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“Woe to the land whose king is a child and whose leaders are already drunk in the morning. Happy the land whose king is a nobleman, and whose leaders work hard before they feast and drink, and then only to strengthen themselves for the tasks ahead”. (Eccl 10: 16-17)

"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 7, 2014

Safe Haven Day ( Again!)

It sure is reminiscent of the movie "Groundhog Day" is it not? Stocks move lower, money rushes into bonds, up goes the Japanese Yen and up goes gold as a corollary.

Methinks however someone forgot to tell the mining shares that this is supposed to be a Safe Have day and thus they are not supposed to be going down. Whoops!

After yesterday's bizarro-world day of trading, in which the markets reversed practically everything they did last Friday, I was not sure exactly what we were going to get. Oddly enough, we are seeing some more upside in the majors against the Dollar ( which is not functioning today like the usual safe haven it is ) as the Euro bounces higher away from the 1.250 level. Tomorrow should be the tell for if the pattern holds true, we should see the Dollar reverse course and move higher tomorrow ( by the close ). If so, the Euro will of course be resuming its downtrend. Maybe something changed but as of yet, I cannot see it.

I wonder what percentage of these trades that we now see on these wild days is due to carry trades being unwound. My guess is that it is a larger number than many of us suspect.

That is one of the reasons that the Yen always seems to rally on a "safe haven" day. as a funding currency, it is sold and the proceeds used to finance leveraged trades. When those trades are reversed, the Yen is bought back.

Once upon a time the carry trade was behind the move higher in BOTH commodities and stocks. More recently, there has been no carry trade involving commodities in general, unless of course it is to take SHORT positions, which is one of the reasons that gold has been able to move a bit higher during these unwinds. When those trades were implemented originally way back when, gold was bought along with every other commodity market out there. When those trades were then lifted or unwound for any reason, the commodity markets would sell off along with equities while the Yen, the carry currency, was bought and the trade closed.

I have no way yet of verifying whether or even how much might be involved in SHORTING commodities as part of a leveraged carry trade, but if that is the case, it would explain somewhat why we got a huge rally in the entire commodity sector yesterday for no apparent reason. Perhaps an unwind of a leveraged carry trade was occurring where the participants had been using borrowed money to SHORT commodities.

Again, I do not know but am merely trying to explain some of the bizarre price action from yesterday - some of which seems to have continued into today's session.

This might be partly responsible for the big rally in the wheat market which has run up some $0.40/bushel in less than two weeks' time. The chatter is that wheat might have fallen far enough to attract some decent export buying but at this point we have no confirmation of that. What we do have, ( or at least did have ) was a very large short hedge fund position in this market. They are now covering and driving prices higher. That being said, unless we get some solid evidence of good export news, it is hard for me to see wheat having too much more upside from these levels.

It would take two consecutive closes above the $5.20 level to change my view at this point that this is merely a corrective bounce in an ongoing bear during which a market is consolidating for a time.

Here is a quick look at the wheat chart ( note that this is Chicago) and not KC.

Soybeans continued on their unexpected tear higher from yesterday ( they put on 30 cents for some reason ) early in the session before aggressive selling showed up just shy of the small chart gap on the November bean chart.

Look, we all know about wet weather delaying harvest but to run the price of beans on the Board up over $0.42/bushel on that account was goofy to say the least. The beans are not going anywhere. They are still sitting in the field dialing their cell phones and calling their owners to come and reap them as it is getting cool out there and they are looking for warm homes beneath the presses in some processor's factory.

By the way, corn got sucked up higher by the big wheat rally today. SAme as the beans - the corn is not going anywhere. From what I am seeing in the weather forecasts, there are going to be good windows of opportunity for harvest progress this week and again next week for a good portion of the belt.

We'll see if the corn runs out of buyers tomorrow. yesterday and today appear to have been "Stop hunting " days.

One last thing for right now - the gold mining sector is just imploding today.
Look at the HUI / Gold ratio. It is now near levels not seen in FOURTEEN YEARS. One has to go all the way back to the very inception of the once great bull market in gold to see the ratio at this level.

For gold, it does not bode well.

In regards to actual performance today, the HUI is currently down some 3.3% with the GDXJ down even harder at 4.46%. OUCH! Truly that sector has proven to have been a nightmare, even for the most resolute of gold bulls.

