“Woe to the land whose king is a child and whose leaders are already drunk in the morning. Happy the land whose king is a nobleman, and whose leaders work hard before they feast and drink, and then only to strengthen themselves for the tasks ahead”. (Eccl 10: 16-17)


"When misguided public opinion honors what is despicable and despises what is honorable, punishes virtue and rewards vice, encourages what is harmful and discourages what is useful, applauds falsehood and smothers truth under indifference or insult, a nation turns its back on progress and can be restored only by the terrible lessons of catastrophe." … Frederic Bastiat


Evil talks about tolerance only when it’s weak. When it gains the upper hand, its vanity always requires the destruction of the good and the innocent, because the example of good and innocent lives is an ongoing witness against it. So it always has been. So it always will be. And America has no special immunity to becoming an enemy of its own founding beliefs about human freedom, human dignity, the limited power of the state, and the sovereignty of God. – Archbishop Chaput


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Thursday, January 15, 2015

Swiss National Bank signaling ECB Bond buying coming

This article is posted at my main site:

IN a surprisingly unexpected move, the Swiss National Bank threw in the towel on their Franc/Euro peg and threatened to move interest rates deeper into negative territory and announced a scrapping of the floor at 1.200.


The result - ABSOLUTE CHAOS across the currency markets, the oil markets and the gold markets.The result? The cross plummeted an astonishing 1400 points in the matter of 30 few minutes! Every single trader on the planet who was in that cross and expecting them to defend that floor that they have been so vocal about defending, within that brief time span, was financially obliterated.
This is what I HATE ABOUT CENTRAL BANKS - as I have said many times in the past, it is my personal opinion formed from years of trading and, I might add, from having been on the receiving end of something along this nature from the Bank of Japan at one time, Central Banks are the CHIEF CAUSE of MARKET VOLATILITY and instead of helping to create/maintain relatively calm and orderly markets, they inject disorder, chaos and devastation.

I just hope some of my readers were not trading that cross.

My take on this surprise is this - there was no reason for the SNB to do such a thing UNLESS they knew that a big bond buying program was coming from the ECB next week. Even though their interest rates were already negative, they were spending enormous amounts of their reserves in maintaining that 1.2000 peg. If the ECB were to go ahead on the bond buying/QE, the Euro would weaken ( at least that is what the market is expecting it to do and thus the reason for the strong downtrend in the common currency). A weaker Euro would exert even more pressure on the Euro/Swissie cross requiring even more ammunition to be wasted by the SNB.

Thus they threw in the towel and surrendered.

Gold certainly does like this!

The oil markets have gone beserk as a result as well.

Saturday, January 10, 2015

Large Speculators returning to Gold - but with this Caveat

Here is the latest chart detailing the relationship between the Hedge funds NET POSITIONING in the Comex gold market and the price of the actual metal.

I have presented this chart for some time now over at my former website to rebut the silliness from the gold perma-bull camp that any moves lower in the price of gold are ALWAYS the result of "evil bullion banks working to suppress the price of the metal to discredit it". That mindset had a place at one time - back when the US Dollar was sinking - but is now passé and an extreme waste of precious mental effort and time. The camp that has this as a central tenet of their "faith" has long ago lost any credibility on this issue among serious-minded investors/traders.

Gold has been sinking in price because speculators were simply not interested in it when better returns on precious capital could be obtained elsewhere (in equities in particular). An ultra-low interest rate environment here in the US, with no signs whatsoever of any inflationary pressure, in which global commodity prices were sinking lower while the US Dollar was moving higher was simply one in which it did not favor any serious appreciation in the price of the yellow metal. There was nothing the least bit "conspiratorial" therefore about a falling gold price, an asset which throws of no yield or dividend whatsoever and requires storage fees, insurance, etc. when holding it in any size. In other words, it COSTS to store gold when such money could be better put to work producing actual returns in equities.

Now that there are some concerns about global growth and equities are looking a bit wobbly, gold is getting a bit of a look from some speculators who are cautious at the moment. This can be seen in the return of some hedge funds to the long side of the gold market at the Comex ( although I should note that the gold ETF, GLD, continues to display an amazing lack of interest on the part of big Western-based institutional buyers ).

The blue line shows the NET POSITIONING of the hedge fund community. The Red line shows the gold price. As you can see, as the NET LONG Position has increased, so has the gold price. The two track each other EXACTLY.

Something I do want to note however that really stands out for me when I see this chart and analyze it in detail.

Beginning in 2013, while the relationship between the gold price and the net positioning of the hedge fund community remained intact, something happened. Can you see it?

