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It was 'Risk On' today as stocks rallied and went out on their highs and gold followed.
The US Dollar dropped to a post WW II low against the Yen on talk of QE3. I suspect strongly that someone in Treasury shared some prospective monetary actions with their Asian counterparts today. Apparently they are not so sanguine about the benign affects of modern monetary theory, even of the more benign and traditional Keynesian sort.
The Fed Is Laying the Groundwork for Further Easing - Thoma
Stimulus will not work in a system that remains unbalanced and broken, with the real economy skewed to support a non-productive financial class. And austerity will merely bring the final crash and counter reaction more quickly. It will not 'get it over with.' It is more like driving faster so you can impact with this bridge abutment rather than one further down the road. A flaming wreck is rarely a good outcome. We might consider fixing the car instead. But that would require a change of drivers.
See you Sunday night.
Silver and especially gold had nice rallies today as it was 'risk on' with Sarkozy and Merkel crooning a lullaby to the equity markets. The dollar retreated sharply from its zenith. It has not yet broken uptrend.
I wonder if the metals liquidation is over, and if the hands that remain are strong and relatively unleveraged. We will not know until the stock market corrects again and we see if the metals follow.
Earnings season is coming up for stocks. I am not impressed with the stock rally today and put a small short position back on since we have reached my 'bounce' targets. Now we see if we rally on or not.
I am long gold bullion. We have not yet broken out and may be coming to a similar situation that we have had a bounce, but it must move higher than 1680 and 1700 and stick a couple days close to say the trend is higher again in the short term.
So I have a little hedge back on. If the metals break out and stocks keep rallying then the miners look a little more interesting.
I have included the December Gold futures chart to make some of the levels of resistance and their meaning easier to see.
Obama speaks tomorrow, and the Swiss are joining the fiat flight to the bottom of the barrel, as each nation tries to beggar their neighbor and join the mercantilist daisy chain.
So the financiers had to hit gold to take it out of the spotlight. We may see more bear raids in the paper trade, supported by physical buying as Asia and the developing world recapitalizes their banks with precious metals, shedding the dollar reserve currency, which is a holdover from the declining order of international finance.
The most blatant raids were put on gold last night with orchestrated selling hitting it in the off hours, including a two percent drop in minutes as massive paper selling hit the bids.
"Spot gold dropped nearly $40, two minutes after U.S. gold tumbled about $50 over three minutes. Cash gold prices since regained some lost ground to $1,836.26 an ounce by 0559 GMT, down 1.5 percent. U.S. gold GCcv1 dived to as low as $1,818.2, and was trading at $1,839.10, down 1.8 percent from the previous close. "Someone dumped a big position with little care, which set off stops and caused the price to cascade even lower," said a Singapore-based trader. Some traders talked about some 4,000 lots of gold being dumped on COMEX…"
Reuters
And yet the price found resilient support in the 1820 area where we expected it, despite the overshoot on the big decline into the 1790s.
I bought back some of my gold position today as the price overshot support and dropped below 1800. We have a confirmation of a familiar support level around today's lows.
They try to make these things look complex, and frightening, but they are really not.
The debts will be discharged by growth or by default, or some combination thereof. The defaults will be done largely by printing money.
Growth is a dirty word in the west, because the fortunate and powerful are in control and wish to impose their brand of neo-feudalism, similar to that which is already in place in China and Russia with their own brands of authoritarian oligarchy, masquerading as capitalist markets.
And so we will see printing around the world, by the debtors and the exporters. Where this will all end who can say with certainty. But it will end, and badly.
A wild day in the markets today as stocks came in much higher and then tanked, with the CDS spreads on Bank of America running much higher along with gold and to a lesser extent silver.
Financials pressed the SP 500 lower all day, and Goldman broke hard to the downside into the close as a story on Reuters suggested that Lloyd Blankfein had hired a white collar criminal defense attorney named Reid Weingarten.
On Friday Bernanke will be speaking at Jackson Hole, and the markets are looking for some indication of the latest subsidy to the markets from the Fed. If not a flat out QE3, then perhaps Benny will speak about a program to control the longer end of the yield curve.
All this uncertainty had investor flocking into the safe haven of gold sending it to the 1890's. This has been a brutal rally for the metals bears.
