The fierce drought that has gripped the lower section of the US corn belt and has been ravaging both corn and soybeans in the region has sent corn futures limit up today and soybeans for the front month July contract to a new all time high. That has sent shudders through the minds of some traders who are convinced that it is only a matter of time before all of this feeds through to the supply chain. REsult - higher grain prices meaning higher food prices in general.
This phenomenon has gotten hedge funds back to buying commodities across the board this morning even with the equity markets careening lower. Gold and particularly silver are getting money inflows as a result.
I mentioned a while back that the old time traders used to see a connection between the price of soybeans and the price of silver. That connection seems to be back in full force today.
Monday, July 9, 2012
Saturday, July 7, 2012
Trader Dan on King World News Markets and Metals Wrap
Please click on the following link to listen in to my regular weekly radio interview with Eric King on the KWN Markets and Metals wrap where we discuss this week's price action in the markets.
Friday, July 6, 2012
Payrolls Number Disappoints - Risk Off
If you recall one month ago, when we got that abysmal jobs number, gold initially moved lower, only to then rebound with a ferocity that caught market watchers and traders completely off guard. Risk off trades were being slammed on as longs bailed out and bears began pressing the downside. Literally, on the drop of a dime, the entire complexion of the market reversed with the bears running for their lives as new longs entered the fray. The reason - the number was so crappy that everyone just "knew" that the Fed was going to immediately launch the next round of QE. In other words, the more rotten the economic data, the more the risk trades were being put on.
Today, as is becoming the pattern in these screwed up markets, the exact opposite has occured. The payrolls number in this morning's release was horrific. Down went gold, and silver, and nearly the entirety of the commodity complex, along with the equity markets, and up went the Dollar. This time however we are not as of yet getting any sign whatsoever that traders are expecting the Fed to act on the basis of the weak payrolls number. I see no upside reversal at this hour in any of these markets - just more selling pressure.
I am beginning to suspect that we are seeing more and more traders/investors coming around to the view that no matter what one might want to call it, QE, additional liquidity, monetary easing, bond buying programs, etc., none of it is going to do the least bit of good in the medium to long term. In other words, one has to wonder whether or not the bloom is off the rose of Central Bank powers. It seems to me that the CB's are losing the war against the global economic slowdown in the minds of more and more traders. What is even worse ( in the minds of some), is that they are losing their status as the all-powerful demi gods of the finance world.
Again, at the risk of beating a dead horse, the problem is not one of liquidity - there is plenty of that - the problem is too much debt and not enough velocity of money. You can lower interest rates all day long until the cows come home but if people do not want to borrow or are afraid to borrow, what good does it do?
In other words, money is simply not changing hands fast enough. As a matter of fact, this morning the ECRI reported that their future inflation gauge, or USFIG dropped to 101.2 from 102.3 in May. Their comment: "US inflation pressures are clearly in retreat".
This is where the pressure is coming from on the Continous Commodity Index and why the bond market is moving higher and yields lower once again. Until something occurs that will change this "lack of inflation" psyche, upside trending moves in the commodity sector are going to be few and far between for all but that sector which has the strongest set of fundamental factors going for it. Right now, that is the grain sector, but even they are beginning to show some signs of stress due to the larger macro economic picture.
IN this environment, gold is going to perform better than silver as the latter must have an inflationary environment present if it is going to run higher. The Yellow Metal cannot seem to clear the resistance level noted on the chart which just so happens to be the BOTTOM OF THE FORMER TRADING RANGE in April of this year. Until it does, it is range bound at a lower price with solid buying down below $1580 on down to $1550. Only a strong weekly close through the $1630 - $1635 level gives Ol' Yeller a shot at getting some upside fireworks going.
Take a look at the following chart of the commodity complex via the Continuous Commodity Index or CCI. It has made an almost textbook retracement halfway or 50% of the distance from the peak in late February of this year to the recent low in early June, and has now stalled out. If the inflationary psyche does not return, it will move lower towards the 541 level to see if it can garner some buying there. If not, further back down it goes. For the bulls to get anything going, they must take the sector through the 560 level for starters.
Today, as is becoming the pattern in these screwed up markets, the exact opposite has occured. The payrolls number in this morning's release was horrific. Down went gold, and silver, and nearly the entirety of the commodity complex, along with the equity markets, and up went the Dollar. This time however we are not as of yet getting any sign whatsoever that traders are expecting the Fed to act on the basis of the weak payrolls number. I see no upside reversal at this hour in any of these markets - just more selling pressure.
