“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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Tuesday, February 18, 2014

China, China and China

There continues to be both strong short covering and fresh buying occurring across the broad commodity sector this AM. The reason? Stronger than expected data out of China.

Last week it was data revealing a surge in both imports and exports. Today it was the larger than expected foreign direct investment numbers.

This is the reason that silver continues to outperform gold to the upside for now. It is also the reason that the overall commodity sector continues to march higher. Shorts are getting squeezed out across the board.

Crude oil is now trading above $101/barrel, the highest level since October 2013. Gasoline is closing in on its best level since late December. So much for the relief we were enjoying at the gas pump. That went back up in smoke. I always have mixed views on surging energy prices because while they tend to support the "buy commodity" theme, they also act as a drag on economic growth especially in today's environment in which the US consumer is so cash-strapped and with such stagnant wages.

Soybeans continue their charge higher with wheat and even corn moving up. Cotton prices are firm and coffee is flying higher while even the laggard sugar is higher today.

In short it is very difficult, if not downright impossible, to find any commodity market in the red today. That is what China does when it is in the news in any sort of positive way. Take a look at the "China Effect" on the chart below.


Thus far the fallout from the emerging markets issues has been superceded by this upbeat news out of China; however, China has its own set of issues so one has to carefully monitor the data coming out of that nation.

It will be interesting to see how many of these individual commodity markets settle for the day. As can be expected in seeing this sort of thing, the US Dollar just cannot seem to find a friend just yet. It is flirting dangerously with some strong chart support just below the worst level of the day. It is either do or die time for the greenback or it risks falling all the way to the 79 level basis the USDX.



Thus far the gold shares are lagging. Perhaps they will catch a late bid.

Gold ran into a bout of selling last evening as it traded near $1330. The failed attempt to charge higher through resistance brought about a round of profit taking. The dip lower in price however was bought ( it seemed to coincide with the China news however).


32 comments:

  1. Will the drought in CA have any impact on commodity prices? How long can they keep pumping out food levels if there is no water?

    ReplyDelete
    Replies
    1. A story today about DE-salinating sea water to drink!

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    2. Just FYI but Catalina Island gets a lot of their water by Reverse Osmosis desalination.
      There is a plan gong through hearings to build a bigger one in Huntington Beach.

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  2. Don't worry, California will have record snow in the spring this year and the drought problem will be over very soon. Happens every time, there is an ongoing hysteria with ag products.

    Remember what happened to the grains after that huge run up in 2011?

    Complete and total collapse based on record crop yields.

    I know guys who panicked and started buying and storing food all over the place, man did those guys get burned.

    ReplyDelete
    Replies
    1. Pray your right. Keep in mind that fully one third of the USAs fruit and vegetables come out of the Central Valley of CA.
      Secretary of Agg was on TV saying no price increases this year. Pollyanna I say BS.

      Even with torrential rains and snow well not even have a normal year this year. May get a wet one in 2015.

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    2. This comment has been removed by the author.

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    3. Mark -
      Unfortunately the Fed cannot make it rain.

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    4. Teaser for the late news on TV on LA
      "Get ready to pay. Drought raising havoc with grocery prices"

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  3. Mike,

    You live in Central Valley?

    ReplyDelete
    Replies
    1. No LA area. Drive through to Bay Area frequently. Ex farmer and rancher with family still in the business. It's already bad as trees and vines are dying and crops aren't getting planted with out assured water.

      Delete
  4. California's Drought Is So Bad, You Can See It From Space:

    http://www.huffingtonpost.com/2014/02/18/california-drought-space_n_4809637.html

    ReplyDelete
  5. Mark, you have your facts wrong on the Cal Drought; sparks

    ReplyDelete
    Replies
    1. Spoken by a man in the rain shadow of the Sierra...I'll take your word for it.

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  6. - CCI index gapped up. It was the First to give the breakout signal last week.

    - Gold/Silver ratio also breaksdown 3 year uptrend. Very Bullish Silver.

    - Gold Miners Leading the Metals.

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  7. Don't look now, but it looks like they are "manipulating" the PMs again.

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  8. GDX getting slaughtered within hours of "$4,000 Gold and Skyrocketing Silver" being trumpeted by "40-year veterans", LOL....

