Shortly After the Comex Close Gold Is Allowed to Trade Above 1200

Gold traded all day below 1200, at times rising to within fifty cents of the key strike price of 1200 where a large concentration of call options were clustered.

Well, since the call options at 1200 have expired worthless, why bother using the energy to continue to suppress the price?

Blatant and arrogant price fixing is done with the cooperation of the regulators at the CFTC who are willing to turn a blind eye to repeated price manipulation by insiders in the US futures markets in precious metals, stock indices, and several key commodities including oil and foodstuffs.

Here is some commentary from the April expiration in silver. Release the Kraken.

SP Futures Daily Chart: 1037 Is a Potential 'Double Bottom' with the February Low

Watch for the SP futures to form a 'double bottom' at its pre-market morning lows of 1036.75.

If that support gives way, the market will reach for a bottom, but with a 900 handle perhaps.

Still, the market is getting rather oversold here, and the techs are not confirming a break of their support in the trendline.

I remain on the 'Long gold - Short stocks' trade that was mentioned the other day.

Silver is starting to look interesting. Later this year I think it may show us an epic rally as the artificial short scheme collapses and retreats to a higher level in a short term buying panic.

It is very difficult to forecast the timing on such an event, so better to take small positions and throw them in a drawer to be looked at only on occasion. One cannot successfully trade the truly unpredictable except in their own selective memory. When will the CFTC and SEC act to create integrity in the US markets? That is why playing such a risk trade is best done with little leverage, highly discretionary funds, and long time frames.

The gold bears are mounting a 'goal line defense' just under 1200 as we are in option expiration.

Here is a look at the SP June Futures Daily Chart at 11:30 NY Time. 1055-1060 remains a key resistance point.



In the meanwhile here is a video interview with Eric Sprott on BNN regarding our farcical financial system presided over by the central banks.

And an interesting discussion about gold, naked short selling, and Goldman Sachs with Stacy Herbert and Max Keiser, with the engaging headline, Goldman Sachs: Undeclared Enemy of the State.

SP Futures Daily Chart and a Brief Note Ahead of the Comex Option Expiry.

The SP is continuing its bounce off the long term trendline for this leg of the bull market in stocks, the result of the reflation effort by the Fed. So far this is a dead cat bounce, and below the 200 DMA it is not wise to take a bullish stance.



Stocks showed some remarkably artificial action last week that was a bit hard to miss.

Similarly, gold and silver continue to rebound from the blatant hammering they took last week as we approach the option expiration at the COMEX. A fellow that trades there said last week that the price would be back over 1200 by Wednesday, and that the option buyers 'were just asking for it.'

Perhaps they were, but it is the job of the CFTC and the US government to make sure that they don't "get it," that is, get cheated, at least not that easily, through the obvious manipulation of price which we have seen in the last week. It would be as if the Nevada Gaming Commission allowed false dealing and marked decks to facilitate the casinos cheating their customers, who were dismissed as greedy gamblers deserving it anyway. Why this argument is allowed credibility in the financial markets is beyond me.

The sellers are easily identified, as are the sellers of the calls, and the large short interests. This is not rocket science, requiring deep analysis. It is a failure to do one's job, and uphold their sworn oaths to protect the public. You can judge their motives.

Think they will be able to keep gold below 1200 into the Call Option expiration? They may have done their work already. And after the calls convert they can hit the futures again, and hits the stops of the new holders of futures from the call conversion. Different day, same racket.

As far as stocks go, 1050-1060 are old familiar friends for support and resistance. In this case 1050 is a massively important pivot, with air underneath.

"The government is the potent omnipresent teacher. For good or ill it teaches the whole people by its example. Crime is contagious. If the government becomes a lawbreaker, it breeds contempt for law; it invites every man to become a law unto himself; it invites anarchy. To declare that the end justifies the means -- to declare that the government may commit crimes -- would bring terrible retribution."

Supreme Court Justice Louis Brandeis

We are back on the long gold/silver - short stocks hedge with a bias to the downside, but that bias changes day to day. We would like to get short the long bond but we are not at that point yet.

At the close:

The SP futures went out around support at 1071, the lows for the day, but the techs were showing a little relative strength led by names like Apple. The weakness in the SP was led by the financial sector.



And as always, keep an eye on the VIX, which drew back a bit today from last weeks elevated highs. The VIX is an important indicator of downside weakness.

Notice that the SP 500 Cash Index is below its 200 Day Moving Average which is just north of 1100. Volume is showing up on the declines and the Money Flows are weak.

I continue to expect Machiavellian things from this market, for that is the stuff that perfect trading results are made of.

Canadian Stock Exchanges Closed Today

As a reminder to all you junior miner punters, today is Victoria Day, May 24, 2010, in Canada and the stock exchanges are closed.