I am beginning to suspect that we are seeing more and more traders/investors coming around to the view that no matter what one might want to call it, QE, additional liquidity, monetary easing, bond buying programs, etc., none of it is going to do the least bit of good in the medium to long term. In other words, one has to wonder whether or not the bloom is off the rose of Central Bank powers. It seems to me that the CB's are losing the war against the global economic slowdown in the minds of more and more traders. What is even worse ( in the minds of some), is that they are losing their status as the all-powerful demi gods of the finance world.
Again, at the risk of beating a dead horse, the problem is not one of liquidity - there is plenty of that - the problem is too much debt and not enough velocity of money. You can lower interest rates all day long until the cows come home but if people do not want to borrow or are afraid to borrow, what good does it do?
In other words, money is simply not changing hands fast enough. As a matter of fact, this morning the ECRI reported that their future inflation gauge, or USFIG dropped to 101.2 from 102.3 in May. Their comment: "US inflation pressures are clearly in retreat".
This is where the pressure is coming from on the Continous Commodity Index and why the bond market is moving higher and yields lower once again. Until something occurs that will change this "lack of inflation" psyche, upside trending moves in the commodity sector are going to be few and far between for all but that sector which has the strongest set of fundamental factors going for it. Right now, that is the grain sector, but even they are beginning to show some signs of stress due to the larger macro economic picture.
IN this environment, gold is going to perform better than silver as the latter must have an inflationary environment present if it is going to run higher. The Yellow Metal cannot seem to clear the resistance level noted on the chart which just so happens to be the BOTTOM OF THE FORMER TRADING RANGE in April of this year. Until it does, it is range bound at a lower price with solid buying down below $1580 on down to $1550. Only a strong weekly close through the $1630 - $1635 level gives Ol' Yeller a shot at getting some upside fireworks going.
Wednesday, July 4, 2012
Happy "What is Left of our Independence" Day
To all my American readers - after this week's convoluted reasoning from the Chief Justice of the Supreme Court, I wonder what really is going to be left of our Independence.
Just be careful not to breath too deep of a sigh - the EPA is liable to come a knocking on your door fining you for emitting excessive amounts of that nasty pollutant, otherwise referred to as Carbon Dioxide.
If you happen to have the misfortune of residing in New York City, no sense in trying to drown your sorrows in a nice big giant cup of Mountain Dew. Nanny Bloomberg has seen to that.
I keep waiting for the Underwear and Sock Police to start passing out tickets for non-compliance with the officially sanctioned color coordinated guidelines.
We are fast becoming slaves in the land of our forefathers.
Just be careful not to breath too deep of a sigh - the EPA is liable to come a knocking on your door fining you for emitting excessive amounts of that nasty pollutant, otherwise referred to as Carbon Dioxide.
If you happen to have the misfortune of residing in New York City, no sense in trying to drown your sorrows in a nice big giant cup of Mountain Dew. Nanny Bloomberg has seen to that.
I keep waiting for the Underwear and Sock Police to start passing out tickets for non-compliance with the officially sanctioned color coordinated guidelines.
We are fast becoming slaves in the land of our forefathers.
Tuesday, July 3, 2012
Live or Die by the QE Sword
Today's rally in gold (and in silver for that matter) was completely based on expectations for additional liquidity measures forthcoming from the Central Banks of the world. First there was chatter than China would be easing. Then came expectations of a rate cut from the ECB. If that were not enough, talk surfaced that the Bank of England would be restarting its bond purchasing program (England's QE) and of course, the non-stop, near religious belief that the Federal Reserve is going to start round 3 of QE "anyday now".
I do not know about you readers but I am more and more disgusted with what is happening to the trading/investing community in this modern financial system. They seem to have lost their collective minds and their ability to reason.
In a most perverse manner, (perverse is about the only word that I can find to express the sickness that pervades the financial system), the worse the economic data has become, the better the stock markets of the world seem to do. Rotten economic data out of China - why let's just buy copper and increase the price $0.25/pound in less than two weeks. After all, China is sure to lower interest rates and that will certainly ramp up demand once again.
Rotten news out of the Euro Zone - sovereign debt issues - let's take crude oil a full $10/barrel higher.
