SP 500 and NDX Futures Daily Charts - June Stock Option Expiration Tomorrow

Unusually low VIX, shaky world stage with bullets flying, lofty equity valuations just stuck below key resistance. 

And tomorrow is the June options expiration.

 

I have not yet if and how I want to play the markets tomorrow, so I have not yet done anything with it.  But I have some dry powder ready.

 

These quiet summer markets are tough to play.  Just ask the gold and silver bears.

 

Have a pleasant evening.

 

 

Why the Big Rally in Precious Metals Today?

I am not taking any victory laps just yet, because we have seen these big one day gains fade in the past, and we do not yet know exactly what prompted this massive short covering, which is what triggered this breakout through 1300.  It is certainly technical in nature, at least in part.

But I thought it was interesting to get an early cross section.  I have posted excerpts below.

I follow the trends, and if this rally can extend itself, and take out some of the more intermediate term resistance and downtrends, then I think we will know much more about it.  These big one day moves up on no news are just a corollary to the big moves down on heavily selling in quiet periods.  They are not a sign of a healthy market providing solid price discovery.

 

If it does extend, and the trend changes, then there will be a number of factors, but perhaps one defining 'trigger event' that by itself could not do it, but given the confluence of events, was the snowfall that started an avalanche.  But we do not have enough information to say that yet.

 

As you know I have an eye on the BRICs, and on Argentina. "...let me just say that it is looking like the first lightning flash in what could become the Perfect Storm."

 

I also have a very open mind for silver on this, which has been a 'stonewall' over the past week or so.  Hardly anyone is talking about it except for a few professionals. 

 

I no longer hold my 'modest position in SLW.'   It was for a trade and was not large in relation to my portfolio.  But the gain was nice, too good and quick to pass by.

One day at a time. Follow through is everything.  Here is what people are saying so far.  As Bill Murphy says, 'price movement makes market commentary.'

"Gold prices were on track for the biggest daily gain in nine months Thursday, driven by investors who were caught flat-footed by the Federal Reserve's outlook for continued low interest rates...

Prices rocketed past the psychologically important $1,300-an-ounce level, breathing new life into the market and luring momentum-chasing funds in as buyers, brokers said. Gold futures had crossed above their 50-day and 100-day moving averages in quick order, sending buy signals to investors who follow such technical indicators."

Wall St. Journal

"Intriguingly, just as we warned, gold and silver have been on a significant tear since the Qingdao CCFD probe began (as synthetic hedges are unwound - which dominate pricing in PMs) while copper and iron ore and so on have all fallen (as the reality of no real demand leaks into these commodities)."

ZeroHedge

"Gold prices pushed above $1,300 on Thursday, propelled by continued tension in Iraq and signals from Federal Reserve Chairwoman Janet Yellen that short-term rates can be held steady for a while longer."

Marketwatch

"Gold price on insane surge after massive trade. The gold price scaled $1,300 an ounce for the first time in more than a month, after comments by US Federal Reserve chair Janet Yellen yesterday and a huge buyer lit a fire under traders."

Mining.com

"Gold rose above $1,310 an ounce on Thursday, gaining almost 3 percent as a drop in the dollar and a lack of commitment by the U.S. Federal Reserve to raise interest rates sent metal investors rushing to buy back their bearish bets...

Gold's rise to a 1-1/2 month high was boosted by the U.S. dollar index's tumble a day after the Fed signaled it will stick with a near-zero interest rate policy to support the economy, disappointing traders who had bet on hints of policy tightening. Analysts said that market participants in droves aggressively bought back short positions that were placed earlier in the week on expectations that a stronger U.S. economy would dampen bullion demand."

Reuters

"Gold surged the most in nine months and silver jumped to a 13-week high as the Federal Reserve said U.S. interest rates will remain low, driving the dollar down and boosting demand for the metals as alternative investments.

Gold topped $1,300 an ounce and silver rose the most in four months, leading a gauge of 24 commodities to the highest since August. The greenback fell to a four-week low against a basket of 10 major currencies. Yesterday, Fed Chair Janet Yellen said rates will probably remain low for a considerable time after debt purchases by the central bank end."

Bloomberg

NAV Premiums of Certain Precious Metal Trusts and Funds

"...let me just say that it is looking like the first lightning flash in what could become the Perfect Storm."

The US Financial Crisis and Currency Wars: A Tragedy In Five Acts

Summer Assignment

Here is a fairly conventional look at Aristotle's analysis of what constitutes a tragedy.

The Greek authors modeled their plays on life and their own legends. Aristotle came afterwards and analysed those successful tragedies, both in art and in life, to determine what made them so.