From that point forward, the build in NET LONG positions by the Hedge funds HAS NOT resulted in successively higher gold prices. The opposite is the case. In other words, it is taking more and more buying by Hedge funds to move the price of gold higher but the end result is that the gold price is at lower levels than such levels of net longs would have taken it in the past.

For instance, look at this week's net long level by the hedge funds. It is currently a bit over 106,000 futures and options combined. A similar level of hedge fund exposure to the gold market back in January 2013 had gold sitting above $1650!

How to explain this ? Simple - While hedge funds have been recently expressing an interest in playing gold from the long side over the Comex, there remains a correspondingly increasing amount of WILLING SELLERS of the metal. To see gold sitting closer to $1200 than it is to $1700 when the net long positions of the hedge fund are at the same level as they were TWO YEARS ago tells me that a very large number of players in gold do not expect high prices in gold to last.

This does not mean gold cannot and will not experience rallies. It is now currently in the midst of one which it taking it up to test resistance between the $1220-$1230 level. It might even be able to take that out and put in a test of $1250. But one does wonder how much buying it is going to take on the part of the hedge funds to really push this market to the point where it actually can do something the least bit exciting; not with this many willing sellers of the metal around.


Here is an intermediate term view of the metal (weekly chart). It has been able to keep aloft above the key $1180 level but thus far has not managed to even make it to the first level of chart resistance noted. Not especially impressive when viewed from this angle is it?

As noted many times when discussing the prospects of this metal - just because a market has found a bottom does not mean it is about to embark on a wildly bullish tear higher. It can meander sideways in a broad trading range for YEARS. Until I see some signs of serious life in this market, I am simply not interested in it other than for short term trading purposes only.

To the readers of this site and especially to those who continue to post here at the forum - please note that I have set in place a process that requires all posts to be reviewed prior to being posted. This is not so much an attempt at censorship as it is an effort to prevent the pestilential spammers from India which for some reason believe that they can use this website as a place to secure free advertising for their crap services. Those who do so, without at least having the common decency, moral integrity and professionalism to obtain my permission or even pay a small fee, deserve the scorn and contempt in which I hold these parasites.

Thanks for your understanding with this. In the meantime, I would urge my loyal readers here and regular posters to come on over to the new site and give it a go. You are missing out on a great deal of commentary and hopefully valuable insight into what is taking place in the markets and more importantly, the WHY behind the moves in price.

Also, it would be fun to have some of you long time posters contributing to any discussions at the new site as some of your contributions in the past have been very thought provoking and interesting.

 





Tuesday, January 6, 2015

For this Year's Christmas List

It's really too bad that we all are just now learning about this. All I can say is; "Santa - PLEASE, PLEASE, remember me because I have been really good".
This is the Ultimate Chocolate Lover's Dream come true - a printer that prints chocolate candies!

http://www.companyspotlight.com/news/the-hershey-co/14411/776693

Also, to my TraderDan.com readers - over the weekend we made the transition at the site to a dedicated server. Apparently there are still some issues with the move that are causing problems for some of you wishing to log in and read the commentary and analysis that I am posting there.

If you are a TraderDan.com member and are having problem logging in, please let me know here and I will forward your email onto the site administrator for help.

I apologize for this inconvenience and assure you we are doing our best to get it cleaned up as quickly as possible.


Tuesday, December 30, 2014

Year End Follies Continue

As noted in yesterday's comments, making too much of moves in ANY market at this time of the year is the height of folly. There is simply too much year end book squaring taking place in incredibly thin trading conditions to put any credence in price moves except in those markets with the absolute strongest of fundamentals.

Please be aware that I am limiting comments mainly because it is a waste of time for any trader to attempt to ascertain any future price movements from the action in this last trading week. As goofy as today's moves have been, tomorrow's are liable to be even worse!

There are huge air pockets above and below every market that is trading right now with so many large players out of the markets until next Monday that anyone who has a hankering to try their hand at market manipulation ( pushing prices around merely to run stops ) is going to give it a try to see if they can pull it off.

 Some are trying to make a big deal out of the situation in Greece but frankly that it a tempest in the proverbial tea pot in my view. Greece's problem is Greece's problem. It is not Spain's or Germany's or France's. Sure, any election that puts another left wing group in charge will foul things up for Greece's financing package but that is something that is limited to that country. Any government that might end up being elected is going to soon get a lesson in reality and that there is a huge difference between electioneering slogans and dealing with real world finance issues.

