Silver Explodes As DJIA Closes Above 13,000

Tyler Durden's picture

After 22 crosses yesterday, and 12 more today, the Dow managed to close above 13000. Transports were lower but less so on Oil's modest retracement (though the Brent-WTI spread remained around $15). While stocks closed modestly higher, volatility and correlation markets remained considerably higher than would be expected and along with quite considerable relative weakness in HYG (the high yield bond ETF) into the close as well as a clear up-in-quality rotation was evident as investment grade credit outperformed notably (not exactly a high-beta risk-on shift). Apple's meteoric rise helped drag Tech to first place overall today and also YTD followed closely (YTD) by financials both up around 14%. The last week or so of slow bleed higher in stocks has notably not been led by a short-squeeze in general - based on our index of most shorted names - but as is becoming more and more clear, divergences (and canaries) are appearing all over the place but we suspect can be traced back to Apple in many cases for its over-weighting impact. Treasuries slid lower (higher in yield) after Europe's close but remain better on the week and modestly flatter across the curve. Aside from a hiccup around the macro data this morning, EUR pushed higher all day against the USD shifting into the green by the US close as JPY stabilized. The USD weakness helped Copper and Gold leak higher but Silver was the massive winner, now up an impressive 4.3% since Friday and 30% YTD as WTI lost $107 and is now down over 3% on the week. The IG rotation coupled with vol decompression makes some (nervous) sense heading into the LTRO results but it seems the new safe-haven trade is Apple (whose option prices are now the most complacent since early 2009).

 

12 more crossovers today and finally we get the much-heralded Dow 13000 close...

with stocks overall led by Apple (tech) and Financials both of which overall remain the best performers YTD...

...but while stocks limped along in a narrow range on 'average' volume, investment grade credit rallied handsomely this afternoon and HYG (the high yield bond ETF) sold off quite significantly (relative to the risk-on sentiment in stocks)...

...and while VIX managed a small down day, overall the vol trend is negative or less exuberant than stocks would infer - especially if we look out across the term structure and wings of the vol surface (and implied correlation)...

It would appear that the momentum-driven excitement has slowed this last week or so and much of that seems to be due to the short-squeeze fanaticism being largely wrung out. Our most-shorted index (in which we took profits) has pulled back to 'fair' with the overall market (orange oval) since inception suggesting much less squeeze pressure (of course that is outside of AAPL).

...and while Treasuries leaked lower (higher in yield) this afternoon and the USD also leaked lower driven mainly by EUR strength, the dispersion in commodities was again the big story with Oil dropping considerably on IAEA chatter and SPR rumors and Silver exploding higher on, well who knows other than high beta catch-up ahead of the LTRO perhaps.

Charts: Bloomberg

Bonus chart: Apple's option prices imply the most complacency with regard to downside concerns since May 2009. This chart tracks short-term and long-term options prices implied distribution skew - i.e. how different from a normal distribution are the prices of Apple's options saying its expected returns are going to be... the answer is - the most skewed to the upside (with little concern for downside) in almost 3 years. As an aside, the kurtosis (or fat-tailed expectations for long- and short-term are in line - often a sign of a trend stalling).


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spiral_eyes's picture

Apple is a bubble, bitches!

MillionDollarBonus_'s picture

Stages of a bubble:

Linear Uptrend: Smart value investors and arbitrageurs accumulate safely at below below fair value prices (well below $5 for silver)

Speculative Mania: Self-righteous libertarians start betting dangerous amounts of money while spreading increasingly elaborate conspiracy theories to justify their obsession

Total Euphoria: Greedy and delusional amateurs scramble to get their hands on every ounce in an effort to satisfy their insatiable self-indulgence

Initial Sell Off: Annihilation of the ravenous and suicidal lemmings who have by now been totally possessed by greed

{We are here} -> Bull Trap: Die hard silverbugs pump what is left of a dying market which sucks in the last of the pack

Capitulation: Total obliteration of the remaining rabble

 

mayhem_korner's picture

 

 

MDB - You are here:

Total-Linear-Thinker-Mania

nope-1004's picture

I'd say much of the move today in silver was JPM and HSBC covering their shorts - so who are the evil speculators again?  But many have stated that once $34.50 then $35.60 Ag is breached, look out.