When even Goldman Sachs' reasonable call for a lower stock market based on its solid analysis of the economic condition gets blown out of the water, you know that the financial world now calls light, darkness; bitter, sweet; and down, up. It really does seem as if we are living in a parallel universe where the "normal" rules are inverted.
The short of all this is simple - for whatever reason, traders have now been properly conditioned by the authorities to buy more and more equities, the worse the economic news becomes. Since traders have been led to expect that Central Bank activity will generate inflation, they bid up the price of the so-called "risk assets", which includes both stocks and commodities.
My own personal belief is that the additional QE will do absolutely NOTHING to impact the LONG TERM PROBLEMS that beset the current global economy. The problem is not that money is not cheap enough - the problem is that there simply too much debt. That however will not stop these Central Banks from pushing the accelerator on the liquidity car nor will it stop these SHORT TERM inflationary outbursts that result as this liquidity finds its way into both equities and commodities. At some point the debt has to clear. What we get however is short term bursts where the VELOCITY OF MONEY increases only to then drop off a cliff as the impact of the QE subsides. In a very real sense, the entire global financial system has now evolved to the point where it truly does either live or die by the QE sword.
A quick look at the gold chart shows the market has found strong buying support down near the bottom of a range near $1550 and strong selling near the top of this range between $1620 - $1630. The latter has been a tough nut for the bulls to crack.
Should the gold bulls be able to muster sufficient strength to beat back the bullion bank selling originating up there, it has a real shot at tagging $1650. Getting through there would be the first legitimate shot gold has at getting to $1680, a level it has not seen since April.
One last thing, I had mentioned a while back in another post that I was of the opinion that the Fed did not want to let the QE cat out of the bag too prematurely as they are acutely aware of the ramifications of rampaging hedge funds particularly in the energy sector of the commodity complex. My suspicions were that these monetary gods would try to wait until the price of unleaded gasoline dropped closer to $2.50 or so before their mouths started yapping about bringing on another round. Lo and behold - look at the unleaded gasoline chart.
Now isn't that sweet! We finally start seeing a wee bit of relief at the gasoline pump and what do our barons do to us - they make certain that we will not be spared from our former pain for long. Gasoline has increased $0.25/gallon in two weeks time based on nothing but hype about QE. Imagine what will happen to this chart if they do indeed give the word. Sad thing is even if they don't, Iran is making noises again and that in itself has the energy markets a bit nervous.
Ben Bernanke has a problem however. If he pulls the trigger on the QE gun to prop up the equity markets for his boss Obama in time for the election, he will NOT BE ABLE TO AVOID surging gasoline prices, which are one helluva negative factor for any sitting incumbent to overcome. Nothing has as much IMMEDIATE impact on the consumer and average citizen as soaring gasoline prices at the pump - NOTHING.
I do not know about you readers but I am more and more disgusted with what is happening to the trading/investing community in this modern financial system. They seem to have lost their collective minds and their ability to reason.
In a most perverse manner, (perverse is about the only word that I can find to express the sickness that pervades the financial system), the worse the economic data has become, the better the stock markets of the world seem to do. Rotten economic data out of China - why let's just buy copper and increase the price $0.25/pound in less than two weeks. After all, China is sure to lower interest rates and that will certainly ramp up demand once again.
Rotten news out of the Euro Zone - sovereign debt issues - let's take crude oil a full $10/barrel higher.
When even Goldman Sachs' reasonable call for a lower stock market based on its solid analysis of the economic condition gets blown out of the water, you know that the financial world now calls light, darkness; bitter, sweet; and down, up. It really does seem as if we are living in a parallel universe where the "normal" rules are inverted.
The short of all this is simple - for whatever reason, traders have now been properly conditioned by the authorities to buy more and more equities, the worse the economic news becomes. Since traders have been led to expect that Central Bank activity will generate inflation, they bid up the price of the so-called "risk assets", which includes both stocks and commodities.
My own personal belief is that the additional QE will do absolutely NOTHING to impact the LONG TERM PROBLEMS that beset the current global economy. The problem is not that money is not cheap enough - the problem is that there simply too much debt. That however will not stop these Central Banks from pushing the accelerator on the liquidity car nor will it stop these SHORT TERM inflationary outbursts that result as this liquidity finds its way into both equities and commodities. At some point the debt has to clear. What we get however is short term bursts where the VELOCITY OF MONEY increases only to then drop off a cliff as the impact of the QE subsides. In a very real sense, the entire global financial system has now evolved to the point where it truly does either live or die by the QE sword.