Some of their stocks that are listed in the US are trading, obviously but most of the Canadian junior miners are not.

Jim Rickards on King World News

Jim Rickards Interview on King World News - click here to listen.

1. Financial Warfare - protectionism, excess savings, managing exchange rates.
2. Beijing consensus: neo-mercantilism can lead to outright financial warfare
3. Bernanke worried about deflation more than anything else
4. Money printing in US and Euro is inflationary and balances China deflationary forces
5. Gold does well in both inflation and deflation - well suited to times of uncertainty
6. Pullback in gold due to liquidation to raise cash in current crunch
7. Gold sellers are daytraders, speculators, but buyers look like strong hands
8. His Price target on gold to $2,000 short term and $5,000 intermediate term
9. Merkel ban on naked short selling was absolutely right - stand up to Wall Street
10. The way CDS are being used they are not part of a free market, but a rigged game
11. Greece, Spain, and Italy are important NATO allies - we are allowing our own US investment banks to assault them financially (economic hitmen)
12. Speculation is fine, but it must be transparent, well funded, and regulated
13. No money down, shadow CDS market is completely destructive
14. Who are the Bullion Banks serving? Who are the longs and the shorts?
15. JamesGRickards is posting on twitter.com

There is a very important thought buried in the observation that Chinese deflationary forces and slack demand are deflationary, but being countered by money printing which is inflationary. That is a prescription for stagflation.

I thought he was rather easy on the Chinese who are egregiously manipulating their currency exchange rate to their advantage vis-à-vis the developed industrial nations of Europe and North America.

Much Ado About TED, LIBOR, and Currency Swaps

There is some alarm being expressed about the recent increase in the TED spread from some quarters this week.

Here is a short term chart of the TED. It is definitely elevated expressing the accelerated demand for dollars in Europe. Although the BIS reports will not catch up with this action for quite a while, I suspect we are seeing a replay of a flight away from dodgy assets such as dollar denominated CDO's that European customers had deposited with their banks that are now being liquidated again. Also, and undeniably, there is a flight to gold, Swiss francs, and US dollars from the Euro as the ECB and the EMU sort out their serious issues brought about by a single currency and monetary policy working across a wide diversity of localized fiscal conditions.



However, here is the longer term picture of the TED spread. As you can see, it is a bit too early to hit the warning sirens. But it does bear watching.



The long view is not very dramatic, and also not as useful for promoting short euro hedge fund trades, or for generating viewer clicks.

For some additional perspective, here is a chart of the one year LIBOR rate.



Here is a short term view of LIBOR in US Dollars. It is definitely elevated.



But here is a similar short term view of LIBOR expressed in ECU's. By comparing the two LIBOR charts one might think that there is an elevated demand for dollars, probably attributable to a flight to safety. The DX chart indicates that it seems to be peaking. But it can always take a turn for the worse.



And while we are at it, here is a reprise of a prior discussion of the Fed's swap lines with Europe, designed to relieve imbalanced demand for dollars.

The US is indeed contributing to the bailout of Greece, via its membership in the IMF. But not through the currency swap lines, unless there is something else going on there behind the scenes. Since the US owns the biggest printing press in the world, at least for now, that would not be a shock.

There may be a time to worry about European insolvency. But quite a bit of what we are hearing about Europe these days seems a bit overwrought, and spoken from the perspective of a particular set of speculative trades.

SP 500 Daily Chart and The Planet of the Apes

The SP futures declined to briefly touch a channel trendline that goes all the way back to the intraday spike lows of October 2009!

The market is rallying sharply now, and if it can retake the old support, now resistance, around 1105 it has a good chance of setting a new uptrend back to the top of the channel. This could just be a dead cat bounce. I was looking at some of the indicators last night, and they were at record oversold levels going back at least four years, including the crash.

Was all this a trading gambit mixed with petulance over the financial reform package? In a normal market I would say "nonsense." But this market is thin, like a Ponzi scheme, driven by high frequency trading and artificial liquidity. The few genuine investors are being chased and shot down like the human beings in The Planet of the Apes. The Wall Street gorillas have all the horses, nets and rifles, courtesy of the government, the regulators, and the Fed.

The smackdown in gold and silver ahead of option expiration next week, and the miners' option expiration today, was some of the most blatant and heavy handed market manipulation I have seen in a long time.

The US is badly in need of adult supervision and behavioural modification. Not the much maligned people, the long suffering public which seeks only to go about its daily business creating wealth in the real economy in the face of mounting hardships, but rather the corrupt and irresponsible government, and the pampered princes of Wall Street, who are engaged primarily in wealth extraction and redistribution, primarily for themselves.

Washington can pass all the reforms it wishes. But until it obtains the will and the regulators to enforce the laws, including the existing laws, it is all merely a show to placate the public and maintain a misplaced confidence in 'extend and pretend' sustained by self-serving neo-liberal economic mythology.

