The overall tone of the commodity complex is firm in today's session as the CCI is up. From what I can see, some of this is tied to news out of China that inflation is relatively tame. This has traders breathing a sigh of relief that there will be no raising of short term rates anytime soon in China. Traders are already fearful enough of slowing growth so the last thing that they want to hear coming out of China is anything that might dampen what economic growth there is.
The second main thing is the Chilean copper strike at the giant state owned mine, Codelco. Chile produces approximately 1/3 of all global copper and thus anything that might interfere with the supply piques traders' interest. The immediate result of any strike will be to alleviate concerns about the rising stocks of the red metal at the LME, one of the main factors behind the grind lower in copper prices as hedge funds have noted that and have been heavy sellers of the metal. We are seeing some short covering occur in there.
There has been a subsequent spillover effect on silver also as a result.
Further aiding the rise across the commodity spectrum has been the weakness in the Dollar brought on by strong buying of the Euro. I am not sure what the strength in the Euro is all about. I only know that I want no part of it. Maybe there is some thinking that all the problem nations, Cyprus, Portugal, Greece, etc. will drop out of the thing leaving the stronger nations behind. Who knows what these guys are thinking anymore? As I have stated previously again and again, a long term trade to this modern generation of mindless gnats is 60 minutes.
There is also a bit of strength in the grains today as shorts cover recent extremely profitable trades while they wait for tomorrow's USDA report. It would not surprise me to see a bearish report to be quite honest although some traders, after having been burned and buried by the last report, are no doubt heading to the sideways preferring retreat as the better part of valor until they can see what numbers the bean counters over there will spit out this time around.
A comment on Silver - it has managed to pop to $28 today on the heels of all of the above - the big test for the bulls however will be to take the metal firmly past that level and hold it there. Right now, traders are still interested in selling rallies. If copper continues to firm however, they might have some second thoughts about the wisdom of doing that. Strikes are dangerous things to trade however. They can end as quickly as they begin and when that happens, traders have a nasty habit of turning around and looking at each other while they say, "what the hell is the market doing way up here?" You know what happens after that!
As usual, US equity markets are higher. What else is new? I am noting however weakness in the Russell 2000 today. That, and the Transports are also weak. Hmmm......
Doesn't seem to phase these guys however as they are pushing the Dow and the S&P 500 higher. My thinking at this point is why not just take the Dow to 16,000 and the S&P 500 to 1600 and get it over with. The bears are not permitted to get any downside due for national security reasons so they might as well just take the market higher into bubble territory all the while they shout out loud how cheap stocks still are.
And for those who might be wondering, Yup, the VIX is lower once again. NO FEAR.... Party Hearty.
"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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