"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


Tuesday, October 11, 2011

Commodity complex reflecting more optimism related to the European bailout plan

The commodity sector has been slammed by hedge fund long side liquidation over the last 5 weeks which has basically taken the complex on a one way ride down and down hard at that. It has now finally bounced as nervous shorts cover for fear of getting caught overstaying their welcome on that side of the market should the hedgies' algorithms flip over into the buy mode over the chatter over European and IMF plans to deal with Greece.

The bounce could take it as high as the zone delineated by the pair of blue lines drawn on the chart. Should it breach this area with some gusto, it should see a return of some speculative money that has been sitting on the sidelines into the commodity sector as a whole.

Interestingly enough, corn locked limit up today with a decent sized pool of orders. News out of Russia on a ban on certain exports send buyers scrambling into both wheat and corn as Russia has been providing a substantial amount of cheaper quality feed wheat. The idea that this source will now end caused significant short covering. Considering there is a major report out tomorrow morning from the USDA, it is going to be anything but boring if the numbers provide any unexpected surprises.

Gold chart update

Gold took out overhead chart resistance last evening in Asian trade and looked very strong until trading came around into the London session, where selling surfaced taking it back down from its best levels and dropping it into negative territory for the day. Support surfaced just below $1665 level but the market could not get back into positive territory.

Gold is trying to break out to the upside but is being kept in check.

Silver once again flirted with overhead resistance near $32.50, moved through it and them promptly failed to hold onto its gains above that level. It found support just above $31.50, bounced higher and managed to claw its way back above $32. It too is attempting to breach chart resistance and make a break higher.

Both of these precious metals markets are very close to changing the "sell the rally" mentality so it will not take that much to flip the psyche. The fact that the mining shares as evidenced by the HUI are finding buyers at the present time is very helpful.

Other than that, there is really not much more worth saying about them until we get a definitive resumption of the uptrend.