Silver Comments

I have had some private email requests to look at silver. This is in response to those who have asked for such.

The chart is an intermediate one so as to give a bit better of a picture.

Bearish forces are currently in control of the market. For the last seven weeks, the $20 level has served as an effective cap for the metal. Bulls simply cannot push the price up and through this level for any length of time.

Bears however have not yet managed to push a weekly close in price under $19 this year. This week's poor showing however resulted in the lowest weekly close since the last week of January. In other words, silver put in the worst weekly close in over 4 months. It is currently sitting in an important support zone on the chart. Failure to hold here and quickly rebound, increases the odds of a breach of $19 which would then target a hugely important support level near the $18 mark.

Note very carefully the solid ADX line is beginning to turn higher. As silver began to accelerate lower in January of last year, that ADX line was moving higher simultaneously indicating the presence of a strong trending move lower. In July the market found a bottom near $18 and began to retrace but that was merely a rally in an ongoing bear market as price failed near $25 and began retreating once more.

The ADX line however continued moving lower indicating that the downtrend had been halted and that the market was more likely to enter a ranging trade rather than begin a new leg lower. Bearish forces were in control but bulls were coming in and scooping up the metal near $19. That has been the case since last fall.

However, the ADX line is now beginning to rise as price nears important chart support indicating that the POTENTIAL for another leg lower in price is emerging. IF, and this is another of those big "if's", chart support near $19 fails, the indicator is going to generate a trending signal. Once that occurs, the $18 zone if going to take on even more significance from a technical analysis perspective as that is the last area that the bears must overcome to generate a move down towards $16.

From an internal standpoint, the Commitment of Traders positioning is revealing.

Look closely at the blue line which is the hedge fund category. Note how it peaked in February of this year. That occurred as silver prices peaked near $22. What is that category of traders doing since that time? Answer - dropping their exposure to the long side of silver. See how that blue line is moving lower and heading towards the "0" line? As of this week's COT report, they are now barely net long by only 988 contracts and options combined. Without active hedge fund sponsoring on the long side of silver, the metal's prospects are not good. Silver MUST HAVE HEDGE FUND MONEY CHASING IT to move higher. It is that simple.

Rather disconcerting is the positioning of the small traders or general public. Out of the entire category of speculators, they have the largest net long position. That is not much comfort if one is a bull and realizes that his allies are among the weakest of hands as they are the least capitalized group of market participants and the ones most subject to margin calls and least able to meet those if the market moves against them.

That is why this region near $19 is so important. With the general public remaining stubbornly long in a market sitting just atop a key support level, hedge fund managers may look to go after their vulnerable exposure. If they do and catch those downside sell stops lurking below the market, a quick $1.00 drop is entirely possible. Rest assured the margin clerks will be extremely busy making phone calls and demanding bank wires.

What does all this mean in simple terms? Bulls must hold the price of the metal above $19 to prevent a rout. Can they do so? Stay tuned as we are going to find out.

Draghi Wreaks Havoc on the Euro

I might add to the title the following words, " By Design".

ECB President Mario Draghi, apparently was feeling the heat from Eurozone manufacturing interests, exporters and some politicians, all of whom have been complaining and moaning about the relative strength of the Euro.

It was apparent that his remarks yesterday were designed to try to do something about that and judging from subsequent market price action, it worked!

The Euro fell from up near 1.40 ( a key level in my view that they will not tolerate ) all the way to down below 1.375. That is a drop of nearly 2% in the currency in two days' time. Not bad for a few minutes of speaking! 

I honestly could not handle power like that. I would run around my yard commanding it to mow itself and my flowerbeds to weed themselves if I had that kind of control over stuff! I would also command the tires of the cars that keep speeding through my neighborhood to go flat.

Seriously, look at the chart and the damage that Draghi was able to inflict on the Euro. He flipped the ADX indicator into a bearish mode and while not yet able to get the currency to trend lower, he managed to turn the ADX line higher. That will need to be watched because, IF THE EURO CANNOT HOLD CHART SUPPORT, and this is a big if, we might have just seen the high in this currency for some time. Again, I am not sure but am certainly watching this closely mainly because of the heavy weighting of the Euro in the USDX index.

