GLD Holdings Continue Falling

Here is an updated chart of the reported gold holdings of the large gold ETF, GLD.

Holdings are currently at 776.89 tons, down 3.3 from yesterday's 780.19 reading. The number is now the lowest reported total since December 26, 2008. That is nearly a 65 month low!

This is the reason that gold demand from India and China cannot falter if the metal is to remain above key chart support. Western investment continues to falter as money managers eye better gains in equities.

The steps by the new government in India should eventually help support gold demand there but we will have to watch the short term impact of these falling premiums.

FOMC Minutes Day

Today was the day on which we get the release of the minutes from the April FOMC meeting. Traders were not expecting much out of these that was not already in the market. In spite of that, the focus seemed to shift to a paragraph:

"In their discussion of the economic situation and the outlook, meeting participants generally indicated that their assessment of the economic outlook had not changed materially since the March meeting. Severe winter weather had contributed to a sharp slowing in activity during the first quarter, but recent indicators pointed to a rebound and suggested that the economy had returned to a trajectory of moderate growth."

It has always been a mystery to me how markets manage to focus on certain aspects of reports, whether from here in the FOMC minutes, the Labor Department or the USDA, and ignore other aspects which are equally important. You could definitely make the case that the Fed is viewing the economy in friendlier terms yet the minutes contained plenty of caveats and concerns. The initial kneejerk reaction however was to ignore the caveats with market players scrutinizing talk about the Fed's exit strategy from low interest rates. In an economy that has become so utterly dependent on these low rates, any talk, any discussion, any focus by the Fed on this topic, is going to create some nervousness.

The first reaction for gold was to sharply plunge scoring a new low back to May 12. That however was quickly erased as players seemed to actually take the time to read through the minutes. Doing so shows nothing especially new from the March meeting in my view. Yes, at some point they are going to raise rates, but the economy is going to have to be strong enough for them to consider doing that and for now, it is not there yet.

Also seeming to help gold recover were lingering concerns dealing with geopolitical risks. While Ukraine seems to have faded somewhat from the minds of traders, some are still buying gold ahead of this weekend's election. I would be a bit surprised to see gold lose chart support before that vote is held and traders get a chance to see the reaction and responses.

The result of all this up and down, go nowhere price movement is to contain gold in its range trade. Once again it should be noted that the pattern of lower highs is continuing. Support remains intact. Nearly the same pattern can be seen in the HUI and the GDXJ, however both of those indices look quite heavy compared to the Comex gold chart. Eventually this constriction is going to be resolved in one direction or the other. Here is the deal - gold could actually break through chart support and drop to $1260 and yet set up another range trade with a lower top and a lower bottom. In other words, the possibility exists that gold could go nowhere for quite some time with the metal being content to just meander back and forth in a prolonged period of sideways price movement.

Much will depend upon traders' assessment of the broader equity markets. If the bulk of them are looking past the current period of hesitancy and caution to better times ahead then risk appetite will stay strong for equities and that will keep gold off the radar screen for most here in the West. It throws off no yield and locks up scarce trading capital and money managers do not get paid to produce nothing. They will put capital to work where it can garner the most returns.

If the environment shifts to one of caution for the majority, then gold will find support and hold up as money managers will be more interested in return OF capital rather than return ON capital. 



Some interesting news today out of India, the world's second largest gold buyer. The consensus has been that the election of a new government would be considered friendly for gold prices as it would eliminate the tariff or import taxes on the metal which the previous government had established. That tax was raised to 10% from 2%. It had also ruled that "20% of all gold imports must be re-exported as jewelry, coins or other finished products" according to a story that appeared on Dow Jones this AM.

However, thus far it seems it is having the opposite effect. According to that same story from Dow Jones, premiums have come down and more gold is actually being sold for the time being. The reason? - Indian dealers are reporting that many fear the relaxation of the taxes will result in more gold coming into the country. That will have the effect of causing prices to actually fall as supply increases. Some are selling out ahead of this. They quote a large dealer in recycled gold in "the western Indian city of Mumbai's Zaveri Bazaar, the country's largest gold market as saying: ' We are getting more sellers than buyers these day. Most of these sellers are coming to offload their bars and coins, which they purchased a few months back".

The big question that many are having, is after this initial response over fears of increased supply, will demand then actually rise as the prices move lower with the premiums coming down. Of course that is the question that we all have.

