"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

Trader Dan's free work will soon be available at www.traderdan.biz

Monday, April 16, 2012

RISK OFF Trades hitting the Commodity Sector

Investors/traders are growing increasingly concerned about an overall global economic slowdown. This morning's Retail Sales number had temporarily cheered them with higher equities coming in on that news but then the fall of the NAHB housing market index (the first in seven months I might add) soured them rather quickly and led to increased selling pressure being seen in the broader equity markets as well as the commodity complex. Even gasoline has thus far not been immune to the pressure.

The result of this has seen the CCI moving back towards the critical low made late last year. You might recall that as the year 2011 wound down, many speculators were in a selling mood fearing European Sovereign debt woes contagion and slower growth in general.

That began to change towards the end of December as many then began anticipating a Central Bank response. Fund flows began reversing and moving back into RISK assets particularly at the start of the New Year as traders were certain that the Fed would not only be bringing back the punch bowl to the party, but also spiking it as well.

Now that we have heard nothing in the last few days from the monetary masters about such things, traders are growing increasingly despondent that a new round of QE is forthcoming and are reacting accordingly - they are generally selling risk assets and buying Treasuries.

Surprisingly, silver is holding relatively well today in spite of the general trend away from risk as it is attempting to hold chart support centered in the region near $31. Bulls need to dig in here or it will sink rather quickly to $30 for a test of their resolve at that level.

I am going to be extremely interested to see whether we get some comments soon from the various Fed Governors. While the S&P is holding much better than the broad commodity sector, it is still trading below its 50 day moving average, having fallen back through that critical level last Friday on the news of China's growth for Q1 slowing to 8.1%.

The least whiff of another round of QE will completely reverse the losses in the CCI - in the meantime the Bears are dominating.

Gold continues to struggle at $1680 - there currently does not seem to be enough speculative money flows to take this market through that level without some sort of spark.

The HUI is lower today and is sinking back towards a very important chart support level near 440.