“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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Saturday, June 14, 2014

Hedge Funds Routed by Large Reportables in Copper

I have to admit, I am always fascinated by the Copper market. As I have said many times here, I watch it and crude oil as my two key indicators for judging the strength or better - perceived strength or lack thereof in the global economy.

Not too long ago I began posting charts of the Commitment of Traders positioning in the red metal because I had noticed what was a rather unusual occurrence. The two groups of large speculators, which dominate the markets, were at odds on which direction the metal was heading. It is not unusual to see these two groups have a somewhat different positioning in a market. What was different however was the fact that their bets as to which direction copper was headed were nearly identical but on opposite sides of the market.

I remarked at the time that one of these groups was going to be a big winner and the other a big loser. I am happy to report ( can you tell what my attitude is towards hedge funds? ) that the Large Reportables made mince meat out of the Hedgie boys.

Here is the latest COT chart showing the rout of the hedge funds. You can see their bet on rising prices backfired big time. Out they have come as long liquidation from this group has kicked in as the price has continued to move lower. Look at the sharp fall in the net long positioning of the hedge funds! It has been cut by nearly 75% in just two weeks!

The Large Reportables have been booking profits into their selling as they cover profitable shorts.


Here is the chart of the actual metal itself. Observe the sharp retreat in price as hedge funds bailed out.


Copper has managed to hold into the first level of support shown on the chart. That extends down to just above the $3.00 mark. If the bears, who are currently in control of this market, are able to take the price down through this level, they have the increasingly probability of kicking off a trending move lower. That would portend a rather ominous slowing of the global economy. With the mixed data that we keep getting, whether it be here domestically or globally, I would think that the odds favor more of a holding pattern here in Copper rather than a trending move but I am open to either possibility. The chart pattern and price action will tell us which scenario to expect.

It is entirely possible that we see Copper heading one way ( Lower) and Crude oil, my other key indicator market, heading the other ( Higher). It all depends on events in Iraq and whether or not the market feels that there is real potential of crude oil supply disruption as a result. If crude oil prices continue to move higher, it will not be long before traders/investors begin to read that as a negative influence on overall economic growth. I would suspect that sentiment will be reflected in copper breaking below support.

I honestly do not know how events over in Iraq are going to play out. With Iran talking about getting involved over there, we have another factor to consider.

What an enormous mess!

43 comments:

  1. This site, like many others, turned out to be ego driven. Comments have been censored not because they were insulting the host or other posters, or because of foul language, but because they only expressed certain type of opinion that was not shared by the host. Some of the views expressed by the host and some others have been surprisingly narrow minded and bigoted. I recognize the host's right to do whatever he pleases with his site; however, I'd rather refrain from participating in such environment and coming back to this site. There must be one place left in the world...
    I do wish all of you the best of the luck in your trades.

    ReplyDelete
    Replies
    1. Abraxas;


      My views are those of a conservative Christian. I make no pretense of hiding them and reserve the right to hold them. That I also greatly respect and hold in the highest esteem, our men and women in the US military is something I will never apologize for.

      You can call that "narrow-minded or bigoted" but frankly I do not give a damn.

      Those who come here to read my trading analysis should expect to see my views reflected and if they do not agree with them, they do not have to come here to read anything I post, whether it be in the arena of financial markets or opinions on anything else.

      Adios - and do me a favor - stop coming here and reading anything that I write on the financial markets. An intellectually honest individual should not be reading stuff at a sight that contains "narrow minded and bigoted" views. Just go away and leave us alone. You will be much happier and I will certainly not have to put up with moochers like you.

      If I actually made this a fee-paid site I could rid myself of freeloaders, trolls and other such drones, but it would perhaps keep some individual trapped in the gold cult from coming to the truth and escaping that snare so I keep it open and free. But it does weary me to have to read the kind of complaints from those who think that this site gives them the right to complain about my views or my responses to anyone. If you don't like them, then stop coming here. It is that simple.

      Delete
    2. Abraxas, you are nothing more than a trouble maker. Your investment ideology has obviously failed you, and now making enemies of more open minded individuals gives you a dopamine rush. Dan's blog is one of the most fair and balanced on the web, and your accusations are false.