A quick look at the gold chart shows the market has found strong buying support down near the bottom of a range near $1550 and strong selling near the top of this range between $1620 - $1630. The latter has been a tough nut for the bulls to crack.
Should the gold bulls be able to muster sufficient strength to beat back the bullion bank selling originating up there, it has a real shot at tagging $1650. Getting through there would be the first legitimate shot gold has at getting to $1680, a level it has not seen since April.
One last thing, I had mentioned a while back in another post that I was of the opinion that the Fed did not want to let the QE cat out of the bag too prematurely as they are acutely aware of the ramifications of rampaging hedge funds particularly in the energy sector of the commodity complex. My suspicions were that these monetary gods would try to wait until the price of unleaded gasoline dropped closer to $2.50 or so before their mouths started yapping about bringing on another round. Lo and behold - look at the unleaded gasoline chart.
Now isn't that sweet! We finally start seeing a wee bit of relief at the gasoline pump and what do our barons do to us - they make certain that we will not be spared from our former pain for long. Gasoline has increased $0.25/gallon in two weeks time based on nothing but hype about QE. Imagine what will happen to this chart if they do indeed give the word. Sad thing is even if they don't, Iran is making noises again and that in itself has the energy markets a bit nervous.
Ben Bernanke has a problem however. If he pulls the trigger on the QE gun to prop up the equity markets for his boss Obama in time for the election, he will NOT BE ABLE TO AVOID surging gasoline prices, which are one helluva negative factor for any sitting incumbent to overcome. Nothing has as much IMMEDIATE impact on the consumer and average citizen as soaring gasoline prices at the pump - NOTHING.
Saturday, June 30, 2012
KWN Markets and Metals Wrap
Please click on the following link to listen in to my regular weekly radio interview with Eric King on the King World News Markets and Metals Wrap.
http://tinyurl.com/76as9hh
http://tinyurl.com/76as9hh
Friday, June 29, 2012
Hedge Funds Continue to Pummel Silver - Until Today
If you want to talk about how utterly insane our markets have become and how schizophrenic the trading action has mutated into, look no further than the last two days of trading this very week.
On Thursday, silver was mauled by hedge fund selling tied to both long liquidation and brand new fresh short selling. The result? Silver hit a 52 week low! One day later - it rockets to close 5% higher in a single day. This is the type of madness that has been unleashed by Central Bank interference into the market place which is the SOLE CAUSE of this volatility.
I could give example after example of commodity futures markets which had hit multi month lows on Thursday only to come storming back higher on Friday. Gasoline hit a 6 month low and then comes flying back $.15/ gallon on Friday because what changed? Crude oil had just reached an 8 month low on Thursday only to them come back on Friday and rise nearly 10% in price in a single day.
What has been happening is that hedge funds have been liquidating long positions across the entirety of the commodity spectrum and building short positions in anticipation of further declines in the growth of the global economy. The craven capitulation by German Chancellor Merkel to the demands of the beggar nations of Spain and Italy, roiled the markets and scared the hell out of the shorts and enticed a huge wave of fresh buying to boot.
Many of the friends of gold complain about the sharp selloffs in gold and in silver as these hedge funds liquidate their long positions en masse at the end of bull market rallies. Yet, it is these exact same mindless machines that come in on the buy side and cause these enormous rallies on the way back up. If you want them on the way up, just be prepared to deal with them on the way down. They are here to stay, sadly I might add.
I have written about this many times but I think today is a perfect example of how utterly useless these computerized trading programs have rendered the commodity futures markets for the PURPOSE FOR WHICH THEY CAME INTO BEING, namely, as vehicles in which commercial end users and producers could manage risk and lock in profits or costs.
Hedgers, which is what these folks are, cannot hedge anything in this sort of wild market environment. Their hedges get all blown to hell and force margin calls to them just like any other trader has to deal with. With these almost incessant price reversals, both up and down, reading the markets has become nigh an exercise in futility for risk managers. How are they supposed to hedge future production or future costs in an environment in which prices reverse 10% in a single day. Is this a change in the trend? If the market going to reverse? Have the market dynamics of supply and demand changed? What happens if we read this wrong and institute our hedges and then the market totally re-reverses on us again?
