Harvey Organ...Must Read...

Harvey Organ...Must Read...

Battle of Waterloo today, Gold and silver won!!! I

 

Hourly Action In Gold From Trader Dan

May 13, 2011, at 10:24 am
by Dan Norcini

Dear Friends,

The “Risk Off” trades returned once again today after disappearing yesterday. I am not sure what the actual event catalyst was but for whatever reason the US Dollar rallied very strongly today as the equity markets tanked and the commodities went down lower for the ride once again. Both gold and silver were derailed after putting in some decent performances yesterday.
The price action continues to reinforce the chart pattern that is forming – one of a range trade for both the metals. Gold is running into selling up near $1520 as a general area and seems to be encountering pretty good buying down near $1480.
Silver’s range seems to have narrowed a bit from $39 – $33 to a bit tighter $36.50 – $34. That market is so schizophrenic however that it is too early to say definitively how this new range is going to work. I suspect it will get wider.
We are seeing very wild swings in price in almost all of the commodity markets out there as so much of the price movement depends on the whims of the hedge fund community. They are manics, of that there is no doubt. One day all is well with the world and its full speed ahead; the next day the entire world is ending and “sell, sell, sell” is the order of business.
All I can tell you is that we have had severe chart damage inflicted upon a host of the commodity markets with all this risk off related selling and that is going to take some time to repair. The reason is very simple – you just do not see a wholesale shift in sentiment back towards a particular asset class overnight once the investment psyche has taken such a terrible hit. The CCI chart is still showing a formidable double top formation on it so the idea that the precious metals are going to now immediately return to their previous peaks within the next week is simply not going to happen unless we see that CCI index turn around rapidly and charge substantially higher. I look for more of this choppy, range-trade for the immediate future with the markets attempting to consolidate to see where they want to go next.
There is a real fear out there of what happens when the end of June comes and the Fed’s QE2 program is supposed to end. The sharp drops in the equity markets are ample evidence that traders/investors are fearful of the results of the liquidity spigot being turned off. Already the Dollar is moving higher as a result of this “quasi-tightening” by the Fed. That brings further pressure on the commodity and stock markets which have been fueled by the endless Dollar printing. This is what is moving the markets for the time being.
Longer term, the fiscal woes of the US are not going away. There is no serious effort to deal with the runaway spending plaguing the nation and any attempts to jack up taxes to narrow the budget deficit will have the effect of just exacerbating the problem as it will put further pressure on the economy, pressure which I might add it is in no position to handle.
This thing seems to have started in earnest back when Trichet failed to raise interest rates in the Euro zone or at the very least sounded hawkish on future rate hikes. Once the markets disgested his comments they began to believe that the “global growth” scenario which has been fueling equity and commodity gains, was turning into more of a “global slowdown” scenario. That in turn fed into the idea that demand for commodities was going to fall. Enter the “Risk off” trades and that is where we are right now.
At this point I am basically watching to see how things begin to fare as we approach the end of June. I find it difficult to believe that if the stock markets begin to fall apart and break down technically, the Fed’s doves on the FOMC are not going to begin advocating further “accommodation”. Should that occur, the “Risk – On” trades will be back on.
Here’s the situation as I see it – Bernanke and the Fed wanted to initially stave off the threat of deflation, something all Central Bankers hate. They were more than happy to accommodate the hedge fund industry and have it do their bidding by jamming the price of nearly everything that was not nailed down higher. That was a simple matter of QE1 and when that expired, QE2. “Deflation – what deflation – we don’t see no stinking deflation”. Carry trades – have it at guys – put on as much as your little leveraged souls desire.
However, once the hedge funds dared to start pushing gasoline prices higher and consumers began complaining, with the usual demagogues blaming Big Oil, Big Speculators, whatever, the Fed decided that enough was enough. Besides, soaring gasoline prices are not good for the current administration and since the Chairman of the Fed serves at its pleasure, something had to be done. (Of course, they could actually drill for the damn stuff but that would be too easy). Out comes the talk of the end of QE2, Trichet fails to hike and down goes gasoline and everything else. Problem solved. In other words, the hedge funds, having dutifully done the bidding of their masters at the Fed, got carried away in the minds of the powers that be and had to be brought back under control. No wonder Bernanke could spout off his continual talking points about inflationary pressures, specifically food and energy, being temporary, transitory, etc. They knew full well at the Fed that they could pull the rug out from under the ninnies that run the hedge funds at any time.
We will see just how far this latest ruse carries things however since, as stated above, the problems afflicting the US are deep-seated, entrenched and unyielding to mere talk and posturing. Job growth is abysmal and while prices may be dropping for some foods and energies on the commodity exchanges, it takes time for that to filter through to the retail side of things.