This Thursday the 25th is the option expiration on the Comex. I have to admit that I am concerned that gold has been allowed to rise up into the oxygen depletion zone here, as had been done with silver not all that long ago, and that applications of bear raids and margin increases will bring it tumbling back down to support.
I wouldn't try and get in front of this comet, because we are not quite sure what is driving it. Chavez' margin call on the Bank of England's gold could be triggering this parabolic run. It would nice if gold consolidated its gains soon. I am playing the markets defensively for now.
Let's see what happens.
I had to chuckle a little today as the corporate spokesmodels on Bloomberg were reviewing the day's trade, and noted the slump in gold with the VIX spiking and stocks slumping, as out of character. 'Duh, what's up with that?' was the most insightful comment of the day.
So, we have had round one of the post option expiry 'gut check' which I had suggested would occur. It was a little more intense than the chart might suggest, because ordinarily gold would have been rallying hard up to the 1650 level on a day like today. But that was not in the cards as dealt from the bottom of the deck.
So what next? I think gold and silver will consolidate and chop around until the deficit discussion is resolved, one way or the other. And I am still in a very defensive position against a correction because we have come far and fast, and the Wall Street wiseguys just do not have the goods to cover their bets, so they have to continue running their bluffs.
La Douleur back-kissed the key trendline it had just broken, so no strong clue there yet. It still is in a position to rally short term and retake the upper end of the trend. A lot of this depends on short term policy decisions in the States.
But in the long run, paper will deteriorate, because it has nowhere else to go. The end game for the eggheads is a worldwide central bank setting fiscal policy and dictating values under the direction of a few senior pigmen. I don't think they will get it, or at least just yet.
Risk on, and there was consolidation in gold and silver, while the US dollar slumped against the euro.
"Why, this is very midsummer madness.”
William Shakespeare, Twelfth Night, 3.4.55
"We are developing processes and procedures by which the Treasury communicates to us what we are going to do," Plosser said, adding that the task was manageable. "How the Fed is going to go about clearing government checks. Which ones are going to be good? Which ones are not going to be good?"
Fed Preparing for US Default - Reuters
Very bullish reversal in the metals intraday, with closes in gold and silver above the psychological numbers of 1600 and 40 respectively.
If they can move higher and stick a close, and hold it through option expiration next week, you can say goodbye to these levels, the dollar, and quite a bit more.
As an aside, the other day I read an essay in a recent issue of Discover Magazine called, The End of Morality. I also found this commentary on it.
In this article, which promotes the triumph of scientific reason, utilitarianism, over what it contends are mere emotions, holdovers from history, it was put forward that it makes rational economic sense to kill one healthy person and harvest their organs, in order to provide them to five other people who can then live a higher quality of life, as an increase of goodness on the whole. The revulsion that one feels at murder is an unthinking instinct which can be overcome by higher thinking, the power of the will.
And it held this out as the higher 'good' in the new scientific morality, freed of the restraints of the mere instinct to preserve innocent life.
"You have these gut reactions and they feel authoritative, like the voice of God or your conscience. But these instincts are not commands from a higher power. They are just emotions hardwired into the brain as we evolved."
The logical extensions of such reasoning should be perfectly obvious to anyone with a sense of history.
And one does not even have to kill them to put them to the good service of the State, and those predestined for a higher quality of life, the übermenschen. At least, not in the beginning.
Plus ça change, plus c'est la même chose.
The 'good news' from IBM and especially a hint that the debt ceiling talks are making progress rallied the market hard today, as the shorts scrambled to cover.
It was 'risk on' and gold and silver were hit hard in a cheap shot on weakness, in the manner of a calculated bear raid as the Comex closed and the thin Globex session opened.
The dollar gave up a little more ground.
Nothing is resolved in Europe, and the debt ceiling crisis in Washington is highly artificial, more of an ideological impasse, or even coup d'etat, than a genuine crisis.
Let's see how the correction goes. Just for reference, gold has had its strongest rally off support since 1980, so a pullback is warranted and expected here.
As a reminder it is option expiry on the Comex next week.
The metals continue to move higher, in fairly steady manner, after the coordinated smackdown at the Comex for the July options expiration.
Gold and silver are typically capped and then hit on a US Non-Farm Payrolls report. Today was the capping of price. Let's see if they can hold their own tomorrow. If they do get pushed down hard, it may very well set up a short term entry point, providing the asset markets do not start liquidating based on some failure or exogenous event.
