At times silver metal is being dumped in quantity in the spot market, and at other times paper silver is being bought aggressively in the futures market.
Shortly after 1amET this morning, someone with no apparent fiduciary duty to their client's for best execution or any apparent trade allocation expertise decided it was time to dump 1500 contracts into an entirely illiquid gold futures market. The 150,000 ounce notional sell order ($184.5 million), captured graphically by Nanex, sent the price down $10 instaneously, tripped the exchange's circuit breakers and halted the market's trading for 20 seconds (once again). This is now the 4th market halt in the past 3 months (and this time on no news whatsoever), as the manipulative monkey-hammerings from who knows whom (BIS?) is becoming increasingly obvious.
As DB notes, it appears that markets continue to steadily price in a greater probability of a December taper judging by the 2bp increase in 10yr UST yields, 1.2% drop in the gold price and an edging up in the USD crosses yesterday. Indeed, the Atlanta Fed’s Lockhart, who is considered a bellwether within the Fed, kept the possibility of a December tapering open in public comments yesterday. But his other comments were quite dovish, particularly when he said that he wants to see inflation accelerate toward 2% before reducing asset purchases to give him confidence that the US economy was not dealing with a “downside scenario”. Lockhart stressed that any decision by the Fed on QE would be data dependent - so his comments that the government shutdown will make coming data "less reliable" than might otherwise have been, until at least December, were also quite telling. The dovish sentiments were echoed by Kocherlakota, a FOMC voter next year. In other words, an Oscar-worthy good-cop/bad-cop performance by the Fed's henchmen, confusing algotrons for the second day in a row.
While attention was focused on the #winning (TWTR) and #failing (NASDAQ and TSLA and so on)... the fact is that the S&P 500 futures market saw its largest collapse from high to low intraday since June 24th. While the told-you-so dance seems so inappropriate, equity markets' dump - seemingly triggered by more than one levered JPY carry trader getting a tap on the shoulder after Draghi's surprise - merely catches down to credit market's lack of exberance for the last 2 weeks (though there is still more room to drop). Stocks are at 12-day lows by the close with very litle BFTATH'ers stepping in as VIX broke back above 14.00% (highest close in over 3 weeks). FX markets were insanely volatile with early USD strength obliterated by JPY and EUR strength in the afternoon. Commodities slid lower on the day and bonds rallied - with 30Y outperformance unwinding some of the week's steepening. Stocks closed on their lows with the best volume in a month.
Why China DOESN'T WANT the Yuan to Become the Reserve Currency
It seems 'someone' needed to run the S&P futures market back over Friday's highs just to flush the stops one more time. Thanks to some JPY-selling that momentum was ignited and S&P futures just made new all-time-highs... because, well why not. Soon after the stops were run in stocks, JPY started to revert and so are futures. Gold, oil, and treasuries are all unch for now as is EURUSD.
- FHFA Is Said to Seek at Least $6 Billion From BofA for MBS Sales (BBG)
- Record Pact Is on the Table, But J.P. Morgan Faces Fight (WSJ)
- Magnetar Goes Long Ohio Town While Shorting Its Tax Base (BBG)
- Mini-Wall Street' Rises in Hamptons (WSJ)
- Obama to call healthcare website glitches 'unacceptable' as fix sought (Reuters)
- Starbucks Charges Higher Prices in China, State Media Says (WSJ)
- Cruz Is Unapologetic as Republicans Criticize Shutdown (BBG)
- Berlusconi struggles to keep party united after revolt (Reuters)
- SAC Defections Accelerate as Cohen Approaches Settlement (BBG)
With WTI crude oil prices hovering at record levels for this time of year, the spread to Brent crude has bounced from zero as Syria started up to around $4.50. At the time time we noted the plunge in the spread was as much related to US infrastructure and technical issues as the war premium and now Pierre Andurand, manager of one of this year's most successful commodity hedge funds, believes US crude will trade at a premium to the Brent benchmark within weeks, counter to the expectations of many in the market. As The FT reports, the ex-Goldman trader is known for taking bold positions, and while not commenting in specific trades, he noted "In order for Cushing inventories to stop drawing and start building, I think WTI [the US benchmark] should be at a premium to Brent [the global benchmark]," within weeks.