Here is the most recent chart of the TIPS spread. Coming on the heels of the IMF downward revision to global growth, it sure makes sense. Inflation is not on the radar screen of most investors and is the last thing that they are concerned about. Right now it is deflation or slow growth that has them nervous.

I should also note here that the spread has now matched its lowest level of this year and is threatening to move to levels last seen THREE YEARS ago near the end of 2011. Here is the same chart broadened out to give a longer term view.

Sadly - there are still guys out there in the perma gold and silver bull camp - who keep talking up silver and attempting to rationalize it falling in price. They have all manner of elaborate reasons why the "paper silver market" is controlling the price of the metal which they assure us should rise were it not for the baddies at the Comex. Among the current novelties is that "something is up with silver because it has such large open interest". Yes, it sure does, and that is because a lot of people want to sell the metal. As a matter of fact, the short interest of the managed money or hedge funds as a % of the total open interest is near a 8 year high. The peak was in early June of this same year when the metal was near $19.00.

The only reason I do not know if there has been a greater number is because my data does not go back that far. So much for another goofy theory. Geesh - these guys never end do they?

Let's just say it this way - when the market begins to worry about inflation and not deflation, then some of these pitiful souls will have their day. Until it does, silver is doing what one could expect it do during a time of falling prices in general and oversupply based on current levels of demand, namely, it is moving lower to attempt to find a level at which supply and demand will be balanced. When it does the chart will reflect it - not one moment sooner or later in spite of all the convoluted, baseless theories being propounded.

Look at the VIX or Volatility Index ( or as I prefer to call it, the Complacency Index). Things do not look so complacent right now do they? The index is at its highest level since March of this year. Clearly there is some unrest in the markets and traders are not quite so confident as they have been for a large part of this year.

One last thing -the yield on the Ten Year Treasury note feel to 2.35% today. It is amazing how the appetite for Treasuries has not dimmed one bit and they continue to be the place to park money during times in which safe havens are in demand. Maybe this will change at some point but not for now!

It sure does make the lie out of the notion being sold by the current administration ( in the hopes of avoiding an electoral blowout next month) that the economy is doing great but you just don't feel it argument BS.

Monday, October 6, 2014

USDA Crop Condition and Progress Data

It's Monday afternoon and that means its time for the latest batch of data from the USDA. Coming at the end of a day in which we witnessed some very strange and inexplicable ( from my fundamental point of view) big selloff in the Dollar and melt up in the commodity sector, perhaps this bit of fundamental data will take some of the zaniness out of the markets tomorrow, at least as far as the grains go.

Let me give you an example of some of the madness today:

1.) Coffee up 6.92%
2.) Sugar up 3.28%
3.) Copper up 1.25%
4.) Soybeans up 3.29%
5.) Corn up 2.86%
6.) Silver up 3.03%
7.) Hogs up 3.06%

You get the point - whatever fundamental shift in the supply/demand equation that occurred since Friday and this morning was something I apparently did not read.

This is what happens when the hedge fund computers go beserk on a macro trade. Dollar - Down; BUY everything not nailed down.

Let me make a point here once more and get it out of the way. You will not hear a single peep out of the gold perma-bull crowd ( or the silver perma-bull crowd for that matter) about "manipulation" on a day like this. Why is that? Because their metal gods went higher, that is why. You see - that is normal in their minds. What is not normal is when the metal gods fall lower.

What they conveniently overlook however is that it is the SAME hedge fund computers that are doing the buying today that are also doing the selling on the big down days.

The point to take home is not "manipulation" but rather the new nature of our markets. They are run by machines - pure and simple - and these machines know nothing of skill or finesse when it comes to entering or exiting positions. They merely fire off their orders, whether it be to sell or as in today's case, to buy, and they do it automatically, ferociously and blindly based on how they are programmed.

For today, it sure looks as if the trade involving buying the Dollar and selling commodities was picked for some ripe apples and gave a whole lot of shorts a bloody nose.

Once the machines were able to bring prices up high enough to catch the buy stops, especially those of the general public and the small trader, the result was a huge buying frenzy from panicky shorts and the usual bottom pickers.

Whether or not this is reverses tomorrow remains to be seen but I suspect this is going to end up being a short-lived event. Unless I managed to miss something which I have not yet managed to discover.