COT Report for Gold

This week's Commitment of Traders report from the CFTC for gold, shows that last Friday's plunge resulting from the surprisingly strong payrolls number, which was promptly erased within a minute when news about a downed helicopter in Ukraine hit the wires, was the result of a rash of hedge fund buying. They added around 12,500 new long positions and only covered a bit less than 400 existing shorts. I suspected we would see more short covering on their part but that did not occur, at least not through Tuesday of this week.

What did occur however was that the spreaders had a field day piling on nearly 15,000 new spreads as I suspected these guys were up to something with that bizarre price action last Friday.

What has also caught my eye is the rather rapid build in new short positions being established by the commercials and swap dealer category. They have wasted no time using the geopolitically-induced bounce in the metal to sell it as it approached $1310 and slightly above that level.

It has been fascinating for me to watch has been the stubborn bullishness of the speculative community in the face of a deteriorating chart pattern. Specs refuse to give up the ghost on the near-permanent bullish sentiment which has characterized this gold market for some time now. This is what concerns me as gold drifts ever lower to that $1280 support level.

The events in Ukraine continue to engender speculative buying in the market but the fact that we have so many in the spec camp remaining bullish with a market that continues to flirt with major chart support is rather unnerving.

I want to emphasize that the POTENTIAL, for a sharp sell off exists in gold if that level gives way. I am not forecasting anything but merely examining the sentiment in this market. Bulls have all their hopes pinned on the ability of gold to hold above $1280 on a closing basis. Ukraine continues to bail them out but with the ETF, GLD, continuing to bleed out gold, I have to wonder how long Ukranian events are going to be able to prevent a breach of chart support. That plus the fact that the HUI ( mining shares ) show very little if any buying enthusiasm at the moment makes me nervous when it comes to the ability of this market to remain above that chart support level. If I could see either a sharp jump in the ETF reported holdings and/or a sharper rise in the HUI breaking out of its range to the upside, I would have a different view. So far we are not seeing either of those occurrences.

For the last seven weeks, the HUI has essentially gone nowhere. It is stuck in a range with the top up near 235 or so and the bottom near 215. The ADX shows a trendless market ( ranging ) with the bears having a slight edge due mainly to this week's poor showing in the mining sector.

"So far, so good",  has thus been the message coming from the gold bulls but that can also be said of the guy plunging off of a 100 story building as he passes each new floor on the way down, " So far, so good", until he reaches the bottom and we all know what happens then.

In spite of all this, I want to continue to emphasize that while this COT report is making for some interesting reading, it has very little value as far as anything predictive at this point because gold is almost totally at the mercy of Ukranian events and no one knows how those things are going to develop or what form such a development might even take. We simply do not know and thus the reason for the very nervous gold trade right now. Until we get some sort of resolution to that crisis, gold should continue to garner some buying support. But just as that is true, so is it also true that many large traders are looking at rallies in gold as selling opportunities. Their focus is here on the US and that means they are looking at the withdrawal of the QE and eventually rising interest rates are bearish headwinds for gold. The market is thus stalemated between those two forces for the moment.

As to which force will gain the upper hand, it is unclear. I have no idea and truth be told, no one else does either. Anyone who claims that they do is full of BS unless of course they have a private line straight to the heavens and can discern the future before the rest of we mere mortals can. That means we sit and wait and watch the price action and go from there. Ukraine flares up = gold goes up. Ukraine abates - gold goes down.

Pick a flower petal or roll the dice - the end result is the same - you are just guessing, not trading.

Ignore the price predictions and the dipsticks which feel compelled to constantly make them. Listen to the market and you will be just fine.

By the way, old crop May beans managed to end the session above the $15 level. Traders are focused on that 130 million bushel carryover number. However, beans at these levels have heretofore managed to crimp demand so we will see just how long they can stay up here. With May in its delivery process, we'll see how many beans show up for tendering and who stops them.

Both corn and wheat stayed sharply lower and closed down sharply lower as well. Some of the pressure on wheat was tied to the weather forecasts for some rain in the parched Plains. The corn number was a shockers and has cast a bearish pall over that market for the time being. It should be kept in mind however that we do not yet even have the crop in the ground yet so a lot can happen between now and the final harvest that could drastically alter the supply scenario for corn.

