Well, it looks like an option expiration week to me.
I pulled my 'defensive positions' in the metals today (short positions), and came out of 'flat' to stick a toe into the gold and silver markets in terms of both metals and a couple of miners that looked rather oversold intraday.
As a reminder, tomorrow is options expiration on the Comex.
You should be able to spot the support on the chart (at 1720, the top of the green trendlines). That *might* hold, but we may not have a bottom in yet. However, unless there is a game changing event like a sudden balancing of the budget, I would be very surprised if 1658 does not hold in the worst case of a decline, with something north of 1700 more likely.
But I could be wrong. It is hard to forecast price movements in the short term when the biggest and most subsidized traders and the government act informally in collusion with the exchanges to put out a spin to support policy decisions. So we will have to wait and see how far this goes.
A lot of it is going to depend on what Benny has to say on Friday. I have not shorted stocks yet, although the temptation is on the table. Maybe tomorrow ahead of the Fed, once I see how the metals act in expiry.
I was performing useful, real world activities for much of the day.
Those wild and crazy free market capitalists and Wall Street welfare queens want another central bank handout, and might toss a tantrum if they don't get it. I don't expect Ben to actually DO anything this week, but he might drop some hints about playing games with the longer end of the curve.
If he doesn't do or say anything, the markets will test his resolve, next week at the latest.
The dissenting governors are prats, so Ben is really in a tough spot with few allies. His biggest problem is the Congress, the economic luddites on the right and libertines on the left, and of course the spinelessly serpentine Obama, but he can do little about them.
He might have the sack to call their bluffs and let the markets tank, standing on principle, but it is not in the nature of the Fed to do anything like that if it threatens the banking system. Bankers have a bias to propping things up, far beyond the point of hope.
The blatant and heavy handed bear raid in the metals, although a source of some profits and very much anticipated here, still makes one want to gag at its arrogant carelessness and cheap obviousness.
Marketwatch
CME raises gold margin requirements again
August 24, 2011, 5:17 PM.
For the second time this month, the CME Group Inc., the parent company of the main metals and energy exchanges in the U.S., announced late Wednesday an increase in margin requirements to trade gold. It raised the amount of money needed to trade gold contracts by 27% to $9,450 per 100-ounce contract.
The move comes on the heels of a $104-an-ounce drop in gold futures prices, which some analysts had blamed partly on speculation that the CME would raise margin requirement again.
Gold’s approach to $2,000 an ounce “invited excess speculation and therefore margin concerns for exchanges,” said Richard Hastings, a macro strategist at Global Hunter Securities. “The quasi-exponential price behavior was dangerous and the exchanges today view this with significant concern — and act quickly.”