The World Gold Council projects Indian gold demand for 2014 to range between 900 and 1,000 metric tons. Last year it was 975 tons. That is a fairly wide range. We are certainly going to find out. Gold bulls need Indian demand to stay very strong to help offset reduced Western investment interest.


Along that same line, GLD reported yet another reduction in its gold holdings. They are now down to 780.19 tons, the lowest reading since late December 2008.

Here is a funny thing - shortly after looking over the story mentioned above, more news broke from out of India which sent gold higher almost immediately. India's Central Bank slightly relaxed their gold import rules. I suspect traders were thinking that it would help gold demand when the period for peak buying in India emerges later this year. However, the short term impact might be negative as the previous story indicated. That took the market right back down.

Hard to say - we'll just watch and see how things shake out and go from there.

One thing that I can say with some certainty, which is becoming harder and harder to do in these goofy markets anymore, is that the mining shares, basis the HUI continue to perform quite poorly. Same goes for the GDXJ, which is hovering above a recent low near 33.75. Buyers seem scarce at the moment. Maybe they will come back before the close of trading today. Gold, and anything gold related right now seems to be an enormously BORING sector. By the way, this is the reason that CME recently cut margin requirements to trade it. Markets that go nowhere lose speculative interest. They are also enormously frustrating for many traders because of the random price movements up and down without rhyme or reason. Most of the time that is caused by speculators just getting out, whether long or short and saying, "the hell with this useless market". Gold seems to fit this description very well right now.

By the way, I am sure that we are going to get more breathless commentary from the GIAMATT crowd how gold "was attacked in a brutal takedown" as soon as the FOMC minutes were released. We will not however get any comments on the equally goofy spike back up in price which erased all those losses in minutes. Of course we all know here that evil manipulators are at work in the gold market attempting to manipulate prices higher and giving the appearance to the masses that inflation is ramping up proving that the Fed's policies are working and that they are achieving their goal of an inflation rate of 2%. Why just today several Fed governors were out congratulating themselves about this increase in inflation.

Actually what happened was the exact opposite - several of them were bewailing the lack of inflation and were telling us that is could be several years before it returns to their target rate of 2%.

However, these Fed-sponsored buyers were buying huge, obscene amounts of gold contracts, without any attention to finesse or the impact that such indiscriminate buying will have on those hoping to obtain the best possible buying price for their metal. They drove the price higher and well up from session lows, punishing the bears who dared to short this key metal that the Fed obviously now wants to stop going lower.

Those of you who read here regularly know by now that I enjoy using sarcasm and hyperbole to illustrate absurdity. Can you see the folly in this never-ending, day in and day out dissecting of every move lower and higher in gold? It is such a waste of time, energy and talent. Just call it what it is - markets are confused - traders are unsure of much - data is conflicting and the Fed itself is uncertain. One moment they focus on one thing - the next moment they are looking at something else. Pick your daisy, pluck the pedals off, repeat the phrase, " She love me; she loves me not" and you have a pretty good description of what takes place on some days in these confused markets.

Speaking of confused markets - Jack had his magic beans but the soybean pit has its magic word, "CHINA". it was old news but China reported huge demand for US beans. That sent visions of empty bins here in the US and up they went. Yesterday they went flying high only to implode lower. Today they went sharply higher yet again ( for now). For the sake of illustration, here is a one hour chart of the old crop bean contract. And these gold guys think they have seen price volatility. Soybeans make gold trading look like it is similar to watching paint dry.

Observe the huge swings in price, soaring rallies followed by steep plunges only to reverse sharply at move higher again followed by another steep drop. Behold what wonders hedge fund computers have wrought!

Moving to touch on the currencies a bit - The Draghi verbal takedown of the Euro that began back when it was near the 1.400 level, has been most effective in undercutting that currency. It has fallen about 2.5% against the greenback since the second week of May and is now perched above a major chart support zone.

If you notice the ADX, it is rising and above 25 indicating the presence of a trending move lower. Bears are currently in control. Bulls have a shot at holding the Euro near current levels but if they do not, we should see it drop initially to slightly below the 1.36 level. Failure there and 1.35 is in store.

Since the Euro makes up such a large portion of the basket of currencies that comprise the US Dollar Index ( USDX), any sharp fall in the Euro will tend to magnify any upward movements in the Dollar. This will need to be watched closely for if the Dollar begins to gain some additional tailwinds pushing it up, gold is going to test that key chart support region near $1280 yet again.

Keep in mind that these currencies have been extremely volatile due to the ebb and flow of safe haven plays of late ( ask any Yen traders about this if you are doubters). Currencies are always sensitive to anything their respective Central Bankers might say but given the current environment, they are even more so at the current time.