Suffice it to say, good weather this growing season is going to act as a real damper on corn prices and that is a good thing for livestock producers and poultry guys. Unfortunately the ethanol lobby will still be around to gobble up way too much corn as far as I am concerned. I know my corn-growing farmer buddies love that stuff but I also have friends in the cattle/hog business and they hate it. At least we get DDG's so it is not a total loss but still, the idea of burning our food in a gas tank to appease a bunch of global warming alarmists is nauseating to me.

Spurs are up 2- 0 in the Portland series... way to go San Antonio!

USDA Report Day

It finally arrived. USDA gave us their Supply/Demand numbers this morning as well as the Planted/Harvested estimates. The grains and beans wasted no time careening wildly as soon as the numbers hit.

Old crop beans were the beneficiaries of another cut in ending stocks to 130 million bushels. However, new crop carryover was raised to a whopping 330 million bushels. USDA raised expected global production from 283.79 million metric tons for 2013-2014 to 299.82 million metric tons for the 14-15 production period. They are penciling in another huge Brazilian crop. Between expected bean production both here in the US and in S. America, the tightness in soybean supplies looks to be winding down. The higher prices have worked their magic by increasing acreage heading to beans.

Total bean production for this coming year is expected to be 3.635 billion bushels - that is just huge. USDA is projecting a yield of 45.2 bushels per acre compared to last year's 43.3.

Crush is to be raised to 1.72 billion bushels from 1.695 billion. Exports are anticipated to increase to 1.625 billion bushels from 1.600 billion.

The big increase in expected acreage and decent yields will leave carryover at plentiful levels.

Corn carryover for 2014-2015 is expected to come in a 1.726 billion bushels, up from 1.146 billion for 13-14. USDA is projecting a yield of 165.3 bushels/acre up from last year's 158.8. The end result is another record corn crop of some 13.935 billion bushels compared to last year's 13.925 billion. That number caught a lot of traders by surprise.

USDA cut exports from 1.9 billion bushels to 1.7 billion bushels Feed usage was cut from 5.3 billion bushels to 5.25 billion.

Global corn production is not expected to increase much as USDA sees 2014-2015 coming in at 979.08 million metric tons, up from 979.02 million metric tons in the 2013-2014 period.

US corn acreage is expected at 91.69 million acres, down from 95.36 million last year. Bean acreage is expected to jump to 81.49 million acres from last year's 76.53 million. That could change even more yet if corn planting is delayed. That does not look to be the case however as the weather forecasts are showing a decent planting window next week for now.

That nearly 5 million acre increase in beans from last year is what the USDA is focusing on and counting on to ramp up the carryover. Traders are aware of the current tight stocks situation but that looks like it is going to fade in importance as S. American cargoes make their way here, not to mention Canadian shipments. Everything now depends on the growing weather for this upcoming season. Hopefully farmers will get some good weather and some nice crop yields.

Wheat planted acreage is expected slightly higher this year at 56.16 million acres compared to last year's 55.82 million.

USDA did cut wheat carryover for 14-15 down to 540 million bushels from the current 583 million bushels. They lowered expected global production to 697 million metric tons, which is down rather significantly from the 2013-2014 season's 714 million metric tons. The bulk of that cut is coming from Canada with Australia's expected production also contributing somewhat to the smaller number as that was lowered by 1.5 million metric tons. I am not quite sure what is behind the sharp drop in expected Canadian wheat production of some 9 million metric tons at this point. I will see what I can find out.

I want to see how the dust settles in the grains before reading too much into the market price movement right now. These USDA reports are notorious for engendering wild swings in price during the session but the key to me will be how they close today. Right now corn is getting beaten with an ugly stick, especially new crop. There are a boat load of hedge funds sitting on the long side of the corn market so this reaction in price needs to be closely monitored.

Hog producers - keep a close eye on this corn move because you might be able to start securing some feed coverage in addition to some hedge coverage of expected 4th quarter production. I keep saying this but you have incredible, once in a lifetime type profits with 4th quarter hogs and now that corn is moving lower, the opportunity is increasing. Be careful not to let your emotions guide you but do your math, check your margins and secure at least some partial coverage.

Shifting over to gold for the moment -

Once again gold bulls dodged a bullet as that market shifted focus back onto the events in Ukraine. Russian President Putin seemed to make an effort to ease tensions there yesterday but some elements of the Pro-Russian ( Separatists ) apparently are intent on holding that election later this month. Just today, Ukranian police and security forces announced that they had killed 20 separatists in some fairly severe fighting in the eastern provinces. That obviously does nothing to de-escalate the situation.