More and more commercials are no longer comfortable using futures contracts for risk management. Instead they are entering into private forward contracts innoculating themselves from this new brand of fools known as hedge funds. While the exchanges may pat themselves on the back for opening their doors to the HFT crowd, the hedge fund crowd and the quant crowd, ultimately they will merely watch the backbone of the futures industry slowly begin to exit. That will empty the playing field of the hedgers and leave the casino with only more of these other parasites to prey off of one another.
That being said, take a look at the silver COT chart showing the massive build in the number of OUTRIGHT SHORT positions that occured through the early part of this week. Keep in mind that this chart does not even include the fresh selling that took the price of silver to a 52 week low on Thursday.
Notice that it is the largest short position they have held in more than 5 years. It could be a much longer time frame than that - I merely stopped charting the data after that far back.
Now take a look at the silver chart and behold the downdraft. As you can, except for a brief period at the latter part of May and into early June, the course of this market has been steadily lower.
Now look back at the OUTRIGHT SHORT POSITION chart above. Do you notice that dip on the right hand side of the chart in the otherwise uptrending line showing the huge build in short positions? This dip occured at the exact same time silver was ekeing out an upmove of about $2.50 in that same time frame. In other words, SHORT COVERING by hedge funds, as well as some fresh buying took the metal higher. Once the short covering abated, the rally was sold with ferocity as brand new hedge fund shorting took the metal down to this week's 52 week low.
It has been this selling which has smashed the CCI, the Continuous Commodity Index lower. Interesting enough, the CCI as a whole had actually been faring a bit better than had silver this last week as the weather market that has seized the entirety of the grain complex, has enabled the index to move higher even as silver lingered near its lows this week. Were it not for the strength in the grains and the resultant spillover in the livestock markets, the CCI would have dropped lower as well.
Suffice it to say that the massive short covering rally that took place across the entirety of the commodity complex shoved the CCI sharply higher blowing it throught its 50 day moving average with ease and putting it in the position of challenging resistance at the 550 level. If next week rolls around and we still see these wild eyed hedge funds with an appetite for risk, that should be an easy matter. If that is the case, Silver will follow this index higher and will OUTPERFORM gold in percentage terms once again.
If risk is out the hedge funds turn sellers, then look for this index to drop lower with silver going along for the ride and losing ground against gold.
If silver is going to get anything going to the upside, it will first have to mount a successful challenge of today's high near $28. Above that, resistance lies near $29 and then another dollar higher at $30. If silver can get a handle of "3" on it and keep that, then we will have a chance of seeing some fireworks.
If that is the case, EXPECT bullion bank selling and swap dealer selling to meet this rally. This is when that segment of traders will sell the silver market, on the way up, not on the way down as some of these "blame everything on Morgan" advocates continue to assert. The bullion banks sell rallies - who do you think is on the opposite side of all those hedge fund buys attempting to absorb as many of those bids as they can to try to stem the rise of the metal? Answer - Bullion banks - nearly everyone else is buying!
Moving over to gold - if the metal can clear $1620 - $1630, which it is in position to test early next week, then it will make another run first at $1650 and then $1665 or so. I will be surprised if it can clear $1665 without any clear signs of QE coming from the Fed. The dose of liquidity coming from the Euro zone will be insufficient in itself to launch the gold market higher. It will need another jolt from this side of the Atlantic.
The thumping the US Dollar took today was pretty dramatic - Once again, for whatever the reason, (in Technical Analysis it is not important), it once again failed to manage TWO SUCCESSIVE CLOSES ABOVE the 83 level. That level is now reinforced on the charts as significant resistance. If the Dollar ever does mount those two closes above there, it is going reach for 85.
On the downside, even after today's massacre, it is still trading above the 50 day moving average. The key will be this red support line shown on the chart. If it breaches that line and fails to recover by day's end, it will drop as low as 80.50 initially where it will have a chance to bounce.
On Thursday, silver was mauled by hedge fund selling tied to both long liquidation and brand new fresh short selling. The result? Silver hit a 52 week low! One day later - it rockets to close 5% higher in a single day. This is the type of madness that has been unleashed by Central Bank interference into the market place which is the SOLE CAUSE of this volatility.
I could give example after example of commodity futures markets which had hit multi month lows on Thursday only to come storming back higher on Friday. Gasoline hit a 6 month low and then comes flying back $.15/ gallon on Friday because what changed? Crude oil had just reached an 8 month low on Thursday only to them come back on Friday and rise nearly 10% in price in a single day.