That brings me to the world of the grains which experienced one of those mini melt-ups across their sector today. The catalyst was supposedly the rainy weather which will work to hinder the harvest but in my mind, that is just an excuse that some unfortunate wire service reporter had to come up with from his sources to explain the wild price action. The truth is more technical in nature for once the buying refused to let up as the Dollar continued weakening, it is just a matter of time before the hunters found the stops that they were looking for. It is no secret that the public is overwhelming short and bearish on the grains and those were the ones whose upside buy stops the bigger traders ( especially the pit locals) were gunning for.

Welcome to the world of commodity trading!

On the USDA reports however -

Let's start first with corn:

Amazingly, the condition of the crop managed to yet improve once more. I did not think that was possible this time of the year. What I am referring to is the percentage rated Good/Excellent. The number is unchanged from last week's reading of 74% but how it got there is interesting. The percent rated EXCELLENT actually gained 1% to 24% taking that from the Good category which dropped to 50% from 51%.

I do wonder however how much traders are going to pay attention to these ratings at this point in the season as they are more interested in harvest progress and crop maturity as they keep one eye on the weather forecasts.

Along that line, the corn crop made some very good progess over the past week. 77% of the crop is now rated mature compared to 60% last week and the 5-year average of 81%.

Harvest is at 17% compared to 12% last week and the 5-year average of 32%. This is what has the trade a bit in a tizzy and why the corn market is still carrying some weather premium. Iowa is only 5% harvested compared to its 5-year average of 26%. Minnesota is at 5% complete versus its 5-year average of 20%. It's essentially the northern tier of the country that has caught some focus.

I have maintained that the reason for the lag in crop maturity this year ( in some areas of the belt ) is actually on account of the ideal late-season growing conditions that we experienced. That kept the plant from shutting down as it normally does and instead kept it green and lush and growing. In my view, this will lead to very large kernel size and heavier ear weights which will boost the overall size of the final crop. It is going to take some time however to prove out my thinking on this.

For now, the trade is just looking at the harvest percentages at face value and is not giving much, if any, consideration to the incredible yields that are being reported from areas that have been harvested.

Essentially the same holds for the soybeans - the percentage of the crop rated Good/Excellent actually increased from last week's reading of 72% to 73%. The boost came from another 1% of the crop moving over to the Excellent category which is now at 20% compared to last week's reading of 19%.

On the maturity front - this last week was a big one for speeding the crop along. Iowa in particular showed a nice jump to 85% dropping leaves from last week's 65% reading. That compares to the 5-year average of 86% so as you can see, the maturity issue for beans is becoming less of an issue there. Illinois is at 83% compared to last week's 68% and the 5-year average of 82% so it has now moved ahead for the first time this year. Same goes for Indiana ( I am noting the big three "I's"); it jumped to 88% dropping leaves from 76% last week and its 5-year average of 87% - again this is ahead.

The overall national standings at 83% of the crop dropping leaves compared to 69% last week and the 5-year average of 84%.

Harvest is at 20% compared to 10% last week and the 5-year average of 35%. Again, just like the corn, this is what has some traders in a tizzy right now.

Iowa in particular is slow on the harvest as they are at 9% compared to the 5-year average of 42%. Illinois however is a bit better with harvest there at 18% complete versus the 5-year average of 32%. INdiana is at 18% also with its 5-year average at 30%.

All in all, this report is pretty much what the trade was expecting with perhaps corn coming in the lower end of expectations for harvest pace and beans on the upper end. Weather forecasts will thus be closely watched to determine when farmers can get into their fields.

Based on what I can see from the current forecasts, there will be regional windows open this week across the belt with more rain expected in the latter part. Harvest will continue to lag the 5-year average as a result but as of now, there is nothing to indicate that we will experience any quality issues.

My biggest concern is not quality nor is the slow pace of harvest but rather where we are going to put all of this grain once it is harvested. I am very serious about that.

Macro Trade Reverses from Friday

This set of comments will be brief as I am extremely busy today.

Friday's jobs numbers sent the Dollar soaring and the commodity complex reeling. Today, that trade is being reversed with the Dollar sinking sharply lower and the entirety of the commodity complex is now soaring.

If you ask me the reason for this you will get a simple answer: "Beats the hell out me". I have no idea what is going or why but that does not matter as the funds are covering shorts or buying like mad in the commodity complex for today.

In looking over the Board, the only commodities I see in the red today are natural gas and feeder cattle. Everything else if going mad.

What we get tomorrow is anyone's guess but larger scale traders are more than likely looking to sell rallies.

