Goldman: Risk Off, Short-Term

Traders’ wariness towards growth plays was compounded by news that Goldman Sachs had advised clients to lock in profits on oil and other commodities as they looked vulnerable to a short term correction.

The bank’s comments seemed to hit a nerve in a sector that many saw as vulnerable after many months of strong gains and very high levels of “long” speculation.

Crude oil fell back from a fresh cyclical high of $113.46 a barrel, losing 3.5 per cent on the session. On Tuesday, West Texas Intermediate is little changed at cents at $108.93.

Precious metals were particularly hard hit by the Goldman-induced selling. Silver had hit a 31-year high of $41.93 an ounce but fell back at one point to $39.75, a 5.2 per cent reversal. The grey metal is currently at $40.72, outperforming gold, which is off 0.3 per cent at $1,462 an ounce after hitting a record $1,476 on Monday.

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Inflation is here to stay!

Consumers were being braced for more pain today after a report revealed that factory gate prices rose at their fastest rate since October 2008.

Manufacturers increased their prices by 0.9% between February and March, leaving them 5.4% higher than a year ago, as they passed on the soaring cost of oil, food and other commodity prices, according to the Office for National Statistics.

This led to record annual prices hikes for paper products, clothing, textiles and leather in March, while food was up 7.4% year-on-year in its biggest hike since January 2009.

The higher-than-expected rate of factory gate price rises was announced the day after the Bank of England resisted pressure to hike interest rates from its record low of 0.5% in a bid to beat down inflation.

Today, oil prices hit fresh two-and-a-half-year highs after fierce fighting in Libya damaged the country's largest oil field.

Brent crude was up 1.4% to 124.2 US dollars a barrel as motorists were warned that the price of petrol at the pump is likely to rise and is set to further squeeze consumers' disposable incomes.

Manufacturers are being forced to increase their prices to their customers after their input costs rose 14.6% year-on-year, although this is slightly down on February's record high of 14.9%.

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S&P Recap and A Look Inside the Markets

Yesterday:

• earthquake rocked Japan and shook buildings overnight. European markets opened mixed to slightly lower. 

• concerns about rising metal prices 

• mixed corporate results were pitted against continuing merger and acquisition activity 

• Libyan leader Gaddafi had agreed to a ceasefire proposal from the African-Union. 

• Stock futures were pointing to a modestly higher open. 

Intra-day action:The session began without a significant gap and moved higher for twenty minute but yet again put the high of the day on the chart very early in the session. We continue to see a pattern of early morning highs. This is a characteristic of pullbacks, not rallies. But in spite of that, the market continues to close off the lows as well although today's close barely finished above one quarter of the intraday range. Bounces were weak the entire session but the indices continue to be resilient.

losers today were the chip makers (SOX) and the small caps (Russell 2000.) The broad NYSE Composite underperformed the S&P as well. This continues to appear like the beginning of a pullback, but as you know I have been proved wrong a many times, as QE trumps TA.

For the S&P Index there were 197 components advancing and 280 components declining. On the NYSE 3,156 issues were traded with 904 advancing issues and 2,141 retreating issues, a ratio of 2.37 to one declining. There were 110 new highs and 16 new lows.

Declining volume still remains unconvincing. But the repeated early morning highs followed by selling are a clear pattern of discontent with this level.

Today's volume was lighter than Friday's volume. Bears really need to get some volume going in order to be convincing; there simply is no panic. But the intraday volume pattern clearly shows spikes in volume with each S&P down move and drops in volume with each up move today; this is a bearish pattern. Checking our Breadth Indicators we see even more bearish consistency among the data tonight. We will be watching the McClellan Summation Index closely over the next several days, watching for it to fall to the 1000 area.

21.4% of the S&P are above their five day moving average, 35% are above their 10 day average, 63.8% are above their 20 day moving average (dropping steadily), 62% are above their 50 day moving average, and 85% are above their 200 day moving average.

Sectors stronger than the S&P for Monday:
- Financials -- Outperformed by +22%.
- Industrials -- Outperformed by +20%.
- Technology -- Outperformed by +13%.
- Consumer Staples -- Outperformed by +81%.
- Health Care -- Outperformed the by +85%.
- Consumer Discretionary -- Outperformed by +31%.

Sectors weaker than the S&P for Monday:
- Basic Materials -- Underperformed by -83%.
- Energy -- Underperformed by -174%.
- Utilities -- Underperformed by -116%.


Range bound market. I'm going long over 1340, short if 1320 breaks. We are right at support. Good entry if you want to go long (if thats your bias) you can put in a stop a couple percent below, and if we make it to 1340 you can take a profit there. This is a very small range though so depends on the need to trade or having some patience. 




edit: Stock index futures pointed to a lower open on Tuesday, with futures for the S&P 500, Dow Jones and Nasdaq down 0.4 to 0.6 percent at 0903 GMT.

* Investors are likely to be cautious after Japan raised the severity of the nuclear accident to the highest level, putting it on par with the Chernobyl 1986 disaster.

Silver Holding 40

As I mentioned yesterday someone made a big bet against SLV by buying a million bucks worth of July puts (25 strike price). The sheeple got nervous and pucked up Silver from their nervous twitchy little hands.


Ever take an oral exam, NO, NOT LIKE AT THE DENTISTS OFFICE.


You know when an examiner (professor/teacher) asks you questions in school. Remember when you spoke confidently it was because you had studied and were sure of the answer. The people that puke and shake, they didn't study, they are not confident, they speak by running away (Sheeple don't do homework). They buy stuff because they heard something on CNBC or from Joe or Bill or Bob. Really, who has the time for homework. How am I so sure this kind of stuff happens, I used to do it all the time. It's out of FEAR!

I'm not knocking selling anything for a profit (no one gets poor taking a profit), sell for the right reasons.
I'm going to make a checklist as a reminder for me and anyone else playing along. This will serve to remind me of the fundamental reasons why I am long Silver.


Here's to holding the important 40. next level lower 38.2 (I'd love to get more at 38) We need Blythe help to get there though.


Long AGQ (bought a small amount right before close)
Sold some ZSL yesterday (half left) Just a hedge (we went up through 40 really fast)




This from Harvey: " I would like to report that silver is in slight contango up until May 2012 and then it goes into backwardation. The lease rates are negative from zero to 3 months then racket up to positive from 6 months and one year.

The total silver comex OI continues to rise sending our bankers into a tizzy. The open interest reading for today which is basis Friday night was 144,923 from 144,647. Silver had an outstanding day on Friday rising over a dollar to close at $40.60. The open interest should have had a higher reading so we probably lost a few more bankers who covered a tiny fraction of their massive shorts.

With silver rising to $42.00 in Europe early this morning, we probably saw more short covering from European banks. The demand for physical silver is relentless. The front options expiry month of April mysteriously saw its OI rise from 13 to 32. The next front month of May saw the OI fall from 69,555 to 67,178. This is quite normal as we start approaching first day notice.

The estimated volume today at the silver comex was a mind boggling 94,419 contracts. The confirmed volume on Friday was 77,844. So it looks like the bankers used all their firepower in knocking silver down from stratospheric heights. The bankers are losing massive dollars due to their huge short position".