"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, November 7, 2013

Strange Day

I am not sure what is going on in many of the markets that I trade/monitor today but whatever it is, it is certainly very odd. There have been some incredible price swings today in so many markets that I cannot name them all here. Suffice it to say, the computers are once again wreaking havoc, all with the blessing of the exchanges, I might add, who love the fees that they generate from this meaningless churning.

As mentioned in today's earlier post, gold has been all over the place. If you look at the 12 hour chart posted below, you can see one big candle with a large upper shadow and a large lower shadow. Would you like me to translate what this means in trader lingo? Here we go:" What in the hell is going on in this market?"

I could say the exact same thing when it comes to the soybean market, the yen, the S&P 500 and the bonds. Hell, even the coffee market is strange today. The US Dollar soared earlier only to set back as the Yen moved higher on that stupid "safe haven" trade that more and more infects the brains of traders who should know better that to stash money into a nation with a DEBT TO GDP ratio of over 200%, which is banana republic territory.

Gold found support beneath the psychological level of $1300 and at the technical level of the 25% Fibonacci level of the recent retracement from the low below $1260.

Where it goes from here is anyone's guess. All that I can say about it is that if it were to now breach today's low, it is going to $1280 for starters. If it can climb above today's high, it should be able to push to near $1340.

One would think that with interest rates near zero over in Euroland as a result of today's surprise rate cut, that the Euro would be struggling to hold water. Not so! The damned thing has managed to move up nearly a full point and a half off its session low. Go figure! Then again, don't go figure because that is an enormous waste of brainpower and effort.

It does seem however that as the US equity markets move lower, the Euro and the Yen are strengthening and the Dollar is weakening. How long this lasts is also anyone's guess.

In Summary - who knows what, why or when things are doing what they are doing.

One thing I do know however is that we have a biggie of a USDA grains report tomorrow AM. That should be fun if today is any taste of what we are likely to get coming off of those numbers. Remember, the USDA missed last month's report due to the government closure. This adds another element of volatility as it makes it about 2 months since we have had some "official" data to work off of. Lots of private firms are coming out with their numbers but those will get trumped by whatever the pencil pushers over at USDA give us.


  1. u all know I trade with $100 stops the gold, so what do you think I care about the Yen rally today, as that is my biggest position? All I can say is that maybe the Euro/Yen is being unwound? I do not know, but maybe Cramer can explain silly 24 hr action; buckle up for more made up numbers tomorrow ladies; take care

  2. Well, good luck Dan with those markets! Only SP500 is my favorite currently.
    Regarding long-term fundamentals, further to my previous posts, and as an answer to Marc's exuberant optimism into the endless stock market surge and gold going to the abyss, another extract I still think is just making sense...

    "Paul Craig Roberts: The Federal Reserve’s policy of creating large amounts of new money in order to support the balance sheets of “banks too big to fail” and to finance continuing large budget deficits is another factor undermining the dollar’s reserve currency role. The liquidity that the Federal Reserve has pumped into the financial system has created enormous bubbles in bond and stock markets. US bond prices are so high as to be incompatible with the Federal Reserve’s balance sheet and massive creation of new dollars.

    Moreover, central banks and some investors have realized that the Federal Reserve is locked into the policy of supporting bond prices. If the Federal Reserve ceases to support bond prices, interest rates will rise, the prices of debt-related derivatives on the banks’ balance sheets will fall, and the stock and bond markets would collapse. Therefore, a tapering off of quantitative easing risks a financial panic.

    On the other hand, continuing the policy of supporting bond prices further erodes confidence in the US dollar. Vast amounts of dollars and dollar-denominated financial instruments are held all over the world. Holders of dollars are watching the Federal Reserve dilute their holdings by creating 1,000 billion new dollars per year. The natural result of this experience is to lighten up on dollar holdings and to look for different ways in which to hold reserves.

    The Federal Reserve can print money with which to purchase bonds, but it cannot print foreign currencies with which to purchase dollars. As concerns over the dollar rise, the dollar’s exchange value will fall as more dollars are sold in currency markets. As the US is import-dependent, this will translate into higher domestic prices. Rising inflation will further spook dollar holders.

    According to recent reports, China and Japan have together reduced their holdings of US Treasuries by some $40 billion. This is not a large sum compared to the size of the market, but it is a change from continuing accumulation. In the past, Washington has been able to count on China and Japan recycling their trade surpluses with the US into US Treasury debt. If foreign willingness to acquire Treasury debt declines and the federal budget deficit does not, the Federal Reserve would have to increase quantitative easing, thus putting even more pressure on the dollar.

    In other words, in order to avoid an immediate crisis, the Federal Reserve has to continue a policy that will produce a crisis down the road. It is either a financial crisis now or a dollar crisis later."

  3. Dan - thanks as always. Quick question - Do you have a read on copper now especially as it might relate to the direction of the rest of the commodity complex?

    1. MDLGTO;

      tough call on copper right now... today is was supposedly responding to the European rate cut positively with the thinking being that the cut in rates would spur economic activity in Eurozone.

      The flip side was talk on tapering tended to undercut much of the commodity complex buying as the Dollar strengthened.

      The daily chart shows the metal in a grinding sideways pattern with a bit of the advantage to the bears although not by much.

      It too, just like gold, seems to be in no man's land.

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