"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


Friday, October 17, 2014

A Day for Composure

With the kind of week we have just been through, it is certainly a relief to see a bit of "calm" coming back into the markets to close out this wild week. Drawing too many conclusions from the price action is probably not too wise given the fact that there were huge money flows flipping into and out of various sectors as traders were trying to avoid not only getting steamrolled, but in many cases, apparently from what I have seen in the price action of some areas, desperately trying to minimize what no doubt were some enormous losses.

At least the Complacency Index, as I prefer to call the VIX, nudged down somewhat from what was a 22 month high!

The Gold Volatility Index also moved lower today. It hit its highest level this year but compared to the VIX, still looks rather tame by comparison.

The Dollar, in spite of all the wild swings, violent price action and outright chaos that seemed to mark the currency markets this week essentially ended the week going no where! It remains in a consolidation mode working between 87 on the topside and 85 on the bottom. The market has certainly relieved its overbought status on the technical indicators so this range trade is actually a pretty good thing as far as I am concerned.

I am noting that the grains all moved lower today. There was some chatter making the rounds earlier this week that one of the reasons for the sharp moves higher in the beans and to some extent the wheat and corn, was the result of hedge funds moving money out of stocks and into agricultural commodities. I am not sure I buy that explanation as I see no reason from a macro level for big funds to be committing to the grains especially when the Dollar has been firm.

There was the usual chatter about harvest delays, dryness in some key Brazilian growing areas during the current planting season down there, as well as some decent export business but as the FOMC notes revealed this week, a harvest is on the way that is going to tax the ability of the US to move it and store it.

As of now I see nothing that would convince me that a harvest low is in especially with a lot more of this year's crop yet to go under the combines. I am looking for some hedge pressure to begin surfacing next week as the weather across the Midwest looks very conducive to some substantial harvest progress being made.

The tightness in last year's bean carryover has contributed to some strength in the meal as processors scramble for supplies but with some big harvest progress coming our way, that supply tightness that currently exists is not going to last too much longer.

Feeder cattle hit limit down today. Let's see they were LIMIT DOWN on both Tuesday and Wednesday this week - then they  hit limit down Thursday morning only to reverse and CLOSE LIMIT UP ( that is an intraday price swing of some $3,000 per single contract). Today they went back down the LIMIT once more. And people wonder why my hair is all turning gray!! like I have said many times, - those gold perma bulls who are always screaming about gold manipulation when it experiences a huge move lower have NEVER TRADED anything else remotely resembling a commodity. Just look at these goofy cattle this week not to mention the hogs, which were obliterated.

I will get some more up later on today on the Commitments of Trader reports and see if there is anything noteworthy in there. Sadly that report is essentially dated by the time we get it since it does not cover Wednesday through Friday of the current week. With a week like the one that we have just witnessed, there is no telling what has happened to the various positions of a huge number of traders out there.

Copper managed to claw its way back over the $3.00 level. There is one helluva battle shaping up near that zone. It dipped down to $2.95 today but some good buying was seen. As the equities began coming back, so did copper.

Silver was not helped by copper's mild strength today as it succumbed to the selling seen in nearby gold. Silver is currently stuck under a resistance level coming in near $17.50.

One last thing - the S&P 500 just barely touched ( depending on which chart one uses ) hitting the 10% CORRECTION LEVEL before bouncing right off of it and moving higher once more. The index ended down only around 13 points on the week after all its wild gyrations. That is a pretty impressive feat the bulls pulled off!

It does however need to climb back ABOVE the 1900 level, which was the support zone that was holding it aloft. If the bulls can manage to close out next week's trading above that level, they will have managed some kind of feat! If they do not, 1800 is going to be tested once more.