SP 500 and NDX Futues Daily Charts - Quiet Days Are Good for Painting

Very light volume day, and the tape was duly painted into the year end.

The commmentary on the financial news networks is so disassociated from reality it is almost like something out of Sunset Boulevard.

I'm ready for my closeup Mr. DeMille.

Five Charts Useful for Framing the Economic Debate in 2012

These charts are from a collection of favorite charts put together by Jared Bernstein from material put out by the Center on Budget and Policy Priorities.

The End of Year Precious Metal Bullion Bear Raid - Another Form of Window Dressing?

Like many others who watch the markets I have wondered what might be prompting this obvious bear raid on the paper precious metals market over past four weeks.

It could be explained by any number of economic developments including the decline of the Euro, but that does not really explain the downward market action which has been sporadic and not associated with news, moreso than fundamental.

One has to be a bit naive or disingenuous to ignore the blatant bombing of the market with large numbers of contracts for sale during thinly traded markets. This is the not the sort of trading that a profit seeking trader would do except under the duress of a margin call.

I admit this would be less likely if one has a high level of confidence in the CFTC.  They have not done much to inspire such confidence in the public this year, particularly in light of their mishandling of the silver market investigation and of course MF Global.

Anyone who watches the tape, rather than waving their hands from the 50,000 feet level,  can see this clearly.

From speaking with other traders, and based on my own thinking, I believe that what we are seeing is primarily a type of end of year window dressing supplemented by a broad desire to maintain 'orderly' prices by the central banks.

At the end of year an institution will mark positions to market. Granted, any number of institutions will have an off calendar fiscal year ending for example in October.

But many others observe the conventional calendar year ending in December as their fiscal year, among them JP Morgan and HSBC for example.

It is a widely remarked phenomenon that trading firms run up prices into key events to make their results look better if the market conditions permit it. And the trading desks run prices lower on some assets into key events such as option expirations.

But what about firms that have very large short positions including naked short positions with leverage? Would they have an incentive to push prices lower into key events of mark to market?

The answer is yes, particularly if markets are thin and sentiment has been battered by repeated bear raids and commentary from their friends in the financial press. They also often spread the word, one way or another, amongst big traders and friends at funds that tend to follow price momentum to add more 'punch' to their efforts.

And of course it does not hurt if a major source of bullish trading amongst small speculators has been taken down into bankruptcy.

Is this why we are seeing this now? Few can know for sure, but if we see a sharp rally in January and resumption of the bull trend the answer is more probably 'yes.'

And if so, this is just another hidden price that is being paid by a nation that cannot bring itself to be free of a financial oligarchy and their corrupting influences.

Be careful of trying to get in front of this while the downtrend is intact. Short term greed is swimming in the water with the sharks. And they own the lifeguards. This downtrend is a good test of your ability to tolerate risk and execute a properly hedged trading strategy.

Better for most not to trade at all but to take a long term horizon and follow some investment plan, and do not change it unless something fundamental changes first.

Gold Daily and Silver Weekly Charts - Dr. Bernanke's Imaginarium

They bombed the thin markets early on, running the stop loss orders and forcing liquidation not only in the futures but in the related markets like the miners and the ETFs.

The first chart shows this fairly well.

This permits a liquidation of certain assets to occur, profits on related plays and short positions and of course the obtaining of key assets on the cheap for the next ride up.

I hate to be a spoil sport but position limits will not really solve this. It would cramp their style of course, but it takes something like an uptick rule and market vigilance against throwing large orders into thin markets to prevent it.

I am sorry for those who are experiencing pain here. This will help you to assess any leverage you are using, which should be none. Also if you have a trading or short term focus and you have the latitude, eg. you are not a long only fund, you should be hedged or out of this until the downtrend breaks.

I have a loss on my bullion positions of about 4.6% thanks to hedging and holding no miners. I did have a few I picked up on a whim on Friday, but there were cut loose early today.

Wait for it. And never add to a losing position during a short term trend that is running against you. 'Averaging down' is for those who do not wish to remain in the game unless it is part of a hedging strategy.

I saw some definite signs of capitulation by the bulls today, but if Europe remains troubled we may not find a bottom until after the end of the year. Let's see how the overnight buying in Asia is going.