Tuesdays are famously called "Turnaround Tuesdays" in this business. We'll see if it lives up to its reputation tomorrow.

One big short covering squeeze day does not reverse a trend.

Friday, October 3, 2014

Mining Shares go Negative on the Year

It comes as no surprise that the mining shares, as evidenced by the HUI and the junior-laden GDXJ have now gone negative on the year. The theme remains the same as it has for some time now - Western-origin investment demand in the gold sector is non-existent.

In an environment in which the US Dollar is King of the Mountain once more, commodities are being jettisoned and inflation pressures are collapsing, gold has few friends except for the perma gold bulls.

For starters, let's first look at the Goldman Sachs Commodity Index to show the impact from a strong Dollar.

This broad-based index just narrowly missed notching a 4 Year Low today! Let me note for the record that I fully expect it to break the support line on the chart. I just do not know the timing. The reason is based on the chart pattern of the US Dollar - the greenback may have moved strongly higher on the weekly chart ( and indeed it's rally is most impressive ) but on the long term monthly chart, it could move much higher. If it does, the same macro trade that has investors buying US stocks, selling commodities, and moving money into the Dollar in general, should continue.

I already posted a weekly chart of the US Dollar this morning, so please reference that. Here however is a monthly or long term chart of the currency. A push through 90, which would be a big deal, unlocks the potential for first a move to 92.50. That would actually open a possibility of a run to 100!

Needless to say, such a run would devastate gold, and silver.

Let's move on to once again note the TIPS spread which continues to plummet. As it does, so too does the gold price. Again, no surprise there.

A surging Dollar working to undercut inflation fears has sent this spread down to lows last seen back in June 2013! Given that backdrop, one could easily understand why Western-based investors are getting out of gold while they can.

Take a look at the reported holdings of the big gold ETF, GLD. Remember how popular that once was? Not any more! Holdings are down over 30 tons since the beginning of this year alone and that does not yet account for what was sold in there today. I will get an update on that for the reader when it becomes available.

Here is the chart. Note that the last time reported holdings were at this level, it was the second week of December 2008.

So, put two and two together, surging US Dollar, falling commodity prices, + falling TIPS spread, and falling GLD holdings and is it any wonder why gold mining shares are being discarded?

First is the HUI. It has sunk below its 2013 ending level and is now negative on the year.

Next, is the darling of the gold perma bulls, the GDXJ. I find it hard not to be obnoxious at this point but I well remember, and I am sure most of the regular readers/poster here do as well, how we had to suffer through the crowing and cackling of those extolling the praises of the junior miners for 2014 as if somehow they were investing geniuses because at one point its gains were actually greater than those of the S&P 500 for the year. No matter that the index had collapsed from over 160 and was now trading with a paltry "3" handle in front of it. Nope, none of that mattered you see for they and they alone were the truly wise and savvy traders/investors who had recognized the "bargains" in the sector and were now gloating in their new found gains. One can only hope that some of them were actually a lot smarter than what can be deduced from their posts and that they actually managed to sell some of the useless things while they still had some meager gains left in them for the year.

I will have to beg the forbearance of my regular readers if have crossed the line and seem a bit too severe on them. After having to suffer through their annoying and arrogant boasting it is rather amusing to see them get their proper comeuppance in the markets. As said here many times, having learned my lessons severely in the school of hard knocks, there is nothing so fitting for a successful trader than humility. Boasters come and go. I have seen and known many of them over my career. Anyone can have an occasional good trade. Doing it year in and year out, over and over again, takes great skill and hard work with many long hours. The successful trade is a sort of reward in itself because you are in effect pitting yourself against others in the markets. Only one side is going to be right. The losing side ends up donating their money to the winners. That is just a hard, cold fact about a zero sum business.

When you lose money you either learn from it, become more humble, less reckless, less prone to boasting or you are soon a FORMER trader or FORMER investor.

One last chart for now ( I will get some stuff up later as I have a busy afternoon right now ). Gold

Look at the weekly chart and tell me if you can see the Triple Bottom. There is an old trader's adage that double bottoms and double tops tend to hold but triple bottoms and triple tops do not. We are going to see very soon if this is validated this time around. I suspect gold will not hold but could be wrong.

There are a huge number of LOSING LONG POSITIONs among the hedge funds and other large specs in the gold market at this time. I noted that several weeks ago in my analysis of the COT reports that those were underwater near $1220 ( some were under at $1240). Below $1200 it gets even worse. If $1180 goes, ALL of the new ones placed last year and/or this year ARE UNDERWATER.

