SP Futures Daily Chart: End of Month and the Bulls Need a New High, Badly

Its the end of April, and the bull run on Wall Street needs a new high to break the head and shoulders broadening top that is forming. They seem to have all they can handle to deliver another up month.



They might manage it into the close, but traders are edgy about going long into the weekend with the Greece situation still unsettled. Its probably once again up to the Banks to take it higher, using the government's money.

Just the other week I cautioned a friend on a chatboard I occasionally frequent to watch out for a divergence between gold and equities, with stocks going down while gold holds its ground or rises higher. This is a possible trend change, with the significance that could be quite dramatic in the coming months. At some point there is likely to be a revulsion against fraud, and the paper that supports it. It is unlikely to happen all at once, but in steps, or stages. There are powerful monied interests behind the status quo.

And so here we are, for now.

Guess Who Is Taking Delivery of 1.7 Tonnes of Gold from the Comex

"Never be surprised at the crumbling of an idol or the disclosure of a skeleton.”

John Emerich Lord Acton

Its delivery time for the May Gold contract on the Comex, and the statistics yesterday showed some interesting buying.

Bank of Nova Scotia 'stopped' 699 big contracts, and issued 100 contracts, for a net takedown of roughly 1.7 tons of gold, the bulk of which was supplied by J.P. Morgan.

As you may recall, the Canadian bullion bank Scotia Mocatta is a subsidiary of Bank of Nova Scotia. Socita Mocatta was recently involved in a bit of a scandal when some investors went to visit 'the vault where their gold was stored' and found it to be surprisingly, perhaps shockingly, undersupplied.

Is BNS acting to back up their paper, or are large investors asking for their bullion in advance? Either way, its an act of good faith on the part of BNS to take the delivery, and probably very smart to do it now.

While cash settlement may be an option, it is not ethical, and BNS is known for its high ethical standards towards its customers, unlike some of its more famous American cousins in the gangs of New York.

Nothing to see here, move along. Its all perfectly normal. No one really has to have what they sell and store for you anymore. Unless they are honest.

h/t Denver Dave

When You Lie Down With Them Dept: Morgan Stanley Has 69% Tier 1 Capital Exposure to the PIIGS

That statistic about Morgan Stanley was an eye opener in terms of percent of capital exposure. No wonder Angie Merkel is playing hard to get, holding out for more than another back rub. Morgan Stanley looks like it done slipped in the pig wallow, don'cha know.

Gentlemen, start your presses.

Bloomberg
JPMorgan Has Biggest Exposure to Debt Risks in Europe
By Gavin Finch

April 29 (Bloomberg) -- JPMorgan Chase & Co., the second- biggest U.S. bank by assets, has a larger exposure than any of its peers to Portugal, Italy, Ireland, Greece and Spain, according to Wells Fargo & Co.

JPMorgan’s exposure to the five so-called PIIGS countries is $36.3 billion, equating to 28 percent of the firm’s Tier-1 capital, a measure of financial strength, Wells Fargo analysts including Matthew Burnell wrote today. Morgan Stanley holds $32.4 billion of debt in the region, which equates to 69 percent of its Tier 1 capital, Burnell wrote.

“Regulatory data suggests JPMorgan’s exposure is largest in aggregate, but Morgan Stanley held the largest aggregate exposure to the PIIGS relative to Tier 1 capital,” the analysts wrote. Overall U.S. bank “exposure to Greece is lower than exposure to
Ireland, Italy and Spain.”

Bonds and stocks plunged across Europe in the past week on concern the Greek debt crisis is spreading across the euro area. Standard & Poor’s this week cut Greece, Portugal and Spain’s credit ratings as concern the nations may fail to meet their debt commitments increased.

U.S. banks held a total of $236.8 billion of exposure to the five nations, including $18.1 billion to Greece, Wells Fargo said. European banks have claims totaling $193.1 billion on Greece, according to the Bank for International Settlements, with another $832.2 billion of claims on Spain.

Performance of Several Key Currencies Since January 2007

This chart shows the comparative performance of several currencies in their dollar crosses since January 2007, or shortly before the most recent financial crisis took hold. For the US dollar itself we are using the DX index.



Gold did sell off hard in the market plunge in October of 2008 reaching an intraday low of $680, a buying opportunity of the first order. Many who said they were waiting to buy a dip never bought, because like most speculators they keep waiting for 'THE' bottom, and keep lowering their target buy price, and never really take a position. Then watch it run away from them, and wait for a pullback, but again never buy back in. Oh they will point to certain stocks that performed fabulously off the bottom, but they did not buy and hold them either, except in their fantasies and trash talk.

This is a flip side to those bulls who were long the tech bubble, and kept waiting for a higher price to sell their positions, just a few dollars more, and ended up taking a ride on a death spiral.

If you did not buy in then, what makes you think you can muster the conviction to buy on any other dip in a new major selloff? What makes you think the market will give you a second chance?

Gold never broke in the Crash of 1987, and offered quite a safe haven until Greenspan and the central banks started selling into it in 1988 to discourage the competition. Think they can do that again? With what?



And as for the theory about debt destruction making a currency more valuable, it could work, but don't hold your breath for the euro to strengthen as the sovereign debt of the PIGS starts swirling the bowl. And where they go, so will the UK and then the US go as well.

And before you complacently snicker at the problems in the eurozone, keep in mind that as a percent of GDP, the US debt is fast approaching the same level as Portugal, and climbing.