That being said, I am especially on alert for interest rate movements here in the US or in the Euro Zone. Current thinking is that while the market does not expect any rate hikes here in the US until at least next year, odds favor higher rates here much sooner than in the Euro Zone. Some are talking interest rate reductions in the Euro zone if it does not show some more increased growth by the time the next ECB meeting occurs next month. Either that or some form of QE coming from the ECB. We shall see but this type of talk tends to pressure the Euro at the expense of the Dollar. I am also noticing on the crosses that the British Pound is gaining on the Euro as well. UK retail sales were very strong in April according to data released today over there. That fed talk of a higher rates there in the UK as well.


Another bit of foreign news - Moody's Investor Service released a report noting concerns over China's housing market. They lowered the sector rating outlook from stable to negative. " A significant slowdown in residential property sales growth, high inventory levels and weakening liquidity over the coming 12 months" was the key phrase. Copper seemed to take it cues from that as it put in its lowest close since May 9.

On the energy front, can anyone say "Soaring Crude Oil Prices". Crude is working its way back higher again after only the briefest of forays beneath the $100 level early this month. In looking at the price action of this key market, I have to wonder if it is telling us something about the health of the US economy. Like just about everyone else out there, I am unclear on the exact picture when it comes to US growth. Some data looks promising when it comes out; some data looks negative.
Obviously, in the face of big supply coming from domestic shale production, demand is staying quite strong. Is the US economy driving this alone?

The chart shows some heavy overhead resistance near and around the $105 zone. Thus far that level has capped the price rise. If crude clears that, it should trade to $108 in short order. Can it? I have no idea but am watching.

On a different note - check out the following link when you can:

http://www.hollywoodreporter.com/news/fast-furious-7-insurance-claim-706037

It concerns the wildly successful "Fast and Furious" franchise. Many of you are no doubt familiar with the very sad passing of Paul Walker, one of the main stars in this series of movies. Apparently, they are planning on some technological tricks to keep his character going in the planned 7th installment. This is similar to what they did with the movie, "Tron - Legacy" where they used the same technology to overlay a younger face of the actor Jeff Bridges on a different actor. I guess it is "progress" but the whole thing strikes me as pretty weird, almost morbid, when it comes to replacing an actor that has passed away with a computerized image. 

If I were a Hollywood actor, I would be a bit nervous about this. Before long, they will not need any actors - they will be able to do the whole thing with computer generated characters. That should lower the cost of making the movie which I am sure will be passed on to us, the consumer, in the form of lower theater ticket costs.  ( note this is sarcasm here) Have any of you out there been to the movies lately and grabbed some pop corn and a drink? Yikes! I mentioned just recently having some fun with the movie "Godzilla" but I can report that another thing that the monsters savaged besides Honolulu, Las Vegas and San Francisco was my wallet.

Gold Holds Support; Constricts Further

There was some news today dealing with gold demand from out of China, now the world's largest gold consumer, and it was not particularly friendly for the yellow metal.

The World Gold Council announced that Q1 gold demand was 18% less than the previous year for the same time period. It was the 55% drop in bar and coin purchases that was primarily behind the fall off.

India was not exempt either as its gold demand fell 26%.

The WGC data showed an overall drop in global demand by 52% compared to a year ago resulting in a four year low.

Combine this with the big drop in GLD holdings, and you can see why gold has thus far been stymied in any attempt to mount a sustained upward move in price. The demand simply is not there.

That could change but until it does, the metal will continue to attract selling on rallies.

By the way, as an aside, this is another of the reasons that I suggest that the readers here ignore the now commonplace, breathless talk about "gold backwardation". If gold demand were that strong as these non-stop gold promoters insist, the WGC would not be reporting falling demand. Then again, some of these charlatans will no doubt inform us that the WGC is in bed with the powers that be and is distorting its own data in order to steer investors away from gold.

Sweeping away all the cobwebs and clearing the fog from their obfuscations, the gold price chart continues to reveal that pattern that is making me nervous about its fortunes. The pattern of LOWER HIGHS is not changing. Rallies are attracting selling at progressively lower points and while support is holding, the persistent inability of the mining shares to get anything going on the upside, is suggesting ( note - this is not conclusive yet ) that the support level is not going to hold.

