"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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Monday, April 2, 2012

Start of 2nd Quarter brings Hedge Fund money flows with it

It appears from today's price action across both the equity markets and the commodity markets in general, that the beginning of the 2nd quarter is seeing hedge fund managers put money back to work across a wide variety of risk assets.

The catalyst seems to be both the Chinese manufacturing data and the US manufacturing PMI data which were on the friendly side and relieved traders' concerns for at least today. Oddly enough that same PMI data showed inflation data relatively tame which generated a move higher in the bond market in spite of the risk allocation trades. Then again, with the Fed managing the bond market, getting a read on it is particularly "fun".

The industrial metals of course led the charge higher with this sort of manufacturing news and so it is no suprise then to see copper, silver, palladium and platinum all strongly higher as a result. Gold benefitted somewhat from this reallocation back into the metals but definitely is underperforming silver with the risk trades in the forefront of the action.

Silver, which is currently up more than 2% as I write this, has managed to better two important overhead technical resistance levels. The first was at $32.50 and the latter near $33. It is now trading at the top of its recent range and should it be able to attract buying on any retreat in price that will keep it above both levels, it should be able to break out of the top of the range and have a decent shot at moving towards $34.25 - $34.45.  If it fails to hold and sinks back inside the range once again, decent support emerges on the chart near $31.50.

Helping both silver and gold today is the fact that the mining shares are also relatively firm for a change further cementing that region from 465- 460 as very solid technical support. Time and time agian over the last two weeks the bears have pushed these shares lower but have not been able to absorb the valued-based buying originating at the recent lows of the last two trading weeks. It certainly appears that a bottom is in the shares; now whether they can finally generate any decent excitement on the upside is the question. The accumulation phase continues but we have await the advent of the markup phase.

charts later....

1 comment:

  1. I'll be beyond doubt about the mark-up phase when the next $1T is allocated. That shouldn't be long whether it's Europe or here. Meanwhile $HUI up anyway IMO provided $SPX up, since people know the score (many taught by JS, many more not). Thanks Dan.


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