What has been happening is that hedge funds have been liquidating long positions across the entirety of the commodity spectrum and building short positions in anticipation of further declines in the growth of the global economy. The craven capitulation by German Chancellor Merkel to the demands of the beggar nations of Spain and Italy, roiled the markets and scared the hell out of the shorts and enticed a huge wave of fresh buying to boot.
Many of the friends of gold complain about the sharp selloffs in gold and in silver as these hedge funds liquidate their long positions en masse at the end of bull market rallies. Yet, it is these exact same mindless machines that come in on the buy side and cause these enormous rallies on the way back up. If you want them on the way up, just be prepared to deal with them on the way down. They are here to stay, sadly I might add.
I have written about this many times but I think today is a perfect example of how utterly useless these computerized trading programs have rendered the commodity futures markets for the PURPOSE FOR WHICH THEY CAME INTO BEING, namely, as vehicles in which commercial end users and producers could manage risk and lock in profits or costs.
Hedgers, which is what these folks are, cannot hedge anything in this sort of wild market environment. Their hedges get all blown to hell and force margin calls to them just like any other trader has to deal with. With these almost incessant price reversals, both up and down, reading the markets has become nigh an exercise in futility for risk managers. How are they supposed to hedge future production or future costs in an environment in which prices reverse 10% in a single day. Is this a change in the trend? If the market going to reverse? Have the market dynamics of supply and demand changed? What happens if we read this wrong and institute our hedges and then the market totally re-reverses on us again?
More and more commercials are no longer comfortable using futures contracts for risk management. Instead they are entering into private forward contracts innoculating themselves from this new brand of fools known as hedge funds. While the exchanges may pat themselves on the back for opening their doors to the HFT crowd, the hedge fund crowd and the quant crowd, ultimately they will merely watch the backbone of the futures industry slowly begin to exit. That will empty the playing field of the hedgers and leave the casino with only more of these other parasites to prey off of one another.
That being said, take a look at the silver COT chart showing the massive build in the number of OUTRIGHT SHORT positions that occured through the early part of this week. Keep in mind that this chart does not even include the fresh selling that took the price of silver to a 52 week low on Thursday.
Now take a look at the silver chart and behold the downdraft. As you can, except for a brief period at the latter part of May and into early June, the course of this market has been steadily lower.
Now look back at the OUTRIGHT SHORT POSITION chart above. Do you notice that dip on the right hand side of the chart in the otherwise uptrending line showing the huge build in short positions? This dip occured at the exact same time silver was ekeing out an upmove of about $2.50 in that same time frame. In other words, SHORT COVERING by hedge funds, as well as some fresh buying took the metal higher. Once the short covering abated, the rally was sold with ferocity as brand new hedge fund shorting took the metal down to this week's 52 week low.
It has been this selling which has smashed the CCI, the Continuous Commodity Index lower. Interesting enough, the CCI as a whole had actually been faring a bit better than had silver this last week as the weather market that has seized the entirety of the grain complex, has enabled the index to move higher even as silver lingered near its lows this week. Were it not for the strength in the grains and the resultant spillover in the livestock markets, the CCI would have dropped lower as well.
Suffice it to say that the massive short covering rally that took place across the entirety of the commodity complex shoved the CCI sharply higher blowing it throught its 50 day moving average with ease and putting it in the position of challenging resistance at the 550 level. If next week rolls around and we still see these wild eyed hedge funds with an appetite for risk, that should be an easy matter. If that is the case, Silver will follow this index higher and will OUTPERFORM gold in percentage terms once again.
If risk is out the hedge funds turn sellers, then look for this index to drop lower with silver going along for the ride and losing ground against gold.
If silver is going to get anything going to the upside, it will first have to mount a successful challenge of today's high near $28. Above that, resistance lies near $29 and then another dollar higher at $30. If silver can get a handle of "3" on it and keep that, then we will have a chance of seeing some fireworks.
If that is the case, EXPECT bullion bank selling and swap dealer selling to meet this rally. This is when that segment of traders will sell the silver market, on the way up, not on the way down as some of these "blame everything on Morgan" advocates continue to assert. The bullion banks sell rallies - who do you think is on the opposite side of all those hedge fund buys attempting to absorb as many of those bids as they can to try to stem the rise of the metal? Answer - Bullion banks - nearly everyone else is buying!