What you are seeing is an exaggeration of price movements due to the lack of liquidity at this time of the year. It is especially tragic that we do get something like the Greece thing this week and not next week. The reaction would likely be much more subdued.

For now, short term technical will dominate the markets. As mentioned yesterday, traders should have lightened up by now or have gotten flat. Watching hustlers run your stops and screw with your positions is never fun so after a while you learn to deprive them of their toys. Personally I have nothing but contempt for the parasites and ticks that make their livings this time of the year by raping the public. Sadly, the exchanges will never do the right thing and just shut down the markets for the last week of the year because they are too greedy trying to collect more trading fees.

As mentioned previously, look at the weekly and monthly charts and those will provide the perspective one needs to keep from being confused and frustrated by the meaningless and random price movements that we are currently seeing.
Early next week the full complement of traders will be returning and then we can put some credence into the moves we get at that time.

For now, this is the time for the worst of the worst in this industry to make themselves manifest.

Wednesday, December 10, 2014

USDA Reports - Focus shifts to Global Supply Numbers

USDA issued its December Supply and Demand report today and as usual, it set off some expected reactions across the grain floor.

About the only surprise in the report that I can see at this time came in the corn numbers. The trade was looking for a corn carryover near last month's numbers of 2.008 billion bushels. Instead USDA upped usage reducing the amount of corn leftover to 1.998 billion bushels. However, they also raised the expected GLOBAL stockpiles to 192.2 million metric tons from last month's 191.5 million.
Apparently, corn sweeteners will find the cheap corn prices attractive and as a result use more of the stuff in making HFCS. They came up with an additional 10 million bushels worth of demand from that sector ( note that it includes the feed sector but based on what I can see, USDA had already factored in the livestock and poultry industry numbers last month.

Strangely enough, they also RAISED the US export numbers by 10 million bushels. That makes ZERO sense to me since corn exports thus far this year have been lagging behind expectations in the trade. With the projected increase in global supplies increasing combined with the US Dollar as strong as it has been, (and with the greenback expected to resume its uptrend next year,) I have no idea why USDA would expect US exports to increase given the fact that corn is plentiful and cheap globally. The US is not the only game in town anymore when it comes to corn and currency differentials make a big deal when it comes to sourcing grain by foreign buyers.
 
On the bean front, everyone and their dog was expecting USDA to lower the projected marketing-year end supplies. They got that. The trade has been looking at the recent spate of huge bean inspections and export numbers ( CHINA, CHINA, and more CHINA) and had guessed that the initial export number estimates from USDA were too low.
 
I guess USDA did as well since they raised the export numbers by 40 million bushels. That is where the drop in the carryout came from as it was reduced from 450 million bushels to 410 million bushels.
 
Beans did sell off on the data however as the market has already priced this in due to the huge rally off the lows that we have been seeing which began back in October. However, what USDA did do was to lower the total global carryover from 90.28 million metric tons to 89.9 million. That would be friendly as well on the surface but the trade was expecting a smaller S. American crop as thus a smaller number on that global carryover than USDA gave it.

Also today, and I think it is significant, the Brazilian equivalent of our USDA released some data which has somehow managed to get completely lost in all the hoopla surrounding the USDA numbers. They raised the current year crop in Brazil to an expected 95.8 million metric tons. That is a WHOPPER. The agency cited improved weather conditions and a larger acreage number. Last month, that same agency, had expected a crop in the range between 89.3 - 91.7 million metric tons. Depending on which end of that range one wants to start from, that is an increase of either 6.5 million metric tons - 4.1 million metric tons! WOW!
Here is the thing - USDA also plugged some numbers into today's global supply report for Brazil but they used a 94 million metric ton number. CONAB came in nearly 2 million metric tons higher.
 
If the trade really comes to grips with this ( and it needs to be kept in mind that it is still very early in the growing season down there and we have to deal with weather for a while longer ), this CONAB number implies a greater global carryover than today's USDA report suggests.

Also, the soybean/corn ratio remains too high in my view and that is going to encourage more US farmers making the move to beans next year for their planting intentions unless the ratio corrects significantly from current levels. Translation - bean prices are too high in relation to corn and the market needs to do something to either lower the price of beans or raise the price of corn for next year to encourage more acreage going to corn. If not, we will be awash in beans at the expense of corn.
 
More on this later... I have to get back to some other markets... The Yen carry trade unwind is on full display today with the Forex markets now being thrown into convulsions as the price of crude oil falls, alongside of equities.

it never ends....

