Back To Business
It will be weeks before we know the true impact and effect of the epic storm that hit New York yesterday. Regardless, trading resumes tomorrow and, with it, expect a return of liquidity and volume to the metals pits.
Though the metals have been trading for the past two days, the lack of market participants has led to a holiday-like feel. The only entities trading have been HFTs which scour the books, hunting for stop orders to exploit on either side of the trade. The resulting charts are just had been anticipated, namely, rangebound within a tightening pattern of lower highs and higher lows. Because of this, we are set up for a volatile and consequential Wednesday. I was expecting a bottom this week and I think I'm about to get it.
First, I look for these pennants to finally conclude with a break out and UP. Initial resistance will come in near $1720 in gold and $32.25 in silver. Sensing a turn in the momentum, some shorts will begin to cover and the metals will then move toward $1730 and $32.50. Once above there (Friday?), even the dumbest algo will be able to see that staying short means risking being caught on the wrong side of the trade and the urge to cover becomes irresistible.
This is what happened in late January of 2011 when the Large Spec Short position declined from 10,473 to 7,203 in one CoT week (1/25/11 - 2/1/11). Could we be set up for a similar drop in the next CoT from tomorrow through next Tuesday? We'll see...
Just a couple of other items. First, if you haven't yet read the earlier post which included the latest Sprott newsletter, please make the time to do so. http://www.tfmetalsreport.com/blog/4287/terrific-new-stuff-sprott
Next, Bill Murphy's at it again. In this interview, he answers some interesting questions but certainly seems to raise a few more. He raises the specter of some explosive, new allegations against JPM et al and he eloquently places things in their historical context.
Lastly, I found this last night on Harvey's site (where he very kindly referenced my latest CoT analysis as a "very important read"). Apparently, it's an editorial or op-ed of some kind from Thunderlips. The audacity is so breathtaking that I read it wide-eyed with my jaw agape. I've decided to reprint it below...though I've added a few of my own "editorial suggestions".
Pop Goes The Evil
By BART CHILTON
Published: Tuesday, Oct. 23, 2012 - 5:11 am
In a hair-raising moment last Halloween (no pun intended), investors learned hundreds-of-millions of dollars at MF Global mysteriously vanished. "Pop goes the evil," gone. That super-chilling circumstance wasn't an isolated event (though we at the CFTC pretended it was). There's a seemingly endless barrage of financial firm faults. We need a financial sector collective culture shift.
People are fed up with the Gordon Gekko "greed is good" mentality on Wall Street. Since that "pop goes the evil" moment, Bank of America and 12 others overcharged for debit and overdraft fees. They settled with the Department of Justice for hundreds-of-millions of buckaroos ("buckaroos"?), collectively. Wells Fargo, with $175 million, settled regarding loan discrimination where minorities were charged higher fees and given higher loan rates than others. Barclays tried to manipulate Libor (even though we at the CFTC tried to ignore all charges of this for decades) - a benchmark interest rate impacting about everything purchased on credit. Peregrine Financial Group appears to have been a $200-millionish house of horrors. (Maybe if we'd prosecuted Corzine, we could have saved Peregrine.) Goldman Sachs and Citi established "fake-out funds" where they pressed customers into investments, only to then place opposing bets (psyche!) for themselves. (And this surprises anyone?) Recently, we've learned JP Morgan and Wells accepted billions in federal mortgage relief funds, but didn't extend the assistance to consumers. It would be negative "from a profit perspective."
The numbers of frightening financial fiascoes are numerous. Some have become numb to it all. Others want to bury their dough in the backyard, and that, too, is upsetting. If it were just a few financial evil ghouls, we could blow it off as idiosyncratic, but it isn't; it's embedded in much of the financial sector (and the government and various industry regulatory agencies). This shouldn't be the new normal (it's the way it's always been). We should be outraged.
What's to be done? Government can't regulate corporate culture (nor, apparently can it enforce law). It can, however, help (HAHAHAHAHA). We've seen firms pay puny penalties (which we at the inept and corrupt CFTC imposed) - less than the profits reaped from their wicked shenanigans. Fines shouldn't be a cost of doing business. Do a crime, pay a hefty fine. If severe, do the time. (Unless you're Corzine, Dimon, Blankfien or otherwise well-connected.)
Firms themselves possess the real remedies for cleaning up this haunting culture (If you believe this, I've got some brand new beach front property in Jersey to sell you). Compensation and bonus structures should transform, rewarding risk professionals instead of spine-tingling traders making cowboy-style gambles. Tudes and memos from the suit suites should offer a different corporate conscience, and have conviction in that charge ("Tudes from the suit suites"? Seriously?? You actually wrote that? And you're a "highly-respected" commissioner of the CFTC?). Captains of the Street should believe they are beholden to customers first, and for the long term - not just next quarter's profit-and-loss statement.
Character and culture go together. It's no wonder many believe some firms (and government agencies) have proven unworthy of trust. But, the country's financial system is too scary important ("too scary important"? What are you, like, in Middle School, dude?) for the status quo to continue. It's time for honest play. It's time for a financial culture shift.
ABOUT THE WRITER
Bart Chilton is a commissioner on the U.S. Commodity Futures Trading Commission and the author of "Ponzimonium: How Scam Artists Are Ripping Off America." Readers may write to him at: CFTC, Three Lafayette Centre, 1155 21st Street NW, Washington, D. C. 20581; website: www.cftc.gov.
That's all for now. Look for a total resumption of daily Turdville activities tomorrow. Until then, I think I'll go bury all my dough in the backyard. (Psyche!)
TF Metals Report is supported by voluntary subscriptions and donations. DONATE TODAY!