It is interesting to see the strong negative correlation between the dollar and stocks. It almost looks like they are moving asset allocations around the plate, trying to whistle up the wind of retail buying.
The metals will be entering a seasonally stronger period of the year after July based on the last ten years, barring the liquidity panic of 2008.
Major players are reported to be calling around Wall Street to reassure the bankers that the US budget deficit debate is a show piece to allow the politicians to serve up some meaningless symbolic diversions to their various constituents. Not to worry, the deal will be done, with token sacrifices from the wealthy and a further erosion of the economic viability of the middle class, the elderly, and the weak. And remember to send in those corporate donations in time for the 2012 elections.
JPM was found by the SEC, at the prompting of the states and some exceptionally blatant evidence, to be bribing officials and systematically corrupting bond markets over a long period of time.
They have settled with the SEC, and issued a press release blaming rogue traders who operated without the knowledge of management.
JPMorgan Chase does not tolerate anticompetitive activity or other violations of law. The firm assisted the government agencies in their investigations and is pleased to have resolved this matter with its regulators. The majority of the funds being paid under the settlement agreements will be distributed to municipalities and other tax-exempt issuers.
The investigations focused on a small desk that was discontinued and on certain employees who are no longer with the firm. These employees concealed their conduct from management.
The firm's policies -- both now and during the period in question -- expressly prohibit the conduct that gave rise to these proceedings. During the course of the investigations, the firm initiated enhanced supervisory protocols and worked with its regulators to further strengthen its compliance programs in the public finance business. These improvements included
implementing a heightened supervision program, increasing surveillance, and increasing antitrust, ethics and other compliance training. The firm will continue to strengthen these programs.
Under the terms of the settlements, JPMorgan Chase will pay a net amount of $211.2 million as follows: $50.0 million to the IRS; $51.2 million to the SEC; $35.0 million to the OCC; and $75.0 million to the State Attorneys General. Of those funds, $129.7 million will be eligible for distribution to municipalities and other tax-exempt issuers. The settlements are not expected to have any material impact on the firm's earnings.
One wonders if the Justice Department will be pursuing specific criminal charges against these individuals, in addition to banning them from participation in the securities markets, but allowing them to remain free to enjoy their enormous salaries and bonuses.
Stay tuned as more of these control frauds continue to fall apart, and the corporate media and the monied interest's demimonde try to ignore them and move along.
As in the case of the Madoff Ponzi scheme, if trading results are improbably and too consistently good, there is a high likelihood that fraud and corruption is being concealed.
Gold and silver had rather healthy rallies today after the artificial pounding which they had taken in pre-holiday markets in honor of Comex futures options expiration.
Mining shares tended to outperform the metals as the relationship between the miners and the metals began to converge again to a more normal correlation.
This afternoon all the safe havens including the dollar took a leg up as it became clear that the banking cartel will not allow Europe up for air.
The looting will continue until reforms are enacted and criminal penalities for rigging markets and defrauding the public are enforced.
I remain long the metals and miners and short the broad indices, although I did make some adjustments today and took some mining profits off the table, with their associated hedges.
With Greece and the end of QE2 under its belts, it was 'risk on' for Wall Street as the VIX plummeted and the safe havens of gold, bonds, and the dollar were shunned by funds eager to squeeze the shorts in the equity markets.
What next? Today was very light volumes with Canada Day and the July 4th holiday weekend, and next week will likely also be light trading, with many North Americans away on holiday.
Let the market come to us. The short term trend reversals look overdone, but they may not be over because they suit the FED and the government quite well.
This *could* be a kind of stealth QE3 - market interventions through third parties and jawboning.
And yet at the same time there has been a 'stunning plunge' in commercial gold shorts.
Silver proved to be a little more resilient than gold today, although both held their levels fairly well as the Street was engaged what is snarkily called 'window dressing,' which basic means rigging the valuations of the market.
Nothing has changed. Let's see how the holiday shortened week trades as we kick off the third quarter, and in two weeks, US earnings season with Alcoa.
The US dollar index continued its decline, as fund managers put forward a herculean effort to optimize their bonuses by buying equities.
With the dollar down, stocks up, and gold and silver down one might suspect today was an option expiration day in a delivery month on the Comex.
And so it was.
Greek vote on their bailout plan may move the markets later this week.
I put the long gold/silver and short stock indices trade back on today at an opportune moment in honor of the anomalies provided by an option expiry.