It is almost as if the gold bulls have some "friends" over in the Ukraine who fire off some bullets whenever the market begins to sink into an important chart support level. It seems to spook traders just enough to keep them from pressing it on the downside and back up it floats. I am obviously being facetious here but the main point is that this Ukraine mess is muddying the waters when it comes to gold for the time being and is a wild card that needs to be accounted for when ascertaining what is behind the various swings in price. Personally I hate trading geopolitically motivated market movements because they creating way too much uncertainty and confusion. Most of us traders prefer more well-behaved markets ( those can at times be hard to find ).

Either way, traders are once again covering some shorts ahead of the weekend, just in case. That seems to be the pattern that is developing now on Fridays. As long as the market is unsure of how things over there are going to play out, gold is continuing to hold above chart support levels.

That being said, the gold miners, based on the HUI chart, are acting heavy. That index is perched right above a key chart support level between 215 - 218. They are not collapsing but neither can they seem to hold rallies. With the giant ETF, GLD,  continuing to report holdings near 5 year lows, it is evident that investment demand for gold and gold-related things is waning. Traders/investors are looking past current events in Ukraine and focusing more and more it seems on the POTENTIAL for eventual rising interest rates.

That is not the case however for the bond market at the moment which has levitated higher up to around the 136 level. A combination of shaky equity market action of late, in conjunction with some safe haven related purchases, has put a surprisingly firm bid into the market. The yield on the Ten Year is sitting near 2.60%  ( 2.618) as I type these comments. That is well off the peak near 3.0% that occurred at the beginning of the year. That tells me that the market is not the least bit worried about inflation for the moment. If anything, the opposite seems true. I find that odd considering all the talk about an improving economy.

Some of this can be attributed to the Fed's forward guidance of no interest rate hikes until sometime in 2015-2016. The market is generally interpreting that to mean around a year or so from now, around the summer of next year. Subsequent economic data releases are going to be very closely scrutinized to say the least, especially the payrolls numbers each month.

Along this line, the Fed announced today that it was going to be ramping up the testing of what is called its, "deposit facility". Each Monday, beginning May 19, it is going to be running tests. According to Dow Jones, the first four tests will see it accept $10 billion in 7-day deposits from banks at interest rates of 0.26%. It will then increase the rate it pays on these deposits gradually to 0.30%.

This facility is one of the means it intends to use to drain excess liquidity from the system.

I mention this because once this process occurs, gold is going to encounter more resistance in the form of headwinds. While some can argue that the economy is too weak for the Fed to be actually draining liquidity ( in contrast to the current lessening of liquidity injections ), thus far the Fed has been rather clear about their intentions and have been making good on those. Fighting the Central Bank is not a winning proposition for investors/traders. We'll continue to monitor these developments. I do wish to repeat that DRAINING liquidity, is at this point, a way's off. We have not yet done with QE; when we do, then we can talk about the actual draining process.

I threw up a quick post of the Euro in yesterday's comments after ECB head Mario Draghi came out to "talk it down". Traders whacked it pretty hard yesterday and continued spanking it on today's session thumping it right through the first level of chart support near 1.38. Thus far it is holding near secondary support in the vicinity of 1.375, but even that looks shaky. That has sent the Dollar soaring back towards the 80 level basis USDX, which makes gold's reluctance to drop further even more interesting as it is fairly evident that Ukraine tensions are holding it up.

Currently old crop beans are being supported, new crop beans are lower, with both old crop and new crop corn lower. I am a bit leery about the strength in old crop beans given today's numbers for the upcoming season. Traders seem to be focused on that cut in old crop carryover but are apparently not taking into account further potential cuts in usage as these sky high bean prices are beginning to crimp demand.

Wheat is slightly lower but KC is holding better than Chicago. Traders are watching rain forecasts for the plains but are still hesistant to become aggressive sellers as no one is sure quite how widespread expected rainfall might be.

I will get some charts up later... it is a very busy day over here right now.

ECB President Draghi Talks Down the Euro

Apologies for the lateness of the comments. It has been a busy day.

