ICE Follows CME in Lowering Margin Requirements to Mute MF Global Impact

ZeroHedge initially misinterpreted the somewhat vague release from CME, raising an alarm amongst a number of people who sent it to me. And a number of people have since been critical of their mistake, which from what I could see was understandable. The CME release was very misleading.

ZH has since corrected it. And the ICE release makes the exchanges' intentions abundantly clear. When you are on the 'cutting edge' of releasing and interpreting news, it is possible to get it wrong once in a while. And it is to your credit to correct it as soon as you can, which has been done.

Zerohedge performs a valuable service in making headlines and news available to general readership in a timely manner, and I thank them for this. Sometimes the headlines are a bit sensational but that is what it is. But on net I am exceptionally glad that the site exists.

The exchange actions on margin may tend to quell some of the expected volatility from MF Global, which is good news to those who have accounts there which they are still trying to resolve.

But greater events are in motion, and it may end up having little lasting effect once the herd starts to move.

Exchange Actions Re: MF Global Inc.

Effective immediately, ICE Futures U.S. is temporarily
lowering the Initial Margin rate for all Speculative accounts to a
level equal to the Maintenance Margin rate for all contracts. The
Initial Margin rate for hedgers already is the same as the
Maintenance Margin rate.

This action is being taken to mute the impact of the transfer of
accounts from MF Global Inc. to other clearing members that
was effected overnight, and thereby support the integrity of
Exchange markets.

SP 500 September Futures Daily Chart and Gold Chart at the Close: Option Expiry Bear Raid

I had thought that the SP 500 would fail at a slightly higher level, the blue resistance trendline, but apparently that is not the case, at least for now.

Earnings misses in the banks and key tech bellwethers is driving the selling, and not coincidentally on the option expiration Friday for July. Michigan sentiment came in at a very low 66.5 which was well below expectations. At least for now belief in the recovery is off the table.

I beefed up my short positions in the financials as part of the short stocks / long gold & silver paired trade the other day, and this appears to be working reasonably well, giving me some room to play behind the shorts to add selectively at throwaway prices in the better miners and in bullion.

I am looking for a move down to the 1050-1060 area before the SP tries to back and fill itself on support. If it breaks down from there then the 1000 level looks possible. Keep in mind that this is a trader's market, and fundamentally it isn't telling us much of anything, except that a lack of financial reform has made the US a nation dominated by frivolous speculators who add no value and tax real GDP through price distortion.



Gold and silver were hit very hard with yet another bear raid, with the paper crowd trying to trigger selling by smashing prices with program selling at key moments and price points, running the stops and scaring the weak hands out. This is how the game is played, and particularly so in this environment of big players and lax regulations.

I don't think this precious metals selling will last much longer, but we have to keep one eye on stocks to see if there is a great move to a general sell off and act accordingly. That means little or no leverage, conservative positions, and hedging against loss. Or better yet, don't bother with the market at all except in long time frames.



Despite the rumours and rationales spread by hedge funds and trading desks like this commentary here, this was obviously a bear raid tied to today's stock options expiration. No profit motivated professional trader dumps positions like this and sells against themselves unless the motive is to drive down the price and run the stops, clearing out the weak hands and taking profits from short positions in related trades. Now that 'sales by the IMF' has gotten tired through repetition it looks like 'liquidation by John Paulson' (JP) is the new bear trade precious metals boogeyman. More likely "JP" is in reality "JPM."

A Modest Proposal