"When misguided public opinion honors what is despicable and despises what is honorable, punishes virtue and rewards vice, encourages what is harmful and discourages what is useful, applauds falsehood and smothers truth under indifference or insult, a nation turns its back on progress and can be restored only by the terrible lessons of catastrophe." … Frederic Bastiat

Evil talks about tolerance only when it’s weak. When it gains the upper hand, its vanity always requires the destruction of the good and the innocent, because the example of good and innocent lives is an ongoing witness against it. So it always has been. So it always will be. And America has no special immunity to becoming an enemy of its own founding beliefs about human freedom, human dignity, the limited power of the state, and the sovereignty of God. – Archbishop Chaput


Thursday, November 6, 2014

Wild Volume in Overnight Gold Trade

Lions and Tigers and Bears, Oh my! Flash Crashes and Reverse Flash Crashes and Swings, Oh my!

That pretty much sums up what is happening at this hour as I watch the overnight trade. It is not only in gold, but I am seeing some very strange things occurring in the December meal contract as well.

Keep in mind what I wrote the other day about those in the gold perma bull camp who are always crying up their "Flash Crash" crap as evidence of some sort of price fixing conspiracy. Also, note that they are deathly silent on what I have sarcastically countered as "Reverse Flash Crashes".

Well, guess what? We got both in one evening, separated by 90 minutes! The first occurred on heavy volume of upwards near 6000 contract that dropped gold $10 in 15 minutes. The Reverse Flash Crash occurred on even HEAVIER VOLUME and completely erased the losses from the "Flash Crash" and then some.

There is currently staggeringly huge volume in the December meal contract taking place at the 10:00 PM Pacific Time Zone hour. There has been more volume done than what occurred during the final 15 minutes of the pit session trade in the grains and that is one of the busiest times of the day.

I have no idea what is taking place but I can say this with certainty, computers are going nuts this evening.

I have said it many times before and will do so again - welcome to the new normal in our broken markets. When the exchanges voted to move to electronic trade, they opened a Pandora's box of idiocy.

Euro Falls on ECB Stimulus Plan

The Euro went one way ( down ) and stocks went the other ( up ) when comments from ECB President Draghi hit the wire this morning.

What caught the attention of the Forex crowd, and the equity guys, was the indication that the Central Bank's program of buying asset-backed securities would last for two years. That news was not in the markets.

Traders are interpreting it a evidence that the ECB is taking a more concerted stance at staving off the deflationary issues currently afflicting the Eurozone.

Here is a chart of the Euro.

The common currency has fallen through a temporary support zone that had formed near the 1.250 region. Depending on its subsequent price action for the remainder of the week, it appears headed for a test of 1.2250 zone.

Here is one of the Dollar as a result:

From a technical analysis perspective, the Dollar remains on a relatively unhindered path for a test of its June 2010 high near the 89 level basis the USDX.

As usual, strength in the Dollar is weighing on gold this morning. I noticed that it had briefly popped its head into positive territory early in the session this morning but once the Draghi comments hit the wire, it sank lower. Traders see these various efforts by the Central Banks as evidence of deflationary pressure which is tending to reinforce the "there is no inflation" theme, especially as they see weaker crude oil prices. Still, the metal has been able to pull away from its worst session low which occurred overnight. A fair amount of that selling in the overnight session looks to me to be margin related.

A brief comment on USDA grain export numbers this AM. Beans were strong once again but cancellations did indeed show up in the meal. Once again it was China that was the big buyer of US beans which continues to surprise me given the ongoing state of the US harvest and the cost differential between US origin beans and S. American origin beans.

I should note however that a total of 651,000 metric tons were cancelled from "Unknown". Speculation will be rife as to whom that was and whether or it is the tip of the iceberg. That has caught my attention.

On the meal side, a total of 306,800 metric tons of meal sales were cancelled this week. That is rather significant. There were sales of 183,300 metric tons so the NET RESULT was the cancellation of 123,700 metric tons of meal sales. If the idea was to ration meal until the pipeline was able to be replenished, it is certainly working.