In order for them not to liquidate in wholesale fashion, it is going to take a tremendous demand surge based on a fundamental reason for owning gold. That does not exist at this time. In other words, this time around, a plunge below $1180, if it occurs, is more than likely not going to see a sharp spike higher with an immediate rebound mainly because Western-origin investors see no reason to own gold right now.

With hedge funds having an ability to play a market from either the long side or the short side, with gold breaking support, a large number of fresh shorts can be put on below that level with traders then looking for a resistance level to sell aggressively against.

If the triple bottom does not hold, I do not see much in the way of downside support until 1150 with a fall to $1100 then not out of the question.

We will just have to watch and see what we get.

As a side note, I have just glanced at the COT reports and they indicate what has been obvious for some time, traders are selling the metals. more on that later....

Jobs Reports Sends Dollar Soaring

It is quite entertaining reading the barrage of emails that regularly hit my inbox detailing over and over and over, the certain demise of the US Dollar. More often than not, it is the usual gold bug chatter about China buying up all the world's gold to make the yuan the new global reserve currency. If not that, it is the regional trading agreements bypassing the Dollar which are going to certainly knock the greenback from its throne.

Such things may or may not happen but the point is we have a huge throng of perma gold bulls who continue hanging on to their gold as they have been told that "any day now it is going to launch higher and one does not want to miss the bull move by not having a position". "Once the Dollar goes", so the chatter states, "gold is going to skyrocket".

Based on today's surprisingly strong jobs report, that day is going to be postponed for a while longer.

Here is a look at the chart of the US Dollar.

Note it has run to the resistance zone I have drawn in on the chart. It is already well past any remaining Fibonacci retracement levels drawn off the June 2010 peak meaning that it is on track for a test of that level up near 89 if it can convincingly clear the 87 level.

We'll see if it can manage that but for now, those who have wrongly bet against the Dollar are not looking especially wise at the moment. I wonder what happened to "Mr. Massive Gold buying is taking place". He is especially looking more and more comical with the passing of each week.

Please understand those charlatans who keep up with their nonsense have opened themselves up to the scorn that they rightfully deserve among fair-minded and objective people who are trying to read and decipher today's very challenging financial markets. It is one thing to misread a market. We all do that including yours truly as we are all mere mortals at best. However, to persist day after day, week after week, month after month, year after year, with the same utterly discredited rubbish and unverifiable reckless claims, misleading many innocent and sincere people, is simply inexcusable. There comes a time to admit one has been wrong, apologize to those who have been misled and simply go away or close down the various propaganda sites. Maybe then their victims can get on with their lives and try to recoup their losses having learned a valuable, but extremely expensive lesson that they will never forget as long as they live here on this globe.

There is an old traders' adage that goes something like this: "The first loss is the best loss". What it means is that once you realize that a trade or an investment has gone sour, you get out - the sooner the better. That first loss, taken early rather than later, leaves a welt but it does not end up obliterating you. Oh that some had learned this lesson and ignored all the "opinions" from the many self-proclaimed experts.

Shifting back briefly to the currency front for a moment - it all goes back to interest rate differentials. The strong jobs number has lent further credence to those who are expecting the Fed to move on the interest rate front sometime next year. Yesterday we heard from the ECB and Mr. Draghi that interest rates in the Eurozone are not going anywhere ( except maybe even lower if that is possible) anytime soon. By the way, the notion that the Euro would be higher were it not for the sanctions imposed on Russia is a canard dreamed up by those who cannot read a price chart nor have apparently been listening to Mr. Draghi who has been making it abundantly clear for some time now that Europe wanted a lower currency.

Here is the Euro chart. It is falling through chart support levels like a hot knife through butter at this point. There looks to be some mild psychological support near the 1.240 level but more serious support does not materialize until closer to 1.2273 or so. If it goes through that, it is going to 1.2000.

more later... busy morning...

Wednesday, October 1, 2014

Saudi Oil Price Cut Surprises Market

Talk about a fast turnaround out of nowhere! Crude oil was moving higher today after its big sell off yesterday. This morning's catalyst for the upward move was news that oil stocks had unexpectedly shrunk. It had recaptured half of its losses from yesterday when it began to slowly fade and then fell sharply. The cause was news out of Saudi Arabia.