Click chart to enlarge today’s hourly action in Gold in PDF format with commentary from Trader Dan Norcini

This Is Not The Inflation You Are Looking For 

Submitted by Tyler Durden on 05/13/2011 09:11 -0400

Because one chart is worth a thousand Fed Chairman press conferences... 

 

 

 

 

 

 

 

FX Wipeout 

Submitted by Tyler Durden on 05/13/2011 12:35 -0400

Wondering where the volatility went? Just look below. Countries now trade like microcap, 3x beta stocks. Thank you Federal Reserve. Oh, and while you are at it, please sell some FX vol Brian Sack. Below is a chart of the DXY constituents: everything getting creamed except for the JPY, showing the only currency not used to short the dollar against. We can't wait for today's CFTC Committment of Traders update to see how many specs got blown up by this move.

 

 

 

 

 

ECB Pushes The M.A.D. Button, Asks Court To Bar Greek Swap Disclosure, Threatens With Market Disruptions 

Submitted by Tyler Durden on 05/13/2011 15:34 -0400

Yesterday Eurostat disclosed that in order to hide its debt over the past decade, Greece had entered into not one, not two, but a total of 13 different currency swap contracts with Goldman Sachs, all based on the exchange of assorted currencies against the euro as well as one involving a dollar-CHF swap. This was a topic that was all the rage back in early 2010 when it was unclear just how deep the Greek insolvency runs, and was pushed into the open after Zero Hedge first exposed Titlos PLC, an SPV securitization deal by the National Bank of Greece which not took a shady "off the books" currency swap and then securitized it. Since then this story has died down as it has become all too clear just how insolvent not only Greece but all other European countries are, and it no longer matter to haggle over pennies when entire countries subsist day to day purely due to the generosity of the ECB. Yet while Eurostat disclosed the number of the swaps it did not provide detail into just what was contained within these swaps. Which is why back in December, Bloomberg, which recently won a lawsuit against the Fed and achieved release of top secret bank bailout documents, sued the ECB, asking "the European Union’s General Court in Luxembourg to overturn a decision by the ECB not to disclose two internal documents drafted for the central bank’s six-member executive board in Frankfurt this year. The notes show how Greece used swaps to hide its borrowings, according to a March 3 cover page attached to the papers obtained by Bloomberg News." Yet even now that it is all too clear just what the true fiscal situation of Greece and the periphery is, the ECB is still scrambling to hide its secretive and potentially fraudulent practices. Per Bloomberg: "The European Central Bank asked the European Union’s General Court to dismiss a lawsuit seeking the disclosure of documents showing how Greece used derivatives to hide loans and triggered the region’s sovereign debt crisis." The reason provided: "The ECB has complete discretion to decide what it should publish in the public interest, according to its defense to a lawsuit filed by Bloomberg News. Releasing the papers could damage the commercial interests of the ECB’s counterparties, hurt the region’s banks and markets, and undermine the economic policy of Greece and the EU, the central bank said." The reason given is the usual one: "Releasing the papers could damage the commercial interests of the ECB’s counterparties, hurt the region’s banks and markets, and undermine the economic policy of Greece and the EU, the central bank said." And so the mutual assured destruction pantomime continues unabated, even though everyone knows by now that nothing of the threatened would ever actually happen.