      Delete
    3. i am done here too Abraxas. just like at TFMR, the comments are (were) a contribution to the blog, and generate(d) traffic. bloggers with big ego's forget that there are thousands of blogs on any subject imaginable - so they need to keep the comment sections acceptable to as wide an audience as possible. i liked to come here to read Dan's market views, and to here various opinions in the comments, not just those shared by the host, same as at the other place. but what i do not come here for is to hear political rhetoric, and intolerant viewpoints - again, the same as... Dan, you are sounding a bit too much like Turd lately for my moderate tastes! i will repeat what i said in my last post that never showed up - it would behoove you to stick to market commentary, the subject matter at hand, so to speak. discussing politics or religion is only going to reduce your viewership, and you won't be changing any minds anyway.

      peace out, to all the non ditto heads who choose to stick around. in my opinion, life's too short to waste on people that already know everything.

      please refrain from trashing me Dan. i won't bother you any more after this post.

      Delete
    4. peckerwood, please share some of these bigoted know it all opinions that Dan has been using? You can't because it's all in your head. How dare you compare Dan to Turd at TFMR. Turd is a looney passenger aboard the Sea going vessel "constant manipulation" We must have some sort of magnetic distortion effecting the deep dark spaces between the ears of some of you cry babies on here today. Your next user handle should cut to the chase and be d.ckhead.

      Delete
    5. peckerwood;

      thank you for having the integrity to leave and respect my views even if you consider them intolerant.

      I am not interested in web traffic because I do not make any money whatsoever off of this site - the only thing I seem to reap many times is grief. I guess it just goes to show that I was too naïve to realize that there are some people who like to do nothing but take from others and never think of repaying their kindness in sharing for free. Maybe if my web site was filled with advertisements that enriched me for freely sharing my knowledge I would have at least had some financial reimbursement to reward me for putting up with those who feel that they have a right to tell their host what he should or should not write. That you even think you can do such a thing is the height of hubris.

      Then again, such is the state of modern society - it is filled with self-centeredness and ingratitude. Thanks for serving as a case in point and a perfect example.

      Farewell - if there was a way to prevent you from reading the site in the future ( which I know you will still do) trust me, I would do so. Sadly the only way I know how to do that is to make it fee paid and limit it to subscribers only but that would defeat the purpose of reaching the gold cult members.

      Delete
    6. John, there's no need to get personally abusive - just as Dan exhorts e.g. Abraxas to move on if he's not happy, we too have the freedom to simply ignore comments which we find either disagreeable or plain wrong

      Personally, I only draw the line when I see what I consider to be blatant lies and distortions - especially where there is a commercial agenda. Let me give you two quick examples - both, as it happens, from Mike Maloney:

      1. I don't necessarily agree with the conclusions reached, but I respect both the analysis and the apparent integrity of the research, and am consequently happy to tolerate the sentimental "protect your family by buying our products" mood music at the end of the production. The guy is not running a charity after all, and this stuff costs money: http://hiddensecretsofmoney.com/videos/mike-maloney-bonus-presentation-vancouver

      2. Blatant misinformation - present a series of carefully-selected facts and hammer them into your preferred commercial vehicle with a blatant disregard for the consequences this will have on your pre-conditioned doting audience: https://www.hiddensecretsofmoney.com/blog/SilverMorePotentialThanGold

      Ironically, in 1) Mike goes some considerable way towards the position he advanced in 2) but that is beside the point - which is that in my opinion the first example is merely something we as adults can agree to disagree on, whereas the second is an egregious example of a Snake-Oil Salesman deliberately duping a vulnerable audience. It's a fine line, I grant you, especially when coming from the same guy, but Good People sometimes do Bad Things, and rather than just look the other way, that's when I sense it's time to step in and call them out. Without wishing to put words in his mouth, I think this is pretty much where Dan is coming from too

      If you don't stand for something, then you'll fall for anything, and all it takes for evil to succeed is for good men to do nothing

      Delete
    7. PostcolonialBrit, I may get a little carried away sometimes, but it gets under my skin when people attack others for what I feel to be no more than jealousy. Hyperbole happens to be my specialty, and caustic retorts are some of my finest examples. If you think my statements tonight were abusive you would really hate to see my angry. LOL

      Delete
  2. Since Silver is partially joined to Cu, at the hip, the question here is
    what will Silver do if Cu starts a downtrend below $3 ( or if it simply stays flat above $3).