The big market movement today was in the Euro as Mario Draghi went out to meet reporters following the ECB's meeting. As many of us suspected, he apparently has been getting an earful from disgruntled European exporters and manufacturing interests and proceeded to waste no time in affirming that the ECB would be willing to take action to stave off deflationary pressures in the Eurozone, if necessary, in their June meeting.

Inflation pressures have been persistently low there and that has the Central Bankers concerned. ( Personally I think it is a great thing but I am not a Central Banker ).

That was all that was needed to see the Euro get kicked in the teeth and down she went. I am constantly amazed in this world of fiat currencies, how easy it is for Central Bankers to move their currencies around by just opening their mouths and uttering some words. It is almost like watching a magician utter some magical phrase before he levitates a beautiful assistant into the air.

The Euro, which had been knocking on the door of the key 1.40 level, was bashed lower falling through 1.39 in the process and below 1.385 before managing to bounce somewhat.

Whether Draghi's comments are enough to reverse its uptrend remains unclear for now but for the short term, at least for today, he accomplished what he wanted. If the Euro falls as low as 1.38, it is going to be interesting to see whether or not bulls will come in and buy it there or whether they are convinced that the ECB is going to come in with either an interest rate cut next month or something more potent, such as their own version of QE. The sense I am getting at this point is that it is going to take some economic data releases which show some sort of constriction in the Eurozone due to currency strength before the ECB gets too aggressive. Time will of course tell.

I put up the Euro chart to show the currency's resistance zone which begins near 1.395 and extends towards 1.40. Downside support is slightly above the 1.38 level with another support zone closer to 1.375.

The fall in the currency sparked a bit better reaction to the upside in Euro gold which moved up 0.51% today compared to a mediocre 0.05% gain in Dollar gold.

Gold was rather comatose the entire session, as were the shares. The strength in the Dollar kept it from moving sharply higher but lingering concerns out of Ukraine continue to support it.

Silver did not fare too well as it works closer down to key support near $19 once again.

Friday's have been anything but calm in the precious metals complex as how traders view the geopolitical situation in Ukraine has been the factor that either generates a strong wave of short covering ahead of the weekend or a wave of long liquidation. Neither bull nor bears seem to want to push their luck with that mess going on over there and with neither side knowing for certain whether things are calming down or heating up. I guess it will continue this way until perhaps later in May when we get that vote although Russia seems to be trying to have that postponed or put off to ratchet down the tensions there.

The big mover tomorrow will be in the grains when USDA comes out with another of their reports which are notorious for producing wild price swings across the entire sector. That is due out at 11:00 AM CDT.  We will know what the market thinks of the report about 30 minutes after it is released when the algos are through playing with them. I will give a report on the grains tomorrow.

There is not much else for me to say today so I will leave it at that except to say "Go Spurs".

I don't have a dog in the hunt between the Nets and the Heat.

Yellen Speaks - Gold Breaks

Fed Chairwoman Janet Yellen was out today and sounded an upbeat assessment on the US economy, faulting the severely cold winter months earlier this year on the spate of poor economic numbers for much of Q1. Traders took that as a clear sign that the Fed is going to continue winding down its QE program, bringing it to an end later this year. She did however emphasize that it would be " a considerable time" before any interest rate hikes would occur after QE ends.

In other words, while the Fed may be slowly turning off the liquidity spigot, they do not see the economy strong enough to handle higher interest rates. Yellen also stated that most of her fellow Fed officials expected to normalize monetary policy in 2015 or 2016. That still is quite a ways off and a lot can happen between now and then.

Regardless, gold moved lower as once again investors opted to view the testimony as further evidence that one of the supporting factors behind a higher gold price is going to be eventually removed. Apparently the equity markets did not like that either, at least the S&P 500 did not seem to as it continues to waver back and forth between slight losses on the day and slight gains at this point in the session.


You'll note on the gold chart that once again gold has failed to penetrate an overhead resistance level and is now retreating lower. It continues to remain mired in this range trade. The ceiling is now just shy of $1320 with the floor near $1280 and extending down towards $1265 or so. Any CLOSING BREACH of $1280 and the odds will favor a new leg lower in gold. Bulls are once again on the ropes and will need some flare up over in Ukraine to bail them out.