Moving over to gold - if the metal can clear $1620 - $1630, which it is in position to test early next week, then it will make another run first at $1650 and then $1665 or so. I will be surprised if it can clear $1665 without any clear signs of QE coming from the Fed. The dose of liquidity coming from the Euro zone will be insufficient in itself to launch the gold market higher. It will need another jolt from this side of the Atlantic.
The thumping the US Dollar took today was pretty dramatic - Once again, for whatever the reason, (in Technical Analysis it is not important), it once again failed to manage TWO SUCCESSIVE CLOSES ABOVE the 83 level. That level is now reinforced on the charts as significant resistance. If the Dollar ever does mount those two closes above there, it is going reach for 85.
On the downside, even after today's massacre, it is still trading above the 50 day moving average. The key will be this red support line shown on the chart. If it breaches that line and fails to recover by day's end, it will drop as low as 80.50 initially where it will have a chance to bounce.
Monday, June 25, 2012
Comments on the Deciphering Silver article
To all;
Thanks for the comments and feedback on the recent article entitled "Deciphering Silver". Glad it was helpful.
To the skeptics - I would suggest you look far more closely at the comparison chart of silver and the CCI. It is evident you fail to understand just how hedge funds treat the risk on/risk off trades.
When the CCI moves lower, silver will GENERALLY move lower along with it. When the CCI moved higher, silver generally moved higher along with it, especially since September of last year when the chart pattern between the two has been almost identical.
The charts simply do not lie but it has been my experience that those with closed minds will never be convinced no matter what illustrations are shown them. For one to continue blaming Morgan for the downdraft in silver even as the CCI has been plummeting suggests that somehow MOrgan is responsible for taking the entirety of the commodity complex lower. Never mind the fact that hedge fund short positions are going up as the commodity sector goes lower -
By the way, have you noticed that the CCI is moving strongly higher today and SURPRISE, so too is silver.
Some of us old time traders well remember the link that used to be between silver and soybean prices. Typically when soybeans were moving higher in a weather market, silver would move higher as well. Guess what - Soybeans are in a full fledged weather market as the drought pattern worsens over the MidWest and the entire grain complex is soaring with new crop corn locked at the limit up price.
It sounds weird, but we traders back then would draw a connection between rising grain prices and inflationary pressures and would oftentimes buy silver as a result. Looks like the old link might still be there, even though the equity markets are moving lower today and there is some light strength in the US Dollar.
If grain prices start a strong trending move higher and begin gathering more upward momentum, it is going to impact the general price of food moving foward and that will be inflationary from a supply standpoint. The big question is what will happen to the demand side of the equation if high grain prices begin choking off demand, particularly in a rotten global economy. The battle royale between the macro picture and the various fundamentals across the commodity markets continues.
Hold on to your hats!
Thanks for the comments and feedback on the recent article entitled "Deciphering Silver". Glad it was helpful.
To the skeptics - I would suggest you look far more closely at the comparison chart of silver and the CCI. It is evident you fail to understand just how hedge funds treat the risk on/risk off trades.
When the CCI moves lower, silver will GENERALLY move lower along with it. When the CCI moved higher, silver generally moved higher along with it, especially since September of last year when the chart pattern between the two has been almost identical.
The charts simply do not lie but it has been my experience that those with closed minds will never be convinced no matter what illustrations are shown them. For one to continue blaming Morgan for the downdraft in silver even as the CCI has been plummeting suggests that somehow MOrgan is responsible for taking the entirety of the commodity complex lower. Never mind the fact that hedge fund short positions are going up as the commodity sector goes lower -
By the way, have you noticed that the CCI is moving strongly higher today and SURPRISE, so too is silver.
Some of us old time traders well remember the link that used to be between silver and soybean prices. Typically when soybeans were moving higher in a weather market, silver would move higher as well. Guess what - Soybeans are in a full fledged weather market as the drought pattern worsens over the MidWest and the entire grain complex is soaring with new crop corn locked at the limit up price.
It sounds weird, but we traders back then would draw a connection between rising grain prices and inflationary pressures and would oftentimes buy silver as a result. Looks like the old link might still be there, even though the equity markets are moving lower today and there is some light strength in the US Dollar.
If grain prices start a strong trending move higher and begin gathering more upward momentum, it is going to impact the general price of food moving foward and that will be inflationary from a supply standpoint. The big question is what will happen to the demand side of the equation if high grain prices begin choking off demand, particularly in a rotten global economy. The battle royale between the macro picture and the various fundamentals across the commodity markets continues.
Hold on to your hats!
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