The events in Ukraine remain a wild card however. The upcoming vote is going to be closely watched but more so, the reaction to that vote. Also, any further weakness in the broader equity markets will bring, as it did in today's session, more safe haven buying into the yellow metal. Some equity players are unsure whether the weakness in the smaller cap stocks is going to spillover into the larger caps. It seems that anytime stocks waver in the least, gold gets a safe haven bid. It is just one more thing for traders to have to decipher when attempting to approach this market for a trade. One thing is for certain - trading gold has become a shortest of time frame trades. One cannot hold a position for any length of time in this completely unpredictable and volatile environment.

Just today, after the Russell 2000 had managed nice back to back recoveries from the recent selling, it fell lower again. Currently it is down 1.96% compared to the 0.84% fall in the S&P 500 index and a 0.99% drop in the Dow. At the same time, the yield on the Ten Year Treasury has moved slightly lower once more. One can see the corresponding linkage when these safe haven/ risk aversion moves are underway. Small Cap stocks underperforming mid to large caps is a sure sign of this risk aversion trade. Both the Yen and the Dollar are also a wee bit higher at the moment. Disappointing sales numbers from retailers seemed to be the culprit that induced the selling in the equities, brought a bid into gold and the other safe havens.

Here is a chart of the GDXJ. As you can see, it is working on putting in the lowest daily closing price since April 17th of this year; in other words, the lowest close in a month. It is sitting right at a key support level so if the juniors are going to manage a bounce, they are going to have to do it almost immediately or risk another leg down. The ADX is rising once more indicating that the potential for a trending move is now more realistic but until that support level gives way, the index is still in a range, albeit at the bottom of the range.

The Daily Chart of the HUI is not any better. It is working on the lowest closing price in three months.

On the grains front - traders are back to chasing soybeans higher once more,  as if we are going to run completely out of beans before turning right around and throwing them all out. This market is about as convoluted as I can ever recall seeing it, especially the old crop as the situation involving those tight carryover stocks is at the forefront of their minds again. Technically based buying is was seen in new crop beans as overhead resistance levels were taken out which brought in momentum-based buying. That buying then evaporated and sellers took over. Right now the beans are lower but whether or not they stay there or go on another wild tear higher is anyone's guess.

The initial catalyst behind the early session buying was news that China  was into the US bean market as USDA this morning announced a purchase of 110,000 mt of optional origin beans. Combine those two words, "China" and "beans" and the result is always buying in the pit.


KC wheat is outperforming the Chicago wheat market as deterioration of that crop was reported yesterday. While recent rains will have helped ameliorate the slide in condition ratings, traders were looking backward at the damage and felt that perhaps some got too optimistic on prospects too quickly. After all, wheat prices had dropped over $0.80/bushel in less than two weeks time. Throw in the fact that the HRS crop is behind schedule for planting and that was enough to convince some shorts to go ahead and book some gains.

Corn is being pressured however by a strong planting pace ( 73% compared to the 5 year average of 76% and last year's 65%) although some of the northern tier states are running behind the norm. It does look like there is going to be an open window up there however this week so traders are looking at substantial progress to be made by the time next Monday rolls around and we get the new and updated planting progress report. Generally speaking, from this point on out, rains will now tend to be viewed as helpful for the crop.

For corn, 34% of the crop has emerged compared to the 5 year average of 42% and last year's 17%. Beans are 9% emerged compared to an 11% five year average and last year's 3%.

The cheaper corn, along with good pasture conditions, and tightness for feeder supplies is driving feeder cattle prices to record high prices. How high can they go is the big question at this point.

Let's see what we get when the trading for today's session ends. Trying to extrapolate from daily market action nowadays is becoming almost an exercise in futility due to the wild price swings and shifting sentiment. Perhaps we need to just take things on an hourly basis. That seems to be the new "long term" horizon.

Spurs up one game on the Thunder. I like KD and believe he is a great role model but I like the Spurs more.

Mining Shares Looking for Friends

Here is the weekly price chart of the HUI. It did not end the week on an encouraging note, with the close being the lowest since the week of January 27 this year. As such, it is in serious danger of falling further and testing the support zone noted on the chart beneath it.

For the bulls to be able to have the least chance at mounting something to the upside, the downsloping trendline will need to be breached. That could form the basis of an actual reverse head and shoulders pattern but the big downside gap that formed last year in April near 300 would have to  be closed for any serious upside fireworks to occur.

The pattern of lower highs since that month is suggesting that a "Sell the Rally" mentality currently exists in the mining sector. Downside support is also suggesting value-based buying is taking place but the question is whether or not these buyers have sufficient clout to ward off opportunistic sellers. The index is range trading with bears having a minor advantage for the time being.