Traders/Investors continue to closely scrutinize Chinese economic data for confirmation of slowing growth. Generally speaking, when they get that, they look to sell copper and of course, silver. Copper prices are thus highly sensitive to any data coming out of China with copper bulls very nervous about getting too aggressive in the face of any suspected slowdowns in the Asian giant's economy.

Speaking of Chinese data, the China Gold Association reported that Q1 gold demand was essentially flat compared to last year when total gold consumption there rose 32%.  The sum total demand for the January - March period was up 0.8% at 323 metric tons. Gold jewelry demand remains strong but it was bar demand that got hit - it fell 44%. Dow Jones made an interesting note that the Association's report was very much in line with the World Gold Council's recent April report which suggested flat demand for gold from China this year. Keep in mind that while gold demand is not soaring, 323 tons in the first quarter is not exactly a trifle.

Still, the takeaway, at least for me, is that without geopolitical-event related support, gold is going to new more than a few new friends among Western-based investors. Asian demand has always been the key to producing bottoms in the gold price but even more importantly, it has been helping to offset reduced Western-investment based demand for the metal. Some feel that the drain on the giant gold ETF, GLD, has been the source of a great deal of this Asian-based demand. If that demand falters, or better yet, if the RATE OF INCREASE slows, then that is not conducive to higher gold prices.

I note with great interest that GOLD BAR demand dropped significantly compared to the same period last year. There have been rumblings that China is supposedly going to increase its official gold holdings in preparation for making the Renminbi ( Yuan ) more widely accepted in international trade. etc. This morning's data would suggest otherwise, at least for now. Of course China is not going to telegraph in advance that they might want to buy large quantities of gold. All that would do is make them pay a heck of a lot more for it. Still, that drop in gold bar demand is noteworthy and should not be ignored especially with GLD reported holdings heading south. The Laws of economics still apply to gold - falling demand without a decrease in supply means lower prices. Either supply must shrink or demand must increase, or a combination of both must occur, to move the price higher.

Oil prices moved higher today as the government reported a drop in inventories of crude when traders were expecting a build. The 1.8 million barrel drawdown is the first in a month long series of builds. Sadly for we consumers, that kicked unleaded gasoline prices up a bit breaking the string of daily lower closes.

Soybeans are back to playing their yo-yo games. After plunging early in the session, bulls managed to take them back up nearly erasing the losses. Within minutes, back down they went again. By the way, this is one of the reasons I continue to mock those who advance the thesis that any sharp move lower in gold  ( aka 'Flash Crash' ) is evidence of the government-sanctioned bullion bank ransacking of the gold price. The sheer ferocity of these insane plunges in price and then equally violent rebounds higher in so many of our commodity markets on an almost daily basis is the new normal, thanks to the maddening proliferation of computers doing the "thinking" for hedge fund managers, whom by the way, if the data is accurate, and I have no reason to doubt it, are not exactly making a killing in the markets these days.

Many of them are losing money which is to be expected when they cannot find a market with a trend. Their computers are too stupid to understand how to trade markets in a range making them vulnerable to constant whipsaws and compounding their losses. Chalk up for one us old dinosaurs also known as "discretionary traders" meaning that we actually analyze and think before we initiate a trade and not just blindly follow some damned machine. I have said it many times here that it does not take much in the way of trading skill to pile on huge positions in a market that is trending when you know that all the rest of the computers out there are going to be sending the same signal at the same time. All that is then required is to then push prices higher or lower, knowing that the rest of your industry will be doing likewise with the result that it makes one look like an investing/trading genius.

The US Dollar managed to blip higher today on the heels of Yellen's comments. I am reading this slight firming as traders interpreting her comments as evidence that rates will rise here in the US well before they do elsewhere in Europe, Britain or Japan. Still, the Dollar is flirting with some important downside chart support. I still believe that were to Euro to somehow reach 1.40, all manner of bloody hell is going to be let loose among Eurozone manufacturing and exporting interests. They do not want a Euro that strong but for now, the ECB, other than saying a few things about that, are apparently content to tolerate the currency near current levels.

Look at the gold price in terms of the Euro and you can see that it too is going nowhere. It is however perched just above a key chart support level near 920. Will it bounce or will it break through? That remains to be seen. If it does fall through this level, it would more than likely occur simultaneously with a downside breach of $1280 in Dollar terms for gold which would push the market into the stronger potential for a trending move lower. The jury is still out however.

