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The metals reversed lower today as fresh selling hit the markets along with selling in the equities.
Jitters about the German vote and European debt situation were blamed.
See today's stock charts posting for commentary.
My view of the metals action is skeptical if not downright cynical. I assumed we would have a down day in the metals to knock out any brave souls whose call options went out in the money yesterday, and found themselves holding fresh futures contracts today.
But the market is what it is, and we need to wait for the downtrend to break. It is drawn on the gold chart in blue.
The old Wall Street adage says:
"Sell on Rosh Hashanah and Buy on Yom Kippur."
Rosh Hoshanah begins at sundown on Wednesday, 28 September this year, and Yom Kippur at sundown on Friday, 8 October.
And the selling did come in today as stocks turned lower after a stronger open.
We are into the end of the month tape-painting period, and barring any fresh negative developments from Europe we *might* have seen a bottom to the selling. But...
There was a gathering of hedge fund gurus today, including the heads of Carlyle and Blackstone. And some of these wealthy and worldly wise sages are saying that the US needs a 'financial shock' to scare the politicians into action, presumably some action that they would approve. Some shock like back to back 1000 point down days, or several huge drops in the dollar.
And Europe is floating the idea of a financial transaction tax again, which would have a devastating effect on the HFT crowd since the amount, although slight at about .1% for stocks and bonds and .01% for derivatives adds up when you are doing thousands of transactions per hour and running trillions in derivatives. The Wall Street crowd is adamantly against it, almost Dimon-esque in its opposition. I suppose that a nice wide exception for the wiseguys would work, but Europe does not seem as inclined to pander as the Yanks.
More threats to the economy from the financial sector? Why not, it has worked every time so far.
So the US market is jittery, and it is hard to see them stick a rally with any conviction in this environment of high volatility and artificial money flows guided by a few hands.
A vote in Germany on the bailouts is coming so let's see how it goes.
Today was Option Expiration Day for the metals on Comex. Presumably the call holders have been beaten sufficiently, and now it is the turn of those holding puts.
This is a nice bounce, but as a caution the downtrends in the short term have not yet been broken.
In an earlier piece today about the gold market we discussed leasing of gold by central banks into the markets which certainly does happen. The only question is how often, how much, and for what motives.
Rob Kirby has written a comprehensive piece on the Gold Carry Trade a few years ago, which I link to here. If you have any interest in this it is a good place to begin.
We get the third estimate of US Second Quarter GDP on Thursday but otherwise the domestic news is light, and US markets are being dominated by sovereign debt concerns in Europe.
