SP 500 and NDX Futures Daily Charts - Facebook Cometh - Last of the Dot Bombs?

Big down day in the US markets today as the trading desks flushed out their weaker positions and got ready to pump up Facebook tomorrow for what could work out to be the mother of pump and dump operations. I do not expect the fat lady to sing tomorrow, but I think she will start warming up for what could be remembered in a few years as the end of an era, a watershed event.

Let's see what happens. I do not expect a down day in the stock markets tomorrow but I could be wrong. Equities are short term oversold.

Tomorrow is also an options expiration.

Devaluing the Dollar - Against What?

When people talk about devaluing the dollar, as opposed to reissuing it completely, the natural question is, against what? What would one devalue it against officially if you do not wish to reinstitute a formal gold standard, which is clearly the preference of the Western central bank.

One likely candidate might be the SDR issued as a new currency for global trade, and for the pricing of international goods and commodities.

The major bone of contention as I have pointed out before would be the new 'basis' for the SDR. What Will the World's Reserve Currency Become?  The BRICs are adamant for the inclusion of additional currencies and gold and silver to make a portfolio that is less weighted to the US, Europe, and England.

A country would have the option to retain their own national currency for domestic use.

This is regards to devaluation as opposed to a hyperinflation and reissuance in which case old dollars would be scrapped for 'new dollars' with a couple of zeroes knocked off.

A friend sent this information about the US Post Office my way today. The speculation on the 'new composition' of the SDR is mine. I am assuming that the number of Euro countries decreases.

The US Post Office is using US$ to SDR conversion tables for international mail insurance --> US Postal Service US$ to SDR Policy and Tables

Earliest reference I could find to when the USPS started pricing in SDRs is 2009, which is well after the initial financial crisis.

IMF publishes daily tables on SDR values--> IMF SDR Daily Tables

Quick calc: at today's SDR rate of 1.52 SDR to 1 US$, if a new global dollar like currency was issued, then a current $1 US would buy you 66 cents of that new currency.

This is about a 34% drop in the $ value.

And that is probably best case scenario, since the daily SDR rate is priced
relative to 3 other currencies. If the US$ were to take a pounding prior to
issuance of a new currency, the exchange rate would be even less favorable to $ holders.

Summary: The pricing mechanism for replacing the greenback is in place. As
your anxiety level rises on the $, feel free to check daily to see what your bank deposits would be worth after a bank "holiday".

Net Asset Value Premiums Of Certain Precious Metal Trusts and Funds

A Quick Look At the Market Technicals: SP500, Gold, Silver, VIX

The gold and silver charts have not been updated for today's rally.

As is clear from the metals charts, gold and silver were DEEPLY oversold short term. So this *could* be a relief rally. The talking heads say it was because of the weak leading indicators this morning with overtones of QE3, but I think it is more likely that the momentum traders took it as low as it would go without hitting the physical markets and threatening a major divergence.

We will know if this is a new bull leg in the metals if they can take out and hold their exponential moving averages on the charts below decisively.

You cannot see it on this chart, but on my daily charts it appears that gold and silver are in a trading range, with the triangles being negated.

Stocks are also short term oversold. I hear that Facebook will go out at $38 per share tonight, and will likely color the market action tomorrow. The SP may tip its hand in the last hour of trading into the weekend.

It appears that tomorrow is the option expiration for May in stocks, and so I suspect that the selling today are the usual animal spirits one sees around such expirations, and tomorrow there will be quite a bit of pressure to maintain a 'stable market' for the secondary shenanigans on Facebook.

So I have taken off all stock short hedges and am letting the bullion run. I *might* put them on into the close before the weekend depending on what I see on the tape.