I am sure this will take many of you back to high school. It brings back to mind those wonderful afternoons in AP English, with one of the most remarkable teachers I had ever met.

I think without too much effort, one can fit any number of situations into this framework. I think it is very possible to fit our current financial crisis and the battle to sustain the supremacy of the Dollar into this as well.

I was going to plot out the rake's progress in this for you, but if I give you the hint to start just after the Bretton Woods agreement, and chart the progress of American capitalism in the world until today.  Remember that events tend to accelerate, and are not evenly spaced out in time. 

You may wish to avoid that Desdemona's handkerchief and other such nonsense about the nanny state and creeping socialism spoiling and dragging down the American heroic spirit, which are fogs to avoid the truth. It is much the same to say that the disabled and the Untermenschen were burdens and parasites, like rats, to the thousand year reign of the Ayrans, who never really existed in the first place.  If so you may be able to figure it all out very well for yourselves.

 

Extra credit will be given for those who are able to identify the major figures of sometimes unintended comic relief, our modern day fools, Falstaffs, and Calibans of mischief.  Hint:  Alan Greenspan and His Merry Pranksters.

One further hint. The US' hamartia is bound up in what became the notion of American exceptionalism. And Wall Street and the City of London are its Iago.

Enjoy the Summer. Bueller? Bueller? lol.

Traditionally, a tragedy is divided into five acts.

The first act introduces the characters in a state of happiness, or at the height of their power, influence, or fame.

The second act typically introduces a problem or dilemma, which reaches a point of crisis in the third act, but which can still be successfully averted.

In the fourth act, the main characters fail to avert or avoid the impending crisis or catastrophe, and disaster occurs.

The fifth act traditionally reveals the grim consequences of that failure.

According to Aristotle, tragedy necessarily involves: hamartia, catastrophe, hubris, anagnorisis, peripeteia, and catharsis.

Hamartia: A term from Greek tragedy that literally means "missing the mark." Hamartia came to signify a tragic flaw, especially a misperception, a lack of some important insight, or some willful blindness that ironically results from one's own strengths and abilities. In Greek tragedy, the protagonist frequently possesses some sort of fatal flaw that causes catastrophic results after he fails to recognize some fact or truth that could have saved him if he recognized it earlier.

Catastrophe: The "turning downward" or the beginning of a decline in fortunes in the plot in a classical tragedy. One might also refer to is as a spiral of decline.

Hubris: It is a negative term implying both arrogant, excessive self-pride or self-confidence, and also a hamartia, a lack of some important perception or insight and self-awareness due to pride in one's abilities.

“He who climbs upon the highest mountains laughs at all tragedies, real or imaginary.”

Friedrich Nietzsche

It is the opposite of the Greek term arête, which implies a humble and constant striving for perfection and self-improvement combined with a realistic awareness that such perfection cannot be reached. As long as an individual strives to do and be the best, that individual has arête. 

Anagorisis: Greek for "recognition" to describe the moment of tragic recognition in which the protagonist realizes some important fact or insight, especially a truth about themselves, human nature, or their personal situation.

 

Peripeteia: Greek for "sudden change" it is a sudden reversal of fortune in a story, play, or any narrative in which there is an observable change in direction. In tragedy, this is often a change from stability and happiness toward the destruction or downfall of the protagonist.

Catharsis: An emotional discharge that brings about a moral or spiritual renewal or welcome relief from tension and anxiety.

Gold Daily and Silver Weekly Charts - Living in Solidarity With the Truth

"You have to live in Truth to remain spiritually free. Life in Truth consists of giving testimony, acknowledging the Truth and defending it in each situation. Truth never changes. It cannot be destroyed by any decision or legal act.  Our slavery stems from our surrender to the rule of the lie, our failure to unmask a lie, and to protest against it in everyday life. Instead of correcting the lie we keep silent, or pretend to believe it is true.

This means living in falsehood. Telling the Truth with courage is a way leading directly to freedom.   A person who tells the Truth is a free man despite external slavery, imprisonment, or official custody.  If in the present political situation the majority of  the Polish people followed the one and only Truth, our nation would become spiritually free today! The external or political freedom would follow sooner or later as a consequence of the spiritual freedom and faithfulness to the Truth.

Overcoming fear is a key element in the process of setting Man free.  Fear springs from threats. We fear suffering; we fear the loss of some goods, the loss of freedom, health or a job. This fear makes us act against our conscience, and it is by means of our conscience that we take the measure of Truth.  We overcome fear the moment we agree to lose something for the sake of a higher value.  If Truth becomes a value worth suffering for, worth taking a risk, then we will overcome the fear that keeps us in slavery...