With the ETF, GLD, losing gold, and with this continued weakness in the mining shares, the signals are not promising for the moment. Time will make things a bit clearer but for now, this sector has fallen out of favor with investors.

Go and See "Godzilla" and have some Fun

For an escape last evening I took the kids to see the movie, "Godzilla". As a kid growing up watching the monster both terrorizing and saving Tokyo, I was hoping for a trip down memory lane. I was not disappointed.

The entire movie, which had a decent script and some great cinematography, was actually pretty good. Unlike that disaster  of a film in 1998, this one was true to the original roots. Godzilla both looks and SOUNDS a lot like the original. As a matter of fact, his roar, which he cuts loose with as he makes his grand appearance onto the big screen, sent the entire theater shaking. " I have arrived and am here to kick some serious ass" is the message! And trust me, THIS Godzilla, can kick some ass!

Watching these enormous monsters duking it out and laying waste to Honolulu, Las Vegas and San Francisco in the process was terrific. The battle scene between the US military and Godzilla at the bridge was a classic! Puny humans, you have met your match!

Wait until Godzilla cuts loose with his radiation blast/dragon-fire. Every detail including the way in which his Stegosaurus-like scales begin first glowing, is true to his roots in those early movies.

If you want to relive your lost youth or to merely introduce your kids to some of the things that we had the joys of experiencing in our early days, before there was an Xbox, Playstation or Nintendo Wii, go and see Godzilla.

I left the theater feeling like I was 10 years old once more. Hat's off to the folks who made this movie. It was a lot of fun. Besides, where else can you cheer out loud for Godzilla and get away with acting like an idiot and publicly embarrassing your own children? That is worth the price of the admission alone!

USDA gets with the Trend

Many of you have been reading about the increasing number of government agencies developing their own SWAT teams. USDA seems to be getting with the new fad.

 I have it on good authority that corn earworms and soybean leaf beetles have been coordinating strategy for assaulting USDA inspectors in the field. Never fear, the USDA is fighting back. Why else would they need body armor?

Can you believe this stuff? Unreal...

http://www.breitbart.com/Big-Government/2014/05/15/Dept-of-Agriculture-Orders-Ballistic-Body-Armor

Then again, it could be those hogs at the packing plants that meat inspectors are checking. The porcine victims are apparently not going to go down without a fight. Those hardy inspectors need to be able to level the playing field.

CME Lowers Gold and Silver Margin Requirements

In a move that is sure to raise the ire of the GIAMATT crowd, ( insert sarcasm here ), the CME announced a reduction in margin rates for gold by 7.7% as of the close of trading today ( Friday ). Speculative margins are now being lowered to $6,600 from the previous initial margin of $7,150. Maintenance margin drops to $6,000 from the current $6,500.

Silver margins are now cut 8.3%. Specs must put up $9,075 for an initial margin down from the current $9,900. Maintenance margins have been lowered to $8,250 from $9,000.

The recent range trade in both precious metals has resulted in lower volatility and that is being picked up in the exchange's computer program which measures that and either raises or lowers the margin requirements accordingly.

I am always amused by the reaction to these events by the GIAMATT crowd because inevitably, whenever the precious metals begin to make big trending moves ( in the upward direction ) , the swings in price begin to intensify. That ramp up in volatility, especially when gold is in a strong uptrend, can easily wipe out smaller, underfunded traders. The exchanges then respond in order to safeguard the Clearinghouse and to make sure that the process is protected. The perma gold bull camp then screeches to high heaven that it is all the more proof that the powers that be are manipulating gold by trying to force out the speculators.

Given the current low volatility by recent comparisons, this move by the exchange will actually make it easier for both longs and shorts, to increase the number of positions. If one is bullish, it actually makes it cheaper to increase the number of long positions in either metal. With the current positioning of the speculative community being net long, this benefits the bulls. Don't expect to hear a negative peep out of the GIAMATT crowd about this however. It is only when the exchanges raise the margins that they begin making noise.

One could easily make the equally bogus argument that the exchanges are making it much easier for specs to pad their current net long positions by lowering these margin requirements thus providing solid evidence that the exchange is working overtime to manipulate the price of gold higher, which is evidently a dastardly thing to do to the poor, friendless gold bears.

In overnight trading this evening, traders are expecting a victory in the Indian elections which is viewed as favorable for gold demand in that big consuming nation. Gold has popped up a few dollars as a result. The metal continues to hold above key support near the $1280 region.