    It appears that Silver broke a downside trend this week (at least from a
    short term standpoint).Does the behaviour of the hedgies and the Large Reportables on Silver mirror that in Cu ? Any insight on this.

    ReplyDelete
    Replies
    1. Wolf;

      That is a tough question to answer because one never knows what silver is going to decide to be on any given day. Some days it wakes up and acts like an industrial metal and then it tends to follow copper around. Other days it decides it is a precious metal and then it tends to follow gold around.

      About the only thing I feel fairly confident about is that it will keep us all on our toes. If it senses growth, it should rise; If it senses deflation, it should fall.

      On the COT, It is very possible that some of the big specs were spreading copper and silver.

      Delete
    2. Tks for response.

      On another topic: I-RACK.
      Here is what I consider a well written analysis on the
      Iraqi situation. On person's opinion of course.
      ( Cheney/Rumsfeld's sins of commission, omission compounded with stupidity, may come back to haunt us for a long long time; poor W got swallowed in their vortex ).

      http://www.moneyandmarkets.com/iraq-falling-now-what-62194#.U5yfg3Yg_VE

      Delete
  3. Count me as another one who is crossing this site off my bookmark.

    You are correct, it is a free site, so I've no right to complain. The tone of all the writing and comments has taken a decidedly negative tone, and I choose to remove myself.

    ReplyDelete
    Replies
    1. doctormyeyes, what you just uttered is absolute garbage! What the fudge are you talking about with that "negative tone" crap? Dan is one of the most upbeat bloggers I've ever read. You most certainly have soiled you diaper, and more than likely just another user handle of Abraxas!

      Delete
    2. john ;

      thanks for the kind words and the defense. I have essentially given up on some people - it scares me as I contemplate the future of the nation.

      Best wishes,
      Dan

      Delete
  4. Thanks Dan for the update on the recent COT activity.

    I guess the much hyped (and hoped for) hot air by some hucksters at the end of last year regarding JPM's "cornering of the gold market" was just another example of grasping at something (anything!) that would hold some folks continued attention instead of them becoming disengaged while the metals yawn.

    The "empty vaults" meme will turn out similarly and then never get mentioned again....just like the Comex collapsing....or the GLD drawdown....or the GOFO rate....or the rate of backwardization....or etc.

    The truth is....no one knows what, when, where, how or why the direction of gold/silver etc will skyrocket or plummet or remain stubbornly stuck in it's current rut.

    All the behind the scene stories, rumor, innuendo or "fact" is a product of someone's hyper-imagination and the technique they use to market themselves...plain and simple.

    Sensationalism sells and sensationalists will always listen.

    ReplyDelete
    Replies
    1. DarkPurple;

      Very well put... we are all mere mortals and are not omniscient and none of us know the future. After trading as many years in these markets as I have and after having my teeth kicked out enough, I have learned to be much more humble when it comes to making market prognostications, tending to let the charts tell me what the market is currently thinking.

      Sadly, as you say, hype sells.

      Delete
    2. To my mind, there are two primary types of Gold maniacs: those who have difficulty distinguishing between what is fact and what they merely wish were the case, and those who are deliberately distorting facts in order to progress an agenda (which is frequently commercial and as often as not related to Silver, rather than PM's in general)

      The second category are a Red Flag to this particular Bull - the first are just timewasters who can be safely ignored; the quickest way for these idiots to amass a small fortune is to start with a large one and just wait

      Delete
  5. Although the Gold pushers, for want of a better description are wrong in their views about gold going to $5000, there is still something fundamentally wrong with the markets at the moment and sooner of later, sooner probably, we are going to see a big correction and when that happens gold and gold producers will have their day even if it might be short lived, i.e. until the money printers start up again!!

    In the long term we will have to see a bigger correction and a realignment, as we cannot keep taking money off the savers and giving it to the people who borrow and spend, as that way lies revolution and has been seen many times in history.

    ReplyDelete
  6. Funny how futures traders always get wiped out by the PigMen.

    Check out the charts of SCCO and FCX, not much damage there. If they were long those stocks instead of gunning the futures market, they would not have lost nearly as much.

    I'm bullish on the economy, I think both these copper plays are great buys here.