The Kingdom announced that it was lowering its official selling price for its crude oil. The cut was $1.00/barrel.

Brent crude was hit harder than WTI as the former made a 2 year low in price.

I think it is safe to say that S. Arabia is not exactly thrilled to see US production rising. I for one am particularly happy to see Uncle Sam dethrone it in this area. Think about what might be if we had an energy friendly Administration here in the US!

Bonds continue on a tear higher. The yield on the Ten Year Treasury Note has fallen to near 2.4% today.

I am wondering if some of the weakness being seen in stocks today - and the resultant rush into Treasuries - might be tied partially to investor concerns over the Ebola virus. That slowing PMI number this morning seemed to get the ball really rolling to the downside but we then got news that a second patient is now being tested for possible contamination with Ebola. Some might ( and I am stressing that this is only a guess ) be thinking worst case scenario with an epidemic that would stunt consumer growth. Who knows? But for whatever reason, stocks at this point in the session are not yet seeing any concerted buying. Markets are funny things - they react to news in sometimes unpredictable manners choosing at times to ignore what many deem important and at other times possibly overreacting.

As a personal side note, I do not understand why we do not have a quarantine in place for incoming flights from those regions of West Africa where that virus is raging. Is it more political correctness at the expense of public safety of US citizens?

We can all argue about the proper role of government but one thing that we can probably all agree on is that one of the chief roles, if not THE CHIEF ROLE, of the federal government is protecting the well-being/safety of its citizens. To me, it is inexcusable that we are allowing anyone coming from that area of the world into this country. How many more deadly or crippling diseases are the authorities going to allow into this nation before we get serious about our borders?

There are too many instances of diseases coming into this nation, that we cannot even identify in some cases or that we once had eliminated here to believe that our open borders and lax immigration policies are not the main contributors.

Equity Markets Remain Jittery

Stocks continue to waver with some investors fretting about overall slowing global economic growth. The September Manufacturing PMI numbers were released this morning by the Institute for Supply Management showing a fall to 56.6 from August's 59.0 reading. The reading remains above 50 showing continued expansion but the pace slowed and that is feeding into those concerns noted above.

The one number that I found noteworthy was the New Orders index. That fell to 60.0 from August's 66.7, which was a multi-year high according to Dow Jones. Again, nothing strongly negative but it does reflect a slowing trend and that is spooking equity bulls somewhat.

That is bringing some strong buying into the bond market which notched a three week high today.

The flip side to this were numbers out of China. It's version of the manufacturing PMI came in at a 51.1 reading for September. That was steady with the August reading.

Investors/traders are looking at this and seeing the glass half full this morning ( especially in the copper and silver markets). The thinking is, "Yes, we knew China was slowing down but at least it seems to have stabilized". One month does not a trend make but for today, copper is breathing a sigh of relief and has thus managed to hold above $3.00. Silver seems to be taking its cues from the red metal and has clawed back above $17 on the number.

The weakness in the stock markets has sent some safe haven buying into gold this morning ( note the Yen is also higher confirming the safe haven bid seen in the gold and bond markets ) and that is keeping the metal afloat above psychological and round number support at $1200. Even the HUI is bouncing today.

Something also I am watching this morning is the further melt-up in the feeder cattle market. In going over the COT data for this very small and thinly traded futures market, I noted that the small specs or general public, have been holding the bulk of the short position in there and they are being mercilessly brutalized by the hedge funds who are squeezing them to kingdom come. Again, this market is currently experiencing a parabolic blow off run which I want to hasten to add makes it EXTREMELY DANGEROUS for all by the most experienced and nimble trader. Be careful with it unless you have some very deep pockets.
Every now and then a mania comes along in the futures world and this market is one of them. When the panic buying out at the auction barns in the country is going to come to an end is anyone's guess but with replacement feeders fetching such nose-bleed prices, my view is that once the panic ends, the fall will be quite dramatic. Oh would I have loved being a cattle guy at this time in the industry with calves to sell! it was not that long ago when you could not GIVE them away.

Crude oil has erased half of yesterday's massive losses as an unexpected drop in supplies.

More later....

Tuesday, September 30, 2014

EuroZone Inflation Data Hammers the Euro

WOW! The Euro is getting obliterated on the foreign exchange markets this morning as news of an horrendous reading (for the ECB) on the inflation front sent shock waves through the markets. Consumer price inflation came in at 0.3% for the month of September, the slowest rate since October 2009!