"Meanwhile, the financial sector is to be enriched by the translation of junk economics into international policy. Living in the short run is the financial sector¹s time frame ­ while distracting the attention of indebted populations from calculations that Wall Street understands quite well: the debts cannot be paid in the end.

But they can be paid in the short run, with promises to pay someday ­ as if any economies ever have been able to grow by imposing austerity! It is all junk economics, of course. But it buys time for the bankers to pay themselves yet more bonuses this year. By the time the financial system collapses, they presumably will have put their money into hard assets.

Bank lobbyists know that the financial game is over. They are playing for the short run. The financial sector’s aim is to take as much bailout money as it can and run, with large enough annual bonuses to lord it over the rest of society after the Clean Slate finally arrives. Less public spending on social programs will leave more bailout money to pay the banks for their exponentially rising bad debts that cannot possibly be paid in the end. It is inevitable that loans and bonds will default in the usual convulsion of bankruptcy."

Michael Hudson

As the crisis continues unreformed, the frauds will become increasingly outrageous, and obvious, to all those with a willingness, and yes the courage, to see things as they really are.

The Horizons AlphaPro Dennis Gartman ETF and Its Narcoleptic Returns

"The investment objective of the Horizons AlphaPro Gartman ETF (the “ETF”) is to provide investors with the opportunity for capital appreciation through exposure to the investment strategies of The Gartman Letter, L.C. (“Gartman”), founded by Dennis Gartman. The ETF will use equity securities, futures contracts and exchange-traded funds to provide the ETF with long and short exposure to multiple asset classes which may include but are not limited to global equities, commodities, fixed income and currencies.

The ETF provides long or short exposure to multiple asset classes including global equities, commodities, fixed income and currencies."

The ETF seems to be underperforming the major indices and precious metals, and mostly everything except for Obama's approval ratings. It did perform a little better than the TLT 20 Year bond index. At least their performance is consistent.

In fairness to Mr. Gartman I do not know how faithfully this ETF follows his philosophy and market 'calls.'

Perhaps this is like one of those Krusty the Klown franchise deals where the product only involves his name, philosophy, pictures, quotes, and trademarks, with no responsibility or genuine involvement in the content. I would suppose he is getting something out of this deal.

I mean look at their returns for the past year. It defines 'mediocrity.' A passbook account at .25% offered better returns with less risk.

I did think that it was cute that they blamed "President Obama's attack on the financial sector' for their lousy performance this year. LOL The Congress could not reform a schoolyard with a SWAT team if the kids had enough leftover lunch money to make it worth their while.

The Gartman ETF seems to be doing a little better than Goldman's advice to its retail clients, which has been wrong 7 out of 9 times according to recent stories from Bloomberg. Gee, do you think they are doing so well because they are doing what they do best, and taking the other side of the trades for their own book? Oh no, I forget. They are "market makers."

At least the Gartman ETF managed to get a memorable symbol for the ETF, HAG:TSX. I suppose DEDMUNI:TSX was out of the question.

When someone sent this chart and fund description to me I thought it was a hoax. I guess you really can't make this stuff up.

Oh well. Another Wall Street legend, shot to hell. Still, tomorrow is another day.

SP 500 June Futures Daily Chart at 1:00 PM EDT, and NDX Futures into the Close

Having broken lower from the first decision point, the US equity market has continued lower, presumably towards the support at the lower end of the long term trend channel.

As a reminder, option expiration is tomorrow for stocks, and next week for Comex precious metals options.

Did the Flash Crash probe the way lower? Traders, and I am one, are notoriously superstitious and suspicious about such unexplained movements, suspecting that they are exploratory and will likely be retraced.

Well, we're there. Wash and rinse. Wax on, Wax off. Make it on the way up, and on the way down. As long as you are fleecing the sheep. That is how you gain a perfect trading record, if you are dealing the cards, playing with guaranteed house money, and peeking in everyone's hands, if even only by milliseconds before they make their plays. Get them buying hope, and then selling panic. It's all good if you can keep the money moving across your tables.



If that support does NOT hold, we're not in Kansas anymore Toto. But some sort of bounce seems more likely at the moment. Ben has not yet begun to print. I think they're just negotiating terms and turf right now.

Later: Here are the NDX June Futures going into the NY close of trading. The futures were selling off HARD led by the financials. The SP futures were looking for traction again around that key 1070 support and barely hanging on, with a similar story around 1800 support on the big cap tech NDX. The SP futures have a definite shot at the prior lows in the overnight trade.

Gold and silver spot was holding the exact levels where I would have expected them to find something to hang on. Let's see stocks go into option expiration tomorrow. There are a lot of calls that are going to be expiring worthless. I wonder if they will try and jam the puts for a little whipsaw action.

I will be a little surprised if they let gold up for air before its own expiration next week.