    ReplyDelete
  7. Steve Brassey,

    SWC got creamed on over 7 million shares traded a few days ago, you may end up seeing a mini-crash in Platinum and Palladium based on that signal.

    We have until Labor Day.

    One of us will be a hero, the other a goat, LOL....

    ReplyDelete
  8. Mark, I think I will be the goat; Happy Father's Day~!

    ReplyDelete
  9. Dan,

    I truly appreciate that you take time out to share your considerable knowledge and expertise on the markets. I am always reluctant to go to your comments section as it seems to be filled with un-constructive and at times puerile and negative comments. I can't remember the last time I learn't anything from comments here - apart from your comments. For the record, I don't necessarily share your world views but I respect that you have the right to express them. Keep up the great work. I do hope that a lot of your readers think about whether they have anything constructive to say before they say it. They scare me some times.

    ReplyDelete
    Replies
    1. Beach_SwimR;

      thanks for that. I wish some people had your attitude. At some point I will probably just hang it up with this blog as it is a lot of work and takes too much of what spare time I have but for now I will keep plodding along and doing what I can to help some of these folks understand what is going on with these goofy markets.

      And yes, some of these people scare the you know what out of me as well.

      Delete
    2. This comment has been removed by the author.

      Delete
  10. Hi Dan,

    Long time reader first time poster. I felt compelled to thank you for your dedication to this site and your time.

    If people want to leave because of something you wrote so be it. I want to read something challenging and intelligent. I read many sources and most only rarely have good nuggets. Yours is excellent. I truly enjoy your writing style and I can say that my trading style is more conservative and patient now. There's always another trade.

    I didn't buy gold last week before the pop since I agreed with you and other sources. Missed out on this weeks pop but who cares.

    Keep up the good work and my advice - don't feel compelled or stressed to respond to some of these attacks. Life's too short. Happy Dad day to you and other readers.

    Cheers FlurplePete

    ReplyDelete
    Replies
    1. Flurple;

      Thanks for that post and taking a bit of time out to write it.

      The one thing I want to try to avoid becoming as I grow older is cynical. I would love to stay optimistic and cheerful all the way to the end of my stay here on this planet but I must admit, in reading some of the thoughts of some, at times it is a wonder that I am not already a cynical old dude!

      Happy Daddy's Day to you as well. There is no greater joy!

      Dan

      Delete
  11. Thank you, Dan. Love your site!

    ReplyDelete
    Replies
    1. Cache;

      Thanks very much for that !

      Have a great weekend.

      Dan

      Delete
  12. Hi Dan-
    I have noticed how many progressive thinkers demand tolerance to ideas or views that THEY hold to be sacred. Tolerance and acceptance of their views is the utmost importance to them and should always be REQUIRED by all…. except for those views they disagree with. Then those same folks become extremely intolerant. This is particularly true when they come across values that are conservative Christian. At these times they often have a difficult time with honest debate and instead go for an emotional argument (“bigotry” is a popular one) which can get personal very quickly (the “turd” word can come up). Thank God we still live in a free country where a site like this can exist and the host is free to express his views even if all readers do not agree or are intolerant of them. Our country also allows “those” the freedom to sign off… thank God.

    Keep up the great work and thanks for the updated COT report on cooper today. It is much appreciated. Your blog is a real treasure. Happy Father’s Day to all the father’s out there!

    ReplyDelete
  13. This comment has been removed by the author.

    ReplyDelete
  14. Crazy days. I see people getting more and more entrenched in their beliefs day after day on the blogs I read and in discussions with my friends and family in the real world. Particularly with regards to politics and the economy. Personally, I think it’s because so many out of the norm and hard to explain events seem to be occurring at a faster and faster pace that everyone with the mental horsepower to do so is trying to make sense of it and no two people are going to do that in the exact same way.

    I’ve been a long time reader here and have only posted a few comments so far and they centered around my views on the velocity of money and the fact I felt the dollar would be in trouble/under pressure by the end of this year (please note I don’t feel it’s an end-of-world event). I still believe that, but will save those views for another time because I have some great news:

    I intend to continue reading Trader Dan’s Market Views! Yes!!!