Thursday, December 4, 2014

Draghi and Company Disappoint Euro Bears

Expectations were high heading into today's ECB meeting that the Central Bank would issue some news detailing the start of another round of stimulus for the lagging Eurozone economy.

'Twas not to be.

Draghi TALKED doing more stimulus at some point as he went through the same litany of things that he has been saying seemingly forever at this point:
 
"Economic risks remain to the downside"
"our projections suggest lower inflation"
"we now see GDP growth at 1.0% versus 1.6% in September"

BLAH, BLAH, and more BLAH. The problem is, as far as the market is concerned, they did NOTHING! Just talk.

That is NOT what the market wanted to hear so guess what? Time to cover all those short Euro positions were loaded in this week in anticipation that they would do SOMETHING. Up went the Euro, now over 100 points and once again, the currency markets are roiled by another yapping Central Banker.






Ah yes, another moment in the "CALMING" affect of Central Bankers on the financial markets. Thank heaven for these people - without them, chaos, instability and turmoil would be the norm in our lives!

Note the words dripping with sarcasm.

This is an example of how these monetary lords mislead markets. Draghi has been sounding like the uber dove for quite some time now and hinting about further measures, then - This - a big, fat egg.
It was amusing to see his excuse for the ECB's inaction - OIL PRICE CHANGES!  Personally I think the ECB is scared to death to follow in the footsteps of the US Fed and the Bank of Japan/ Abe government and get aggressive on the QE type front. I wonder what the Eurozone exporting related industries are going to think of their latest "plan" seeing that the Euro is going the other way than from what they were hoping?

Perhaps, some time during his current press conference, Mr. Draghi will look at this cell phone to check and see how the Euro is responding to all this, and then make some statement promising more definitive action next time around. Who knows?

I wonder what it must be like to have financial markets responding to every syllable that proceeds forth from one's mouth?

By the way, while this circus show was going on, Saudi Arabia cut all January oil prices to the US and to Asia! Crude oil went "thump" as a result.

Monday, December 1, 2014

Moody's Cuts Japan's Credit Rating

Moody's Investors Service, a credit ratings firm, cut the credit rating of Japan one notch this morning to A1, down from Aa3.
This has further spooked gold bears and we are seeing a rash of short covering in the gold market as a result.
Let's see how long the impact from the Moody's decision will last and whether or not it can attract any concentrated NEW buying.

Wednesday, November 26, 2014

US Dollar Relieving Overbought Condition

(Please note that this article is taken from www.traderdan.com).

It is no secret that the currency flavor of the year has been the US Dollar. King Dollar has reigned supreme over the Forex markets especially since this summer when it began a torrid bull move higher breaking out above 81 and making a run to near 87 before it caught its breath and backed down a bit. It decided to run some more, this time to 88.50 before again pausing.
 
Right now, the currency markets are rather subdued thanks to the US holiday ( don't blink however because it all might change!). There has been some movement in the major crosses but not that much to speak of in terms of anything significant. It seems that for the moment, traders are content to let the various pairs meander in some tight ranges.

Chart20141126174513

In looking over the chart of the US Dollar Index (USDX), the currency unit seems to be consolidating in a tight range between 88.50 on the top and 87.50-87.25 or so on the bottom.
 
I have drawn in a shaded rectangle to denote the region where it is encountering some buying.

If you look down at the indicator on the lower plot, you will see the RSI or Relative Strength Indicator, an old but helpful measure of buying or selling internals. Note that since the strong bull trend started in July, the RSI has ranged exactly where it ought to range for a market in a bullish posture - it has not dipped below the 40 level ( see the lower dashed line).

Chart20141126174513

To show the strength of this move, look at how long the RSI has remained above the 80 level, which is considered overbought.

The recent leg higher has produced a negative divergence ( higher high on price not confirmed by a higher high on the RSI) but the market thus far is unconcerned about this, so we will also remain unconcerned. We know this because the lower part of the range remains intact.

Chart20141126174513

The market appears to be working off the overbought condition by moving sideways, allowing the RSI to fall towards the 40 level ( see the shaded rectangle on the RSI insert). The longer the Dollar can move sideways with the price remaining above the support zone on its plot AND the RSI remains above the 40 level ( and the rectangle), the more the odds increase that this is just another pause before the next leg higher in the US Dollar. Traders will want to monitor this closely the next week or so.

If the Dollar were to fall through its support, we would not want to see the RSI fall below 40. That would introduce some doubt as to the staying power of the current leg higher and would bode for a deeper correction. Let's keep an eye on this.

Those who are actively working gold, especially, will want to monitor this most closely.