Dan Norcini
Today was another case of "Buy Europe" as traders reacted to further rumblings out of Brussels that the EU finance ministers were finagling a way around the original Euro treaty of 1991 which supposedly prevents bailouts of countries that screw up their own fiscal house. The idea, best that I can understand it, is that the member countries would pool some funds and provide direct loans to Greece. Germany apparently did not like the idea.
Traders did however and began buying up the European currencies as the Euro, Swiss Franc, and the British Pound were all higher today after getting whacked yesterday. Seems like the Yo-Yo model is still intact. Tomorrow- who knows?
Regardless, today was "what risk - there ain't no risk" and with that, everything that moved and was not nailed down to the ground was purchased. Crude oil, copper, grains, cotton, you name it - the only exceptions that I could see were natural gas and sugar. Yes sirree bob - the algorithms are alive and well as the weakness in the Dollar triggered them to buy today after triggering them to sell yesterday.
I think I have found a solution to the world's search for plentiful and cheap energy - I read somewhere that some clever inventors are trying to use the motion of the ocean's waves to produce energy. Forget that - how about harnessing all the motion that is generated and then wasted from these damn algorithms and funnel that into some device that can crank out electricity and crude oil would become obsolete overnight.
As I said yesterday, there is no trading fundamentals anymore in these markets, it is all about money flows from hedge funds and those are all cranked out by machines. The machines are running the markets in what seems like a "Terminator" movie. Skynet is probably not far behind. By then it will decide to get short the grains and decide that to really make a lot of profits, it needs to eliminate demand sources so it will generate another order to kill off the carbon-based humanoids that eat the stuff. Once demand is then curtailed, prices will fall and Skynet can clean up on those shorts. Honestly, that is what it feels like at times sitting here watching the money being crammed into markets and ripped out the next day only to be stuffed back in the following day.
Skynet is obviously long the equity markets as the S&P 500 made a yearly high in today's trading session negating a potential double top near the 1150 level. The day is yet young so it remains to be seen whether or not John Conner can take it down. It could be I actually have the wrong movie in mind as the entire rally might be part of "The Matrix" and its imaginary world of illusion. I certainly have no idea what they are trading in there as the stock market has priced in one helluva recovery. Even the Administration was forced to admit the obvious today that the unemployment rate is going to stay elevated for an extended period of time so I am a bit confused as to where all the "demand" from this consumer demand driven economy is supposed to be coming from. But that is just a case of the "market" being far wiser than any of us. I am sure they have that all figured out.
Back to gold - the bounce back up and away from $1,100 confirms that level of support and the bottom of the trading range. With the push through $1,120 short covering was triggered among the weaker shorts taking price up into the region where the stronger-handed shorts once again emerged near their former level of defense near $1,130. Bulls will need to jam price through their selling to get the market on track for a test of the high from 2 weeks ago. That level, centered near $1,145 is what stands between them and a push to $1,160. The bullion banks will attempt to stymie the move higher here at $1,130 and then try to take price back down to the lower end of the trading range. Interestingly enough, gold has been making a series of higher lows over the past 6 weeks with the result that while it is still in a consolidation period or range trade, the range is tightening or constricting. The longer it can hold above the $1,100 level, the higher the odds are that the breakout move will be to the upside.
The HUI is following the pattern seen in the gold today. It is higher moving away from support near the 409 - 410 level but it too is meeting overhead selling as it works in its range trade. The top of the range is 429 - 431. The Dollar continues to flirt with a technical breakdown as it inches ever lower towards the bottom part of its recent trading range. It came within a mere few points of taking out the bottom of the range and inducing some stop loss sell orders from being activated but the bulls were able to muscle price away from the danger level - for now. Volume just seems to dry up as it moves toward 80 on the downside but this could get quite interesting if the bears show more conviction and attempt to make a concerted effort to pick off those swelling stops. Just like gold, although in the inverse, the Dollar's range is tightening but it has been making a series of lower highs that show up more on the hourly chart rather than the daily. The jury is still decidedly out on this thing but as close as it is to critical support, one would have to give the slight edge to the bears at this point. Once again, it all depends on how traders/investors react to the developments coming out of Europe in relation to Greece. That situation is so fluid and traders are so fickle that predicting anything in advance is a fool's errand.
It is probably also not helping the Dollar any when we read that the President has nominated Janet Yellen, current head of the San Francisco Federal Reserve, to the position of Vice Chair of the Federal Reserve. She is as dovish as dovish could be. Traders would interpret such a choice for that position as a signal that the Dollar will be sacrificed and that inflation is in the cards. Yellen is another Academic with ZERO private sector experience whose entire resume can be summed up as "perpetual university student". There is certainly nothing there to inspire the least bit of confidence when it comes to supporting the currency.
Bonds are strangely higher today when one considers a yearly high in the S&P 500 and a general reflation trade. I have given up attempting to figure that market out as it is undoubtedly so heavily intervened in by the monetary authorities that the signals it gives off are dubious. One would think that with gold moving higher today and the Dollar lower that the last thing that would be moving higher is the bond market. After all, if the economy is so damned good that the equities can put in a yearly high leading one to believe the chatter that the Fed is moving towards draining excess liquidity because things are so peachy-keen, then why would money be flowing INTO and not OUT OF bonds.
In the meantime, don't worry about a single thing - bankrupted states, financially impoverished towns, townships, counties and cities, falling tax revenues, chronically high underemployment rates and federal government spending that can only be described as a treacherous betrayal of the next generation of citizens - none of this is important - the only thing that matter is that the stock market is higher so all is well. Let the good times roll baby!
Personally it looks to me like America has been bewitched.
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