07 May 2010

Silver Breaks Above 18 in a Nearly Vertical Move, and Gold Follows Higher - Response to a CFTC Warning?

The price of silver just spiked higher.

More fat fingers?

Plenty of fat heads, but they are primarily occupied being financial news anchors and commentators, and of course Congressmen, at least according to Jim Glassman of JPM.

Looking for any news. All we have is a rumour about an investigation into the silver market short interest that may be intensifying but has been in the market for some days.

Some spike. Some markets.

Perhaps the market is celebrating the defeat of EVERY shareholder initiative at the Goldman Sachs meeting today. No connection to silver, but it makes as much sense as anything that has been said in the mainstream media to explain most big market moves in the last few days.

Maybe a trader typed in a million unit buy order for GOOGLE and accidentally typed in SILVER instead.

The IMF meets on May 11 in Zurich. They will be discussing alternatives to the dollar reserve schema, and there is some speculation that Russia and China will formally raise the issue of gold and silver in the currency basket based on their stated positions and some speeches by officials. But that seems a bit of a reach without something fresher, unless news is leaking out somewhere. We have not heard it.

Any new news? lol.


Well it looks like gold is now getting into the act, and silver continues to climb.

These are some seriously opaque, pseudo random, weirding way markets.

Trading them here is like being on the outside of an inside joke, but no one is laughing.

Much later...

Karl Denninger thinks it was due to a warning from the CFTC on speculative position limits that came out today. Kudos to Karl. Good eye on that warning, and nice call on the correlation.

The timing makes sense, although it must have been some hedge funds piling on and running their games with the mining stocks. They like to start shorting the miners, and sometimes with a somewhat naked abandon, and then hammer the front month metals futures in tandem with some of the Banks to drive down the spot price. I doubt JPM is bothered by any practical limits, exemptions-wise. Still, it might be the dawn of a new day.

CFTC Issues Advisory On Compliance With Speculative Limits
By Sarah N. Lynch
Publié le 07 Mai 2010

WASHINGTON - (Dow Jones)- The U.S. Commodity Futures Trading Commission issued a warning to the market on Friday to remind participants that speculative trading limits apply throughout the trading day as well as at the end of trading.

The warning was issued as an advisory note by the CFTC's Division of Market Oversight. A spokesman said the release of the advisory on Friday was not connected to Thursday's unusual market events.

The advisory sought to remind market players that "any trader whose position exceeds the applicable speculative position limit at any time during the day is in violation" of federal commodities law even if the trader reduces the position limit levels at the time the market closes.

The CFTC gave no explanation for why it decided to issue the advisory.

It comes as the CFTC is considering a proposal to crack down on energy speculative traders by imposing stricter trading limits.

Did Gary Gensler take a three day weekend, leaving Bart Chilton in charge?

Or did yesterday's market meltdown provoke a memo from the Big Boss to 'do something' about Wall Street?

As an aside, I am back in long gold and silver and short stocks from earlier today. But the positions are considerably more modest than at the beginning of this week.

If the bulls cannot lift themselves out of this hole in stocks after today's hopped up Jobs Report they might have to go down and get a better footing. Unless Jean-Claude and Ben decide to do something about Greece over the weekend.