 

 

 

Nomura's Sceptical Strategist On Why Correlation Risk Is Rising And What It Means For Inflation 

Submitted by Tyler Durden on 05/13/2011 11:32 -0400

In his just released piece, Bob Janjuah's partner at Nomura, Kevin Gaynor, makes some quite profound and very contrarian observations on correlations, a topic discussed extensively on Zero Hedge in the past year. While the prevailing thought is that recently cross-asset correlations have actually dropped (in some cases to record levels), the truth is quite different: "While our colleagues in the Macro Strategy team have made a cogent case that price action in several markets reveals a more discerning behaviour and reduction in observed correlations, Bob and I have been coming around to a slightly different view. Many clients with whom we have spoken over recent weeks are becoming aware of the rather narrow sources of market drivers (two we would argue) and consequent similarities in terms of themes that have driven individual asset classes. It logically follows that anything changing the actual or expected state of those market drivers will have an impact on market returns across a range of risk types and geographies. More to the point, given the nature of those themes (mostly one way), we must be aware of the possibility for a non-linear response to linear changes in those market drivers. That's a fancy way of saying that correlation risk is actually rising in our opinion, as two themes appear to be dominating markets – western liquidity injections without leverage or EM FX appreciation and EM as the source of marginal final demand. These two potent forces have come to dominate the return environment. Consider leadership in DM equity indices since March 2009; it is basic materials and industrials and more lately oil and gas. Ex those sectors, western stock market returns would look rather more threadbare. But perhaps more the point in terms of the non-linearity issue is that the beta of the major indices to these sectors has naturally risen over the past 2 years. Whereas in the past, one had to broadly get financials correct to have a decent stab at calling equity returns (a gross oversimplification I know), it now seems to be the CRB sectors you need to get right." The follow through of all this, and it can be read below, is that the 30 year "great moderation" is rapidly ending and the inflationary threat is now very close, and would be EM driven. At that point none of the Fed's emergency tightening policies, no matter what Alan Blinder's textbook says, would have any impact whatsoever.

Denouncing Fed, Ron Paul announces presidential candidacy

 

 

PIMCO raises bet against U.S. government debt.

 

 

 

Don't Buy A House in 2011 Before You Read This



Niall Ferguson: US Dominance Is Over 



Winning in the Hyperinflation/Deflation War
By: Deepcaster




Dollar-Gold Adds 1% for the Week as Eurozone Default "Looks Certain", Asian Buying "Strong"
By: Adrian Ash, BullionVault








Silver to Surge to $450/oz and Gold to $12,000/oz – Cazenove’s Robin Griffiths
By: GoldCore

Japan's Latest Proposal To Contain Fukushima's Radioactive Fallout - A (Circus) Tent 

Submitted by Tyler Durden on 05/13/2011 11:59 -0400

You just can't make this up: proving that Japan can outdo even the Russians when it comes to nuclear crisis "response", Dow Jones reports that the latest scheme to come out of TEPCO is to cover Fukushima with a giant tent. It is unclear if it will have a circus coloration yet. From DJ: "Giant polyester covers will soon be placed around the damaged reactor buildings at Japan's Fukushima nuclear complex to help contain the release of radioactive substances into the atmosphere, the plant operator said Friday. Tokyo Electric Power Co. (TEPCO) will install the first cover at the No. 1 reactor, the focus of recent stabilization efforts, starting next month." This probably means that Japan looked long and hard at the concrete shell option and realized it was impossible, which is true. The problem is that by now the melted cores are not in the complex, but deep beneath it and the radioactivity is actively seeping directly into the soil. And since the polyester tent idea is doomed to failure, it is only a matter of time before the Simpsons dome is firmly in place over a ragion with a radius of about 20 kilometers. Impossible you say? Just wait.