"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


Wednesday, May 23, 2012

Continuous Commodity Index - Fed Operation "Push Down Commodities" Successful

I have been convinced for some time now that the Fed is growing increasingly concerned about the impact from both the Eurozone and the slowdown in China on the US economy. The swooning equity markets in the US  ( the S&P 500 is almost negative on the year as of the low today) are heralding investor fears and uncertainty over when the next round of stimulus might be coming.

Yet the Fed continues to remain relatively silent when it comes to committing to any definitive date for another round of bond purchases even as the yield on the Ten Year Note is now close to 1.70%, having clearly broken below the critical 1.8% level last week.

I have maintained for some time that the Fed fully understands the impact that another round of QE will unleash on the commodity markets and is therefore attempting to see these markets driven lower before engaging more actively in QE talk. As stated many times here already, the danger they face in this gambit that they are playing is a collapsing stock market. One wonders just how much more downside they are going to try to squeeze out of the commodity markets before stepping in.

If you notice on the chart below, the CCI has one more line of support near the 500 level, which is the 38.2% retracement level of the entire rally from the 2008 low. If that does not halt the decline in the commodity world in general, then it is quite conceivable that the index could fall all the way to the 50% retracement level near 438. That level is also reinforced as technically significant as it is near the lower tine of the pitchfork drawn off the 2001 low and 2008 high, an area where we can expect to see some buying emerge.

While one can see that the long term macro trend on commodity prices remains higher, the intermediate trend is lower as is the minor trend which can be clearly seen on a daily chart.

For the silver guys out there, you will need to see this chart show some definite signs of bottoming before silver can be expected to start any sort of uptrending move.


  1. great stuff dan......its amazing how your posts always fit right in to what i think.

  2. Hey Dan!

    Love ur stuff, but would nudge you to take pity on the simple minded masses. I get that you think there is a hedge fund long-bullion-short-equities strategy.

    Could you one-day 'splain that for the masses? When does it work? (Up markets, down, both?) Does it hinge on the magnitude differences? Does it involve some sort of lag of the equities when compared to bullion? Do these hedgie nuts seem to get routinely hosed every op-ex period, and was the massive out-performance of the miners today pretty much due to the hedgies covering shorts to raise money for bullion margin needs?

    You get the point.

    I *think* I get most of it, but I can't confirm if you don't let slip the details at some point. And this stuff isn't old hat to most of us...

    Bless you for the good that you do.
    CIGA Daniel in Denver

  3. Where do you see central bankers stepping in to buy gold from hedge funds?

  4. I really appreciate your post and you explain each and every point very well.. Looking for more updates from your side.Good returns in Commodity Market… Check out ones Mcx trading Tips

  5. Amazing post dan, i always read the article or posts shared by you. I always get the best information shared by you which helps me to trade safely.

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