The real reason we have witnessed a retreat in crude pricing has little to do with the condition of the market or the actual demand for product. It is the result of a classic yo-yo short in anticipation of a major advance in the price. In other words, some very large traders in oil futures contracts – the so-called "paper-barrel" speculators of future actual consignments of oil (or "wet barrels") – are manipulating a short-term cut in price after establishing a position that will profit with the price going down. This amounts to a "put" clone resulting in an exaggerated decline in the crude pricing level, usually orchestrated on a five-day pricing spread introduced by a sequenced derivative move on the futures contract itself. The trader profits when the price goes down by exercising the "put" to sell options on the futures contract at a higher strike price than that provided by the market by redeeming the derivative. Of course, when that happens, the market price will increase. The trader then profits again by having derivatives on the increasing price already in place. The price is manipulated just like a yo-yo moving up and down. Now the maneuver is only doable during periods of lower-than-average futures contract volume and a narrow period in which the price is not likely to spike because of outside developments (for example, natural disasters, a rapid escalation in hostilities, blockage of transit, collapse in production, and so on). It becomes less useful when the market indicators themselves are decidedly moving up. The approach succeeds by wider market perceptions, not fact. It ends when the actual pricing dynamics take over. In between, a few traders make some bucks by manipulating the margins. There will be little opportunity for this device to operate again as we move into the summer volatility.
the trend in the depth of book size has been declining rapidly over the last few weeks.
Why do I not consider price? A cognitive bias that can be a psychological disaster for a trader is known as "Anchoring". "Chart Analysis" as difficult as it is, doesn't compare to "Self Analysis". I spend as much time working on myself as I do on the charts.
Here are some notes on what to expect with the US dollar from our good friend, Master Kenny Adams.
80.80/81.50: MAJOR. At present, this is holding as maximum upside potential for the near term. If reached, this level is sufficient in strength to return the USDX to a major bear trend.
82.15/83.80: MAJOR, with numerous major overlays inside this bracket. Its core holds at 82.20 / 83.20. A close above 81.70 would be expected to continue on to a test of this level.
83.10/84.25: MAJOR, and here occurs another partial overlay, making for three major overlaid brackets between 82.15 and 83.80.
A move up to 82.15 or above - although not currently supported internally, would be expected to result in exhaustion and a very rapid collapse.
IN SUM: We do not expect the USDX to close above 81.50, before exhausting the upside and returning to its longer term bear trend, except for the conditions listed above.
I do think that silver breaks lower this week. The contra trend rally has in my view ended and we should see silver break to the downside again this week… that is, unless the 200 day is breached with conviction and if spot can get past $37.58 taking the H&S out of play. The neck line is $32.50 and if it is breached, we will see sub $30.00 silver in no time at all. If we take a look at the 2 year chart in silver you can see that silver still remains in a downtrend.
Very Interesting Not At All Illogical argument in the Following Article at Silver Doctors about the various elements of a perfect storm for Silver and other PM's by August 2012.
Inflation of 10% will become 15-20% and the US and Euro consumers will scream for a shield against this inflation. Where do they go? Where anyone trying to safeguard themselves goes: Physical precious metals
Is Physical and Paper Coming Unglued? "Unexpected deviations have a nasty habit of leading headline news, so this one has my attention" : De Groot
Unexpected deviations have a nasty habit of leading headline news, so this one has my attention.
“Well, I think the gold market was looking fine from yesterday. Then we had reasonable payroll numbers here in the US and that took the gold price down. But then we had a sudden reversal which is quite interesting. My understanding is the PM fix in London saw some physical buying and was fixed a few dollars higher than gold was trading on a spot basis.”
~ Gabelli Gold Fund manager, Caesar Bryan
“I prefer to play the commodity space by owning physical gold,” Faber tells Chiefsworld. “If I were an American, I would store it outside the U.S., because in the U.S., it is not completely unlikely that they will eventually take it away.” “Like in 1933, gold will be purchased back by the government” because eventually the financial mess will be so bad that gold prices “will go ballistic, and the government will take away something from a minority, and not many people own gold.
“When gold prices shoot up, it will be quite a popular measure to take it away from these rich people,” Faber says. “It’s happened before.” From May 1, 1933, until 1974, U.S. citizens could no longer hold gold as a protection against paper money, which also lost its gold backing at the same time. Foreign central banks could continue to exchange the U.S. dollars that came into their possession – known as eurodollars for decades — for gold and did so particularly when the U.S. dollar was devalued and then floated against the gold price in 1971.
Faber notes that the Chinese economy is slowing, and says it will slow further and perhaps crash at some point, which is why he is staying out of commodities other than gold.
Condon: You sound as if we're facing a financial crisis like the one that followed the collapse of Lehman Brothers in 2008.
Stockman: Oh, far worse than Lehman. When the real margin call in the great beyond arrives, the carnage will be unimaginable.
Stockman: "The (Bernanke) Fed is a patsy. If Paul Volcker was running the Fed today you wouldn't have half, you wouldn't have 95 percent, of the speculative positions today."
Here's the heart of the matter. The Fed is a patsy. It is a pathetic dependent of the big Wall Street banks, traders and hedge funds. Everything (it does) is designed to keep this rickety structure from unwinding. If you had a (former Fed Chairman) Paul Volcker running the Fed today 7/8- utterly fearless and independent and willing to scare the hell out of the market any day of the week - you wouldn't have half, you wouldn't have 95 percent, of the speculative positions today.
The David Stockman Investment Strategy: Cash and a Few Bars of Gold (and the Golden Debt/GDP Constant)
But spend time with him and you discover this former wunderkind of the Reagan revolution is many other things now - an advocate for higher taxes, a critic of the work that made him rich and a scared investor who doesn't own a single stock for fear of another financial crisis. Stockman suggests you'd be a fool to hold anything but cash now, and maybe a few bars of gold. He thinks the Federal Reserve's efforts to ease the pain from the collapse of our "national leveraged buyout" - his term for decades of reckless, debt-fueled spending by government, families and companies - is pumping stock and bond markets to dangerous heights.
Typically the private and public sectors would borrow $1.50 or $1.60 each year for every $1 of GDP growth. That was the golden constant. It had been at that ratio for 100 years save for some minor squiggles during the bottom of the Depression. By the time we got to the mid-'90s, we were borrowing $3 for every $1 of GDP growth. And by the time we got to the peak in 2006 or 2007, we were actually taking on $6 of new debt to grind out $1 of new GDP.