    ReplyDelete
  15. Dan,
    I was on here last night and could not believe some of these comments. I wanted to take the time today to say thanks again for all of your time and effort. Hope you enjoy a great father's day with the family!
    If anyone should get paid to write about the markets, it is you my friend. Don't ever quit the writing without notice, I am sure I am not the only one who would gladly pay to read you on a daily basis.
    Happy Father's Day Dan!
    TraderMartin

    ReplyDelete
    Replies
    1. Martin;

      Thanks buddy!

      Hope you had an enjoyable Daddy's Day as well buddy.

      Dan

      Delete
  16. Happy Fathers Day Dan!
    Your thinking outside the box is appreciated.

    ReplyDelete
  17. This comment has been removed by the author.

    ReplyDelete
    Replies
    1. The potential situation in the Iraq/US "Green Zone" I mentioned a couple days ago is only a matter of time seeing as how an evacuation is just getting underway.
      Say good-bye to a billion dollar plus state of the art facility.

      How long will it take for Iranian troops to meander through the Green Zone in almost the same way US troops stormed and occupied Saddams palace?

      The irony is thick.

      The US potentially helping out (or fighting?) Iran in Iraq might seem farfetched but if what I surmised about the Sunni/Shia angle is the core issue (besides Syria) then a more unlikely alliance might come into play at some point....SA and Israeli operating in Iraq (and Syria) using mercenaries and some of their own elite forces mixed in.

      The whole situation promises to get uglier and long in duration. And then it'll be Afghanistan/Pakistan. :-o

      "US Orders Partial Evacuation Of Baghdad Embassy As Aircraft Carrier Arrives In Gulf"

      06/15/2014
      Earlier today we reported that despite, or rather due to, all the confusing propaganda from either side, it was not exactly clear whether and how far away from Baghdad the ISIS offensive had been halted (if at all). It appears the confusion has also impacted none other than the US State Department, which moments ago announced it would evacuate an "substantial number" of the whopping 5,500 staff situated in the US embassy in Baghdad on the banks of the Tigris river, staff which incidentally is the largest of any US embassy. Additionally, the State Dept said that some additional U.S. govt security personnel will be added to Baghdad staff as result of instability and violence in certain areas of Iraq.

      zerohedge.com

      Delete
  18. Dan, I just wanted to say thank you for all the hard work and time you put into this blog. I am a lurker (as I sure countless other people are) and have gained invaluable knowledge that I would not have attained anywhere else besides your blog. 

    For the record, I am a conservative Christian as well and greatly appreciate your realistic, honest, and non-agenda interpretation of the market and current events. It is almost impossible to get that kind of perspective in the current state of the news networks. 

    I will continue reading your market commentary and sincerely hope you do not consider stopping this blog as a result of trollers. Thanks again!

    ReplyDelete
  19. Looks like the crisis has ended, despite more than 10 headlines at KWN warning of the "End of the World".

    Investors are now piling into consumer stocks and dumping gold.

    The U.S. Consumer has never been stronger.

    XLY less than $1 away from making yet another world record, lifetime high.

    ReplyDelete
  20. Mark, you might want to take a peek at the log charts of the BDI vs. S&P 500; this kind of divergence or dichotomy can not persist forever, and when it breaks it will not be pretty. It will end when it ends!

    ReplyDelete
  21. Meh, the BDI hasn't meant anything in years.

    Anyone following that thing as an indicator missed one of the biggest stock market rallies in world history.

    I just follow the tape and the action of the IBD Mo-Mo stocks, as well as key sectors such as the SOX and XLF.

    Everything else is just noise.

    ReplyDelete
  22. The seemingly new relationship between the West and Iran is being slowly unveiled.
    You've got to wonder what type of grand deal was struck somewhere along the line....and will it hold or is it even meant to be held?

    Alliances are quickly and dramatically shifting.

    "Britain's Hague says to make announcement on relations with Iran"

    LONDON | Mon Jun 16, 2014 1:05pm EDT

    LONDON (Reuters) - British Foreign Secretary William Hague said on Monday he would make an announcement about improving bilateral ties with Iran "imminently"....(cont.)

    Reuters.com

    ReplyDelete
    Replies
    1. To date Iran and Russia have both out maneuvered the USA and Europe. They have no fundental long term reason for supporting us and will back away when it suits them. No reason to expect honor among theives and I include our side in that statement.

      Delete

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