Any nation is bound to perish if deprived of bravery, if it pretends that everything is good when it is not, and if it is satisfied with half-truths. Every day we must be aware that when we are demanding truth from others we must live in truth ourselves, demanding justice we must be just, demanding bravery we must be brave."

Jerzy Popiełuszko

Silver was the stonewall again, refusing to lose its aspiration to the 20 handle. Gold wavered a bit but finished well.

 

We *might* get a gut check for those punters who flipped metals positions trying to second guess the market today.

But all in all, the clock is counting down on this act of the drama.

The SGE received approval for a gold free trade zone in Shanghai. The BRICs will be meeting in Brazil on July 15.  They are chafing at the latest excesses of empire.

The financiers will never see this next one coming, they are so used to looking down on everything and everyone.  If you are looking for clues, the kabuki at the Comex will be one of the last places to see things as they really are.

 

When one considers the way things are among the puffed up princes, along the lines of Pascal's wager, it really is hard not to laugh.  The last will be first, and the smart money are dopes, getting it all completely wrong, like an opera buffo.

It really is.  Irony doesn't even begin to cover it.

Have a pleasant evening.

SP 500 and NDX Futures Daily Charts - Technical Foul

Stocks were in a highly technical trade off the FOMC announcement.

There was some spin put out, probably by trading desks earlier in the week, that the Fed might increase the taper. This was a howler.

So the shorts were squeezed and risk perception has fallen to a cyclical low.

Summer is a tough time to trade, because the volumes are so dull. But I now have my eye on the short side of the equity markets, in addition to the intermediate positions in gold and silver.   As any first year Latin student will tell you without really understanding it, festina lente. 

Event risk is very high. But the hubris now carrying the financial sector is powerful. It will cause them to ignore the signs of impending danger, but that change will come on its own schedule. 

I came across a phrase the other day, that while unrelated, seems to describe the US financial television channels fairly well.   Containing little of substance; all teeth and teats.

Have a pleasant evening.

NAV Premiums of Certain Precious Metal Trusts and Funds - And Ah! Bright Wings

"When the people of any particular country have such confidence in the fortune, probity, and prudence of a particular banker, as to believe that he is always ready to pay upon demand such of his promissory notes as are likely to be at any time presented to him; those notes come to have the same currency as gold and silver money, from the confidence that such money can at any time be had for them...

The commerce and industry of the country, however, it must be acknowledged, though they may be somewhat augmented, cannot be altogether so secure, when they are thus, as it were, suspended upon the Daedalian wings of paper money, as when they travel about upon the solid ground of gold and silver."

Adam Smith, Wealth of Nations

By the way, from what I have been able to determine, Adam Smith never said, "The problem with fiat money is that it rewards the minority that can handle money, but fools the generation that has worked and saved money."

 

It is certainly popular on the internet, and quoted widely.  But I have never found even the use of the word 'fiat money' in any of his writings that I have examined closely, much less this particular quote. And his use of the word 'minority' seems to be confined to the context of someone who has not yet 'come of age' or their majority.

If you find an actual citation from his original works I would be glad to have it.  I spend quite a bit of time trying to search out the basis for various quotes.  I am not always successful, but am continually shocked at how many quotes there are that seem to be just constructed out of thin air. 

And this does not include the even more common practice of taking quotes selectively and out of context to support notions that the author could have hardly been expected to support given the body of their work and thought in context.

 

Related:  Paul Krugman Does Some Injustice to the Thoughts of Adam Smith on Gold, Silver, and Money

By the way, some of Krugman's acolytes later admitted the error.  If only his more vehement opponents would so willingly show such grace in a misstep, of which we are all capable.  But such is the undervalued status of truth at the extremes of the political continuum.  God is truly to be found in the ordinary things, and the exceptional, but as He defines such exceptional rarities in His economy.

 

Bill Black on the Rule of Predatory Finance Over Argentina

As you know I think that this ruling by the Supreme Court, written by Antonin Scalia, which essentially puts the Argentine people and the other creditors at the mercy of the demands of a few vulture funds, may prove to be a watershed, or perhaps trigger, event in the excesses of crony capitalism and the Empire of the Dollar. 

 

The blowback from this action on foreign assets held in the US, and on US corporate assets held overseas, may be profound.  

 

The BRICs will be having their annual summit in mid-July.   And the US has certainly given them something to think about,  set at least a part of their agenda,  and given them a common cause of concerns, over the past four or five months.   I see no reason for optimism that a ruling elite, grown in-bred and self-absorbed in its hubris, will do anything different in its self-serving policies.

 

If there ever was a time for enlightened leadership to rise to the occasion it is now.  And in looking over the current crop of puffed-up princes and predators, we can see none.