"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


Thursday, March 10, 2011

Federal Reserve adds $27.9 Billion in Treasuries to its Balance Sheet this past week

Silver Chart update

It's been a busy day today with a lot of action and quickly changing markets but here is an afternoon chart of silver. It looks like it was able to stave off the selling and recapture support near $35 which is promising particularly as we are now finally seeing some good upside volume compared to what we have been getting recently.

First order of business for the bulls is to get the price back over $35.50 and keep it there.

If they run and let the sellers get aggressive, today's low near $34.75 needs to hold to prevent a run back down towards $34.40 - $34.30

4 Hour Gold Chart

S&P 500 Looking very Heavy

Ever since Crude Oil began rallying, the US equity markets have been encountering stiff headwinds. Today, even with crude moving lower, stocks have been unable to get much of a bounce higher although they did attempt moving higher around midday. That bounce ran into eager sellers and down it went again.

From a technical perspective, this is the first time since August of last year than the S&P has dropped below the 50 day moving average and not bounced off of it. How it closes today will therefore be closely watched by technicians to see if we are going to experience a deeper pullback in stocks than we have thus far experienced this year.

On the daily chart the big down day in late February is now looking more and more like it was the near term top in a 6 month nearly vertical rally.

Volatility, Volatility and more Volatility

There are several things at work in today's session - Commodities in general are getting sold as profit taking and some fresh shorts looking to pick tops are coming in. Copper continues to show signs of weakness with some talking about its chart pattern as indicative of expectations for a slowdown in global growth.

That is being fed by news of China's trade balance which has some talking about a slowdown in Chinese growth. I personally do not buy into that thinking as I think the data was skewed by the Lunar New Year holiday.

The USDA reports were viewed by most in the market as bearish for wheat, and not particularly friendly for corn although the numbers are certainly not bearish for corn. Beans are higher shrugging off weakness from its neighbors.
This is feeding through to the CCI which is falling today.

With crude oil sharply lower, the precious metals are getting hit with a strong round of selling that is being fed also by a move higher in the Dollar as the Euro is getting pounded over re-emerging fears of sovereign debt issues with the downgrade of Spain by Moody's.

All in all, selling is hitting nearly everywhere with the exception of the Dollar and the US bond market. US equities are off their worst levels of the session as bulls are buying the dip especially with the weakness in crude oil.

The crude oil market is obviously not expecting much to come of the so-called "Day of Rage" that has been promoted for tomorrow in Saudi Arabia. The manner in which crude is trading suggests that some are beginning to focus more on the fundamentals around oil especially with the Saudi's reassuring that they can make up any shortfall in crude oil supplies. They have been saying that for days now but suddenly it seems as if everyone is now believing them. 

If those sovereign debt woes begin coming more to the forefront of traders' minds, look for gold to receive solid support especially in terms of gold priced in Euro terms.

HUI on the receiving end of the ratio spread trades

The HUI is known for huge gaps both up and down. Today is no exception with the index gapping sharply lower and breaking down below both the 50 and 100 day moving averages. The index is crawling back above the 50 day but has some serious technical work to do in order to repair the damage on the charts.

Once again the huge ratio spread trades are supplying the crushing of the mining shares as they are performing worse than either gold or silver bullion.

4 Hour Silver Chart