"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

Thursday, April 24, 2014

Stop Hunting - the Financial Version of the Hunger Games

Just a quick post for now to detail some goings on this morning.... more later including some charts...

The Durable Goods number that came out this morning and caused some ripples. By the way, those are "big ticket" items. The orders jumped 2.6% from February last month beating the market expectations of a 2% rise. It was also the largest increase since November.

The result of this was to set off a round of short covering in the copper market as those who have been shorting copper based off of problems in China and expected slower growth there, were caught off guard by the strength of the number here. China is the world's largest user of copper but the US is still important to that market.

I noticed that as copper strengthened on this bout of short covering, so too did silver. It seemed those leaning on the industrial metals from the short side decided to head to the sidelines and await some further data before pressing their case.  Copper has been quietly sneaking higher over the last month tacking on some $0.25/pound and while the chart is not especially friendly, it seems to have found a bottom below $3.00 for now. As many of you who read this blog regularly know, I track that market quite closely as I believe it is a much better barometer of what is going on as far as growth or lack thereof than most anything else.

The way I am reading that chart right now is that growth is not solid but neither is it all that sluggish. In other words, things are improving, but not by all that much. If copper can clear $3.20 then I will feel more comfortable about future economic growth prospects.

Hey, how about that REVERSE FLASH CRASH where the "good, benign, saintly" manipulators came in an shoved gold higher in some sort of perverse spike upwards? First it was run lower and a huge number of downside sell stops were picked off enriching quite a few floor traders in the process, only to careen higher forcing a huge number of buy stops to be run.

I am reminded of the old song:

" A hunting we will go, a hunting we will go; Hi, Ho, the derry O, a hunting we will go".

Just insert the word 'stop' in front of the word 'hunting' and you about have it.

By the way, do not expect to hear any round of criticism from the GIAMATT crowd about the ricochet higher in price. After all, that is reserved only for downward moves in price. Spikes higher are perfectly acceptable because we all know that everyone who wants to buy gold in large quantities wants to make sure that they buy it in such an obvious fashion that they drive the price higher so that they can pay a much higher price for it than if they had otherwise quietly been accumulating it.

I am using a bit of sarcasm here to just prove the point I continually make here at this site - today's wild swings in price are evidence of the broken nature of our markets due to the proliferation of computerized trading which rips price higher and lower as the new norm. Remember this the next time gold drops lower and up start the usual: "FLASH CRASH - evidence of evil manipulators at work" nonsense flares up.

Here is what actually happened and it had NOTHING, ZERO, NADA to do with manipulators or some secret esoteric anonymous large trader lurking in London or anything else - News hit the floor that Russia has decided to hold military exercises near the Ukranian borders and that included air operations.

Pro-Russian forces in eastern Ukraine are continuing to clash with Ukranian forces and that announcement sent stocks temporarily lower while gold shot higher as safe haven plays popped up. You can usually see that sort of thing when the Yen reverses and scoots higher.

It looks to me like the initial spike higher has attracted some sellers now that things seemed to have calmed down a bit. We will have to wait and see how the dust settles today. As long as there are any fears of further escalations over there in Ukraine, the market will be supported. If those fears fade, watch for more selling pressure to re-emerge once again.


  1. Amen Dan! Thanks for your highly insightful analysis as always. I appreciate this blog very much and have learned a great deal from it.

  2. I wouldnt get too excited about golds pop. It clearly broke through 1280 resistance and wanted to go lower. The Ukraine tension is domestic and wont keep gold elevated in my opinion. Knee jerk reactions are tricksters

    1. Permabulls are probably hoping for it to be a bullet dodge like the one right before start of 2014 (when it poked through 1180 support, and then popped back up) that wound up being a rally/melt up for a few months.

  3. Yep...all about the Ukraine.

    I just saw Putin on TV lay out the rationale for his next move. In 24-48 hrs. is my guess.

  4. The question we all ask ourselves, "Is America, Europe, or Russia gonna get this right?" The next question is "Is America, Europe, or Russia gonna get this all wrong?" As is my style, there is no answer here in sparks.


    Was standing in front of the beef counter in a local grocery in FL when the butcher came over and asked, "Anything I can help you with?"

    "Yes," I answered, "Help me understand how NY Strip is up 50% in the last week..."

    Told me he goes in with three friends and buys a 4-H steer once a year.

  6. billmasi;

    You are seeing the impact from back to back droughts in 2011 and in 2012. Beef prices will let up later this year (end of the Q3 and into Q4).

    Eat more chicken!


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