figure in Mr. Epstein’s private life. Several said Ms. Maxwell hired, supervised, and fired household staff, while directing the visits of dozens of "massage therapists”—typically young women.

Juan Alessi, who said in one of the depositions that he served as the Palm Beach house manager from around 1992 through 2002, described a basket of sex toys in Ms. Maxwell’s bathroom closet. He said he would find them around when he cleaned up after visits from the young women. -WSJ

"The defendant worked with others, including employees and associates who facilitated his exploitation of minors, by among other things, contacting victims and scheduling their sexual encounters with the defendant," according to US prosecutors, ostensibly referring to Maxwell. 

And then there's the Clintons...

According to Politico, "Maxwell first grew close with the Clintons after Bill Clinton left office, vacationing on a yacht with Chelsea Clinton in 2009, attending her wedding in 2010, and participating in the Clinton Global Initiative as recently as 2013, years after her name first emerged in accounts of Epstein’s alleged sexual abuse." 

Here’s Ghislaine Maxwell, by many accounts Jeffrey Epstein’s “pimp” and “groomer of girls” at Chelsea Clinton’s wedding. pic.twitter.com/leBUwqoWnT

— Adam McKay (@GhostPanther) July 7, 2019

Chelsea was in turn introduced to Epstein through Maxwell's ex, billionaire founder of Gateway computer, Ted Waitt of La Jolla, CA. 

A person close to Chelsea Clinton described Waitt as a “very close family friend” of Clinton and her husband, Marc Mezvinsky, and said the couple met Maxwell through him in 2011. The person said Clinton and her husband ended their friendship with Maxwell when she and Waitt broke up in early 2011, and disputed that Maxwell and Chelsea Clinton were ever “close.” 

Two people familiar with the relationship between Maxwell and the Clintons said Maxwell, Clinton and Mezvinsky flew together on a private plane to rendezvous with Waitt for a trip on Waitt’s yacht. One of those people said the trip took place in 2009.

Waitt, whose philanthropic endeavors focus on the world’s oceans, has given somewhere between $10 million and $25 million to the Clinton Foundation. -Politico

Not true, according to a friend of Maxwell, who told Politico: "The Clintons were relatively intimate with her," a friend of Maxwell told Politico. Meanwhile, "In 2002 and 2003, flight logs reportedly show that Bill Clinton flew on 26 flight legs on Epstein’s private jet," according to the report. 

So that we're clear - the Clintons became "relatively intimate" with Maxwell - who was known as Epstein's inseparable assistant and 'sex scheduler' - long after Epstein admitted to being a pedophile in a controversial 2008 plea deal.

Maxwell’s ties to Clintonworld, meanwhile, would last another decade.

One friend of Maxwell’s, who spoke on the condition of anonymity, described their surprise upon showing up at a dinner party at her Upper East Side apartment around 2005 to find Doug Band, then a top adviser to Bill Clinton and the Clinton Foundation, among the 8 to 10 guests. In 2006, a charity run by Epstein, C.O.U.Q. Foundation, gave $25,000 to the Clinton Foundation, the Daily Beast reported. -Politico

"Ghislaine was the contact between Epstein and Clinton," a person familiar with the relationship told Politico. "She ended up being close to the family because she and Chelsea ended up becoming close." 

A spokesperson for Clinton has disputed that the two women were ever close, while Bill Clinton issued a statement via spokesman Angel Urena, claiming "President Clinton knows nothing about the terrible crimes Jeffrey Epstein pleaded guilty to in Florida some years ago, or those with which he has been recently charged in New York." 

Urena said the flight legs comprised four trips in 2002 and 2003 and that staff and Secret Service were present on all flights. Urena said Epstein visited Clinton at his Harlem office once in 2002 and that he briefly visited Epstein’s apartment one time. -Politico

The Trump connection

Politico also reveals the depth of President Trump's relationship with the Maxwells - in particular Robert Maxwell - which went back "to at least the late 1980s" until the Czech-born Daily Mirror owner died after falling off his Yacht, Lady Ghislaine, in the Atlantic Ocean (ruled an accident). 

An item from a May 1989 gossip column placed Trump and both Maxwells at a party aboard the elder Maxwell’s yacht, named the Lady Ghislaine, that featured caviar flown in from Paris and former Republican Sen. John Tower of Texas. The item notes that Trump compared his own larger yacht with Maxwell’s.

As it happened, Trump’s yacht, the Trump Princess, had originally belonged to the Saudi arms dealer Adnan Khashoggi — the uncle of slain Washington Post contributor Jamal Khashoggi — and Maxwell’s yacht had originally belonged to one of Adnan’s brothers.

"He was a character and a colorful guy, and I think we were lucky to have seen even a short time of him in New York," Trump told Larry King of Maxwell two weeks later. "He was my kind of a guy." 

In 1997, Maxwell "bummed a ride" on Trump's private jet along with the author of a New Yorker profile of Trump - Mark Singer, who referred to Maxwell's father as an "inadequate swimmer." 

Meanwhile, Maxwell was instrumental in Jeffrey Epstein's rise within her sphere of influence. 

It is unclear whether Ghislaine Maxwell first introduced Trump and Epstein, who socialized together at least as early as 1992, but she was crucial in ensuring Epstein’s access to Trump’s world. Archival video unearthed on Wednesday by NBC from that year shows Trump and Epstein surrounded by dancing women at Mar-a-Lago, with Maxwell smiling in the background.

"Ghislaine was his path to social acceptance,” said Thomas Volscho, a professor at the City University of New York who has been researching Epstein. “They don’t always accept you. Ghislaine was really a conduit for him to start to socialize with people who are way beyond his level." -Politico

And with that, Maxwell also began recruiting for Epstein - as detailed in a lawsuit brought by former Mar-a-Lago changing room attendant Virginia Roberts Guiffre - who claims she was approached by Maxwell in 1998 to meet Epstein, after which the two of them participated in her sexual abuse.

Maxwell has denied the entire thing.  

According to the Daily Telegraph, Maxwell also introduced Epstein to British Royal Prince Andrew - the two of whom were pictured with Epstein accuser Virginia Roberts, who claims to have seen Bill Clinton on Epstein's infamous island while she was being sex-trafficked. 

Epstein also attended a birthday party for Queen Elizabeth at Windsor Castle in 2000. That same year, Maxwell and Prince Andrew attended what the Daily Mail described as a “hookers and pimps”-themed Halloween party hosted by Heidi Klum.

A month later, in early December 2000, Trump, his future wife Melania, Epstein and Maxwell all attended a surprise 60th birthday for Barbara Amiel, a British socialite, that was also attended by the likes of Anna Wintour, Charlie Rose and William F. Buckley.

Tina Brown, a notable magazine editor, recalled that around this period Maxwell would reach out to her to socialize when Prince Andrew came to New York. “She was a bit mysterious,” Brown recalled.

In short - when it comes to the socially awkward Jeffrey Epstein and his connection to the elite circles he mingled in, it's all about Ghislaine.