Even as JPMorgan seems set to put its London Whale troubles behind it with a nearly $1 billion imminent settlement, while at the same time throwing two mid-level traders at NY prosecutors and washing its hands of the whole tempest in a teapot affair, a curious snag has appeared. The CFTC, which in the past has never had a problem with promptly settling any market manipulation abuse with any bank in exchange for a small cash-greased slap on the hand, is suddenly a sticking point in JPM's ability to just walk away from the biggest prop trading Snafu in history. As WSJ reports, "the CFTC is focusing on the bank's increasingly aggressive trades made over several months early last year, when it added tens of billions of dollars to its derivatives positions—contracts tied to investment-grade corporate bonds, these people say. The CFTC is likely to use new powers granted by the Dodd-Frank law that allow it to charge firms for recklessly manipulating markets, say people familiar with the agency's thinking."
- Less Tapering Becomes Tightening Credit No Matter What Fed Says (BBG)
- Yellen Is Now Top Fed Hopeful (WSJ)
- Syria - A chemical crime, a complex reaction (Reuters)
- More ECB collateral: Wrecked cruise ship Costa Concordia raised off rocks in Italy (Reuters)
- Aging Boomers Befuddle Marketers Eying $15 Trillion Prize (BBG)
- Abe Turns Pitchman, Says Japan Is Now A Buy (WSJ)
- Ex-JPMorgan Employees Indicted Over $6.2 Billion Loss (BBG)
- Barack Obama blinked first in battle for Lawrence Summers (FT)
- Berlusconi to support Italian government in video message: sources (Reuters)
- How China Lost Its Mojo: One Town's Story (WSJ)
The prices of the metals were down sharply last week. Was this manipulation? As you’ll see below, the picture in silver is astonishing.
It started early this morning as Asia really went to bed - when gold markets were temporariliy halted. Someone decided that was the perfect time to sneak a few thousand contracts through the futures market (and clearly has no fiduciary duty to a client for best execution). As the US day-session opened, it was silver's turn totake a hiding (and gold less so that time); and then into the close, with both precious metals (and copper) heading towards their lows, Silver nose-dived (now -8% on the week) and its worst day in almost 3 months. Away from precious metals, Oil surged back over $109 as Syria chatter hotted up again (from Assad this time), the USD slid further (though ended flat on the day after an opening dump), and Treasuries shrugged off early gains to close red even as stocks closed lower (despite a late-day ramp effort) - breaking the streak and stunning a few TV anchors as VIX-slam and the 'short squeeze' seems over for now.
It is somewhat ironic that none other than CNBC is reporting the news (which was suggested here months ago in "Will JPMorgan's "Enron" Be The End Of Blythe Masters?") that as part of its divestment of its physical commodities unit announced previously, JPMorgan may also seek to cover up any trace of market manipulation in the division recently embroiled in the aluminum cartel scandal (which we reported on in June 2011 and which story recently rose to prominence as a result of follow up reporting by the NYT) by getting rid of none other than Blythe Masters.
There is a tradable approach to analyzing the fundamentals of supply and demand in the monetary metals markets. This article is a brief summary of the approach we take...
In yet another in our series of taxpayer-funded Federal Reserve research that has achieved so much over the years, the New York Fed blog has released its perspectives on the Tulip-mania bubble of 1633-37. Hot on the heels of SF Fed's Williams comments that bubbles can only be seen in rear view mirror and then of course - and that there's always an exogenous factor to blame' - in the case of tulips, the New York Fed cites "beers" as the catalyst since 'shares' were exchanged in pubs... Ironically then, it seems even 380 years ago, the only thing that mattered was liquidity.