Risk Aversion sends Global Equity Markets lower, Bonds higher

One never knows what the markets are going to focus on any given day ( which is the reason this never gets boring) but today seemed to be one of those days in which investors/traders were given to experiencing a sudden case of "risk aversion".

News out of the Eurozone set the mood with Euro-area growth up a mere 0.2% for Q1 when market expectations had been for a 0.4% increase. While hardly the stuff of legend at 0.4%, at least the estimate was up slightly. When the actual number came out and investors realized that the Eurozone was barely avoiding an overall contraction, equity bulls got nervous. Heck, it seemed as the entire world was suddenly itching to get out of stocks and into bonds.

Ever since China news has been less than stellar there have been concerns about a slowdown in global growth.

Even here in the US, players seemed to hone in on the Industrial Production number, which was down as they overlooked a friendly Initial Jobless Claims number.

The lousy Euro-area number increases the pressure on the ECB to "do something" at their next meeting in June. Already talk is ramping up of their own version of QE to stave off deflation. Keep in mind that in the past the ECB has surprised the markets by announcing an interest rate reduction apart from their actual meeting. It could happen again if we get any further unexpectedly weak numbers out of that region.

No matter the reason, most global equity markets were weaker today. Bonds, on the other hand, here in the US, were higher with interest rates falling below the 2.5% level at one point on the Ten Year Treasury. There remain an awful lot of speculative shorts in the bond markets and it appears that they are getting squeezed in a big way right now. When that many bets are all on one side of a market, it does not take much to get the ball rolling in the opposite direction. These things tend to feed on themselves as short covering begets more short covering until all that is left is the strongest of hands.

To illustrate why I believe we currently have a risk off trade occurring in the markets, take a look at a rather simplistic, but helpful, comparison chart I use to gauge investor demand for risk. It is essentially comparing the Russell 2000 index to the S&P 500 index.

The Russell 2000 is comprised of small cap stocks and by its nature, tends to be much more sensitive to sentiment in regards to risk than its bigger cousin, the S&P 500. This can be seen in the chart.

Notice how the two indices can practically be laid directly over the top of the other and the pattern is almost identical. Both tended to rise and fall in harmony beginning at the date shown on this chart all the way up until this month.

Can you see how recently, the Russell 2000 has been underperforming its larger cousin in a very big way? Look at the February low for the Russell 2000 and you can see that the index actually fell to that level today before it rebounded. Compare that to the S&P 500 which remains well off its February low.

If we take the high point of the Russell 2000 back in March of this year which was up near 1212 ( the best close was near 1208) and compare that to its current level, near 1096, the index has fallen some 9.3% from its best CLOSING LEVEL. The S&P 500 on the other hand closed today near 1867, down 25 points from its best CLOSING LEVEL near 1892. That is off a mere 1.3%. Another way of saying this is that the Russell 2000 is very close to achieving an official "correction". That requires a drop of 10% off the best close.

The lesson? Investors appear to be nervous right now and seem to be fearing SLOWDOWN fears at the moment. This is one of the causes of the big rush into bonds. We are apparently back to caution as the name of the game. I think many are wanting to see confirmation of an improving economy here in the US, especially in the employment area, before getting too aggressive on the buy side in stocks again.

Along this line, the VIX or volatility index rose today. It still remains quite tame however.

There is also a bit of chatter out there that holders of European-based bonds are jettisoning them in favor of US Treasuries. That talk has picked up as sentiment increases that the ECB is going to act on the stimulus front next month. If they do, and if the Euro weakens as a result, some of those bond holders would prefer to own US Treasuries as they expect the Dollar to strengthen against the Euro. We'll see about that but it is a plausible theory.

One last thing, I do not currently have the time to do this, but some of you more enterprising readers out there might be able to do some research to see if you can track money flows INTO TREASURY ONLY FUNDS. It would help to confirm that we are seeing a shift out of stocks temporarily into the safety of bonds. Demand for bonds is very strong right now. I continue to marvel how the Fed has been able to reduce their bond buying and not upset the interest rate market. First they get a geopolitical event to induce safe haven buying into bonds and now they get some fears over slowing global growth. Boy howdy are these guys good! Their reduced buying has been more than offset by investor demand.

Keep in mind that the nature of today's markets is that all it will take to completely turn this sentiment around is a piece or two of solid economic news. Again, I want to caution you traders out there, do not overtrade right now and watch your position size closely. You can have your trading career end very quickly if you become foolish right now.