That immediately fueled further speculation that the ECB is going to be forced to implement some sort of QE over there in order to try to force a turnaround in the lackluster economy.

With a meeting of the ECB later this week, traders are paying even more close attention to what will come out of it in regards to potential moves by the Central Bank.

The currency has fallen through one level of chart support after another and as of yet still shows no sign of bottoming. Today's session low is right smack dab in the support zone noted. If that does not stem the bleeding, I do not see anything on the chart until below 1.2400.

With the Euro getting steamrolled and falling below support near 1.2650 and even psychological support at round number 1.2600, the US Dollar is soaring higher. As it moves higher, the commodity complex is also getting hammered.

Crude oil in particular is reeling as it is currently down more than $3.00/bbl as I type these comments. The low is near $91 thus far. There is some chart support just below the market near the zone from $90.60-$90.40, which if that fails to hold this market, is the last support zone I see on the crude chart until closer to the $87.50 level.

Silver has completely fallen out of bed as it is down more than 3% at this time and has lost psychological chart support near $17.00. It is trying to stabilize there but copper is threatening the $3.00 level and if it goes, so too will silver.

The Goldman Sachs Commodity Complex is imploding with the index currently down over 2% and notching a brand new, fresh 27 month low. Even cattle are seeing selling pressure today which is something considering the strength in that complex.

The strong dollar simply makes US exports that much more expensive on the global market and that fact tends to undercut buying. The Dollar is working its way steadily towards the next zone of resistance on the chart ( 86.50 - 87.00).

The Brazilian Real is also continuing to fall against the Dollar making US soybeans less competitive with Brazilian-origin beans as well. Again, most grain traders that I have known over the years haven't a clue about currency exchange ranges and tend to be myopically focused on the US domestic market to the exclusion of the impact of currency exchange rates on export business.

With today being the actual end of the quarter and the end of the month, these large moves in the markets may also be partially attributed to book squaring and evening of positions. The start of the new month will be very interesting to see how fund managers intend to position themselves as they put money back to work.

Here is a chart of the GSCI:

The HUI has completely surrendered all of its gains for 2014 and is now trading well below the ending level made on December 2013.

Here is the most recent TIPs spread chart overlaid with the gold price. Notice how the two seem to be moving in perfect harmony. The market is simply not the least bit worried about any inflation at this point.

One last chart for right now... it is the big gold ETF, GLD, which reported holdings that once more dropped. Total holdings are now at 772.25 tons, having now dropped to a level last seen in early December of 2008. All that gold that was bought based on the experiment we now call Quantitative Easing has been sold and the money put to work elsewhere. Simply put, Western-origin gold investment demand stinks to high heaven. Just remember that whenever some huckster out there regales you with wild, baseless and unverifiable claims of "massive gold buying".

Sure someone is buying the gold that is being sold but that is true in any market, even as it falls in price because there must always be a buyer when there is a seller. The point to remember however is that if there are more sellers willing to sell at a lower price than there are buyers willing to buy at a high price, the price is going to go down. Period!

A last written item - in watching the Japanese Yen trade in the midst of this carnage this morning, I am noting some firmness in that currency, as well as in the bond market, telling us that there is some safe haven buying occurring against this backdrop. It does appear that is what is keeping gold supported about the $1200 level for now even as the gold mining shares evaporate in price.

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Wednesday, 8 October 2014

market moniter

The Indian Market Monitor

Saturday, October 4, 2014

Performance Map

Friday, October 3, 2014

Nifty @ 7800 is Stop for Longs

Wednesday, October 1, 2014

Sector Performance in September

Diwali Discount

Tuesday, September 30, 2014

Top 25 in September

Saturday, September 27, 2014

RS / Market Breadth

Monday, September 22, 2014

Recent Trades

Saturday, September 20, 2014

Sector Scan

Top 25 Stocks

RS

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Trader Dan's Market Views

Tuesday, October 7, 2014

Safe Haven Day ( Again!)

Monday, October 6, 2014

USDA Crop Condition and Progress Data

Macro Trade Reverses from Friday

Friday, October 3, 2014

Mining Shares go Negative on the Year

Jobs Reports Sends Dollar Soaring

Wednesday, October 1, 2014

Saudi Oil Price Cut Surprises Market

Equity Markets Remain Jittery

Tuesday, September 30, 2014

EuroZone Inflation Data Hammers the Euro