    Man, it works every time.

    Meanwhile, Zale's Jewelry up 40% and Six Flags at 52-week highs as the consumer continues to enjoy the economic boom times.

    ReplyDelete
    Replies
    1. "... by 40-year veterans..." Stop, you're killing me!

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    2. Why cant these guys just state the relevant facts, as they see them, dont spout any conclusion,or predictions. and let the reader decide what if any follows from those facts. Its getting pretty pathetic when Mark knows when gold will go down only by looking at the KWN headlines. How could it have gotten so out of whack?

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  9. GDXJ down over 6%, exact repeat of August 2013, huge reversal day.

    Could gap down tomorrow morning and leave a huge island top.

    ReplyDelete
    Replies
    1. what about the the LOL ! WOW ! perhaps you forgot taking the meds…

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    2. Could indeed... Volume over the past 2Mo. has been a lot higher than Aug. 2013. I think the acquisitions/activity is a sticking point for blanket shorts over the sector. That said, I think the market is showing us who the real dogs are...Companies that are performing, increasing production/lowering costs are being rewarded. Those that have promised to go in production "any time now" for the past three-four years are being shorted more heavily.

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    3. so gold is up 150 bucks this year , drops 18 in the last hour after market closed , and the bears come out raving ! haha … oh Lord we are having bear bbq saturday branch … , my house , you all invited , even you Mark … special guest , ride on top of the grill

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    4. … don't forget to bring your bitcoins … and the tesla …. though i doubt you can afford it

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    5. Lowering cost as in not raising the corporate secretary salary by 200 percent and the cfo salary by 500% after raising 30 million dollar in 2011 based on promises or production in 30 months?

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    6. Anon. If santa clause cannot talk the market up you sure as hell cannot either. Relax man.

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  10. aint opening my mouth … in fact i never pump gold … i tell you one thing though , take a hard look at the stock market , and count the number of companies that are trading at ridiculous earnings with no earnings whatsoever ! if you are so concern of some poor bastard in the middle of no where making a few hundred grand … you should think again about investing in many companies nasdaq just to give an example …. when the shit hits the fun , all the bernie ebbers come out … do a little time , and have a good life … if you are saying that gold miners are over valued , then , we just live in different planets , and all I can do is politely disagree

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  11. Speaking of Tesla, its up to $221, up 14% to new world record highs after hours. Market cap is now $25 billion, more than double of Newmont Mining's $12 billion, and trading at 15x sales and 121 foward P/E ratio.

    Obviously the professional institutional investors believe that the sky is the limit for the consumer and that gold mining is dead.

    LOL.....

    ReplyDelete
  12. yes , they make so much money , they should be taken off the market and ask for other than toilet paper in exchange for their precious shares … i see you LOL now … bet you took your meds … like I say mark , come nice and oily ready for bbq … and don't forget your bit coins haha

    ReplyDelete
  13. Mark,

    Gold will rise and you will lose; but unfortunately so will everyone else--including me. Despite every hope to the contrary, I know that eventually this relatively short reprieve from economic reality will end as the pull of magical thinking finally yields to the push of basic math and accounting. By all means though, bask in all of the glory while you still can.

    As you were...

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  14. I'm sure we'll hear about all the excuses for the gold stock "smash" in the coming days.

    Meanwhile, the put/call ratio on the indexes were screaming this morning as everyone and their brother was trying to pick a top in the S & P 500. Which undoubtedly means after a few more days of digestion we are going to rocket to new highs.

    Good news is that gold will probably be dragged up kicking and screaming with the S & P 500!

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    Replies
    1. Probably more dizzying up and down and up action in the metals for another year or so and then the final.bottom at well under 1180 to deal a final.blow.to the gold mystics. Then it will take years to reach the all time high. Then a blow off and crash no matter what jim says. Gold is not money that much is clear.

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  15. Just a final word about KWN. I used to enjoy reading and listening to the stuff there. But its now over the top. Tomorrow there will be a story about Rumplestilskin turning a lot of straw into gold and doing hedging of that gold, thereby driving down the price. Let gold get into a long term uptrend and maybe they can get more respectable.

    ReplyDelete