"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


Wednesday, November 9, 2011

12 Hour Gold Chart

Gold failed to extend past the psychological level of $1,800 and is now moving lower towards the first level of chart support just above $1750 and extending down towards $1725 - $1720.

It was to be expected such a large rally in the US Dollar during today's session (Wednesday) would provide some strong headwinds to any move higher in gold. That and the fact that the CCI was hammered lower today as anything remotely resembling a risk trade was yanked off.

This evening, gold is moving lower as there is follow through selling across both the base metals and the precious metals with only slight weakness being seen in the Dollar. Clearly traders are concerned about the woes in Europe.

As long as any setback in gold holds ABOVE $1680, the pattern that will develop is more consistent with a market taking a breather. A drop below this level, that cannot recover it within the same session, will forebode a drop back towards $1640 - $1625.

HUI holding in relation to the S&P 500

Traders/investors looking to take a defensive posture in the equity markets continue to see the mining sector as a place in which to find some temporary shelter. While the HUI is getting pulled lower today alongside the entirety of the US equity markets, the sector is holding in relation to the broader market.

A good trade has been to spread the miners against the S&P, a trade which I mentioned here some time ago would be a winner for the hedge funds instead of the shortsighted spread trade involving the bullion markets and the mining shares. The hedgies were able to play that trade and profit from it for a while but they overstayed their time with it as investors began warming to the solid profits being generated by many of the mining companies. It also did not hurt the bullish cause to see some of the gold miners increasing their dividend payout.

For a look at the HUI in isolation, you can see that the index has filled the former gap region but failed to rally through the top of that gap and hold above that level. It should find some additional buying support back down at the bottom of this same gap near the 570 level if the dip buyers are going to still feel comfortable committing capital to the sector in the midst of this instability in Europe.

Silver whacked along with Copper as Risk trades are taken back off (AGAIN)

Rollercoaster is too tame of a word to describe the kind of insanity being created in our financial markets by the computer algorithms. Yesterday it was "everyone in; the water's fine". Today is, "Get the hell out; a great white is coming at you".

Tomorrow, it will probably be time for a nice yacht cruise again. Who knows and at this point, why even bother attempting to figure it out.

First the focus was all on Greece. Now it has shifted to Italy. Next it will probably be Spain and if we get to that, it will be the survival of the entire European Monetary Union that will be called into doubt. At some point, if things keep heading in the same direction, with one fire after another popping up, nationalistic tendencies will doom the Euro as nations begin opting out. Either way, history is being made.

The impact of this mess (at least for today) is that Copper and Silver were both spanked as traders are looking for a contagion effect that would slow overall global economic growth. Copper is currently down 3.5% with silver being 2.9% lower.

Gold is getting caught in a tug of war between the commodity index related selling due to risk trade reversals and its role as a safe haven. It is currently trading down but not by all that much considering the carnage occuring in the US equity markets. It is hovering between $1780 and $1790 as I write this.

Interestingly enough, gold IN EURO TERMS, is actually higher today which underscores the fact that the yellow metal is indeed serving as a safe haven. It is currently trading near 1320, a mere 50 euros or so off of its recent all time high.

CME working to release transferred MF Global accounts for trading

For the sake of those who read this site and whose accounts were impacted by the mess at MF Global, here is the latest news from the CME Group. The advisory was issued this morning.

CME Group Provides Update on Customer Account Verification Process in Conjunction With Bulk Transfers of MF Global Accounts

CHICAGO, Nov. 9, 2011 /PRNewswire/ -- CME Group today provided an update regarding the process it announced November 4, 2011 to verify customer collateral transferred to receiving firms through the MF Global bulk transfer process, as authorized by the Trustee.

CME Group is committed to ensuring that all customers are treated fairly as CME Clearing works with the Trustee, is making substantial progress on verifications and continues to receive information from the 12 receiving clearing firms and other Derivatives Clearing Organizations (DCOs) to facilitate this process. However, due to the massive undertaking of processing data to verify 15,000 accounts for CME Clearing, ICE Clear US, The Clearing Corporation, KCBOT Clearing Corp., MGEX, NYSE Liffe US and The Options Clearing Corporation, as well as the unique circumstances of the MF Global bulk transfer process, the validation of each account's collateral balance is taking longer than originally anticipated.

CME Group recognizes the urgency of the situation and is working to complete this process as soon as possible. The company expects that those customer accounts including only futures positions will be verified, and holds will be removed on a rolling basis beginning this morning, November 9. Following the completion of futures-only account verifications, the company will work to complete the process and remove any remaining holds on accounts involving options positions throughout the remainder of this week.

CME Group is using a number of channels to communicate with customers as soon as information is available and will continue to provide updates throughout the process through its clearing members and on its website for this matter, www.cmegroup.com/mfglobal.

 Further information about CME Group (NASDAQ: CME) and its products can be found at http://www.cmegroup.com/.