The jury does seem to have come in however on the mining shares based on the HUI. The index has fallen through chart support near 220. The day is not finished yet so the possibility exists that the index could rebound prior to the closing bell. However, if it does not, it would tend to augur further losses ahead for both the shares and the metal. There is a band of light support near 218; if that fails to force a rebound higher in the shares, then 216 comes into play.

Silver once again failed to reach $20, much less penetrate that level. It looks as if it is back to testing the $19 region, which has thus far been able to hold it except for a brief penetration before the price rebounded. I am curious to see if copper prices can hold above $3.00 and am wondering what might happen to silver can it not.

Hogs got whacked with an ugly stick today as traders bleed out some of the premium in those summer months. I keep urging hog producers out there to secure some 4th quarter hedge coverage. Do not let those good profits get away from you. Lock in some expected 4th quarter production. Gamble if you must but not without securing a portion of protection. Specs - I am speaking to producers here who are bona fide hedgers, not you.

Let's see how the dust settles today and how time constraints are for me. Perhaps I can post some additional comments depending on what happens later.

Consumer Gift - Falling Gasoline Prices

The chart says it all - consumers are getting a nice gift in the form of lower gasoline prices here in the US. Let's see how long it continues....

Strong European PMI data boosts the Euro

What seemed the set the tone in the Forex markets today was the various European PMI numbers that were released very earling in the morning our time. The composite PMI ( both services and manufacturing) came in at 54 but it was the individual countries which sparked the Euro. Spain registered a 56.5, up from 54.0 in March. Italy showed a 51.1 reading compared to 49.5 in March. UK services scored a 58.7 compared to 57.6 in March.

Once those numbers hit the wires, the Euro shot through 1.39, a technical resistance level which has been containing the upside for the Euro for some time now.

If that wasn't bad enough for the US Dollar, the Canadian Dollar jumped when Canada's trade data was released. Even the Yen was higher today. The problem that the Dollar is currently having is that the Fed, while continuing to taper and reduce the amount of bond buying, has laid out its forward guidance in a manner that suggests that there are not going to be any interest rate hikes for perhaps a full year out. When traders look at that, and they see general economic improvement elsewhere, they are bypassing the Dollar. It does not seem to be a case of aggressive Dollar selling but rather one in which it is being passed over - in other words, more an absence of strong and eager buyers. Markets follow the path of least resistance and without any dedicated buyers, that means down for the Dollar, for now.

There is a lot of guessing taking place as to what the ECB is going to do there because complaints about the strength in the Euro are increasing among some European manufacturing interests. That, and the fact that Eurozone inflation remains very subdued, too subdued in the minds of some. They of course are blaming that on the strong currency.

If the ECB were to surprise the market ( which currently is not expecting them to do so ) by an early rate cut, instead of waiting until June as the market broadly expects, that could be expected to weaken the currency but for now, traders are chasing it higher as the technical chart breakout is bringing in momentum buying.

When one looks at the events in Ukraine, and realizes that Europe is the especial region where the impact from any serious escalation of events over there would impact, watching the Euro move higher like this is rather interesting to say the least. Traders are obviously putting that on the back burner today and focusing on the PMI numbers.

One thing that the stronger Euro is succeeding in doing is to drive the price of gold in Euros down at a faster clip than gold priced in US Dollars today.

Euro gold is stuck in a range trade just like its Dollar-priced counterpart. The ADX shows a trendless market but one in which bearish forces are currently dominating. You can see both the resistance zone and the support zone I have noted. For the potential to trend to occur, one of these zones will need to be convincingly taken out.

This is the same problem that gold has been encountering for some time now. With economic data improving, and with gold throwing off no yield, it is taking geopolitical issues to keep it supported. Otherwise, traders/investors are opting for higher-yielding assets. That is keeping the market trapped within a range.

The one plus for this is that silver is actually a bit higher as a result of the strong European economic data. Even copper managed to firm.

Hard Red Winter Wheat is leading the grain complex today as beans succumb to talk of increasing imports from S. America. Drought and heat are hurting yield in key growing regions for the KC wheat and traders are pushing prices higher. Also aiding the move higher is that unrest in Ukraine, a key wheat growing region.

I will try to get more up a bit later... wanted to give a short update as to why the Dollar was moving lower today.