If you simply think for a moment why a large bank would short PM's in the first place (during a period of the largest central bank balance sheet expansion in HISTORY) you come the the rational conclusion that they are complicit in the collusion to keep a lid on the currency debauchery, so the debauchery yardstick (PM's) need to be kept down.  The proof is there, yet yellow-bellies like the CFTC seem to be intent on ignoring the blatantly obvious.

Either that or they (like MDB) own Berkshire stock.

nope-1004's picture

I don't want to come across as condescending to MDB, but I thought I should clarify for the record what the real stages of a bubble are.  It was Jean-Paul Rodrigue from Hofstra University who came up with the graph.

http://people.hofstra.edu/jean-paul_rodrigue/images/Manias%20Bubbles.pdf

I believe we are just exiting the Bear Trap.

Al Gorerhythm's picture

MDB seems genuine in his posts but there are some folk here who think that his posts are really subtle sarcasm. I'd like to know if MDB considers his postings as subtle sarcasm or real insights. If it is sarcasm, then he is doing a dis-service to the newbies who might be struggling with this awakening. He gets so many down arrows that, if he is being sarcastic, his delivery needs work. 

MDB, if you are for real and truly believe this then there is little we can do for you as you have been posting the same tripe for ages. If not, then let the unwashed in on your little joke.

prole's picture

MDB posts, like fine wine, are better on days when -

A- You have got three or four drinks in you

B- ZH threads start with "Silver Explodes"

Hugh G Rection's picture

Long Live Israel indeed!

I laugh at the beastly Goyim and their futile attempts to hedge against our global Zionist monetary empire.  Relying on barbarous relics to preserve wealth, little do they know the Gentiles we allow to live in the upcoming decade will need an RFID chip to conduct any transactions.

Let me say this very categorically.  You talking monkeys cannot change centuries of planning.  We have subverted and control every major economy in this world through, biribery, blackmail, and vicious psychopathy.  Your masses of socially engineered mouth breathers will die or submit.

We are the Learned Elders of Zion!

CH1's picture

MDB is all sarcasm, all the time.

prains's picture

MDB's fatgina needs a trim

economics1996's picture

Somedays are better than othrs for MDB.  He was a little serious for the new reader.

slyhill's picture

Unfortunately, it may be more insidious than sarcasm. Disinformation for hire, perhaps?

Al Gorerhythm's picture

They're my thoughts. I believe that he writes this drivel in the vein of preposterous hyperbole. He never seems to reply to questions about the rectitude of his posts. Therefore the only conclusion is that he is a troll or one of the most myopic dolts to visit these pages. His postings are triteness wrapped in a cloak of deceit and have been refuted by others and yet he continues. Stubborn to the core, blinded by the light. As an unanswered enigma, entertaining comic or insideous troll? ; he only leaves his postings open to question and taken with a grain of salt.

LongBalls's picture

I agree. I feel MDB is dangerous. If he indeed intends to lead with sarcasm that is fine. But there are newbies that are trying to part through the BS. He has never validated the sarcasm belief. Therefore, untill he claims otherwise we must take him at his written word.

Fedophile's picture

The noobs will just have to put their critical thinking caps on and come to their own conclusion over time.

dark pools of soros's picture

one person's noob is another's sophisticated investor

Real Estate Geek's picture

Dangerous?  WTF?

The desire to silence others is what's dangerous.

Al Gorerhythm's picture

I don't believe anyone has suggested that. WTF are you on about?

Real Estate Geek's picture

My reply was to LB's post.

To directly answer your question, I take issue with characterizing someone as "dangerous" because he espouses ideas that are un-(fill in the blank) to a self-appointed judge.  That type of BS is how we've allowed the PC crowd to mire us in concepts like "hate speech."

We have come way too far from the mindset of "I may disagree with what you say, but I will defend to the death your right to say it." 

BidnessMan's picture

With fiat currency creation going to infinity, why would there ever be a final down leg back to a mean barely above pre-bubble prices?  This chart must assume stable money, which is definitely not what the future holds.  

In any case, this is not about bubbles.  The value of PMs is not going up.  The value of the dollar is going down. From $35 in 1971 to $1775 - the dollar is down 98%.

BlackVoid's picture

Intitutional investors are just starting to notice.

Dead Canary's picture

"Either that or they (like MDB) own Berkshire stock."

Uh, people that live in their mothers basements don't own stock.  DUH!

perelmanfan's picture

MDB may well have a point. All fiat currencies go to zero. Gold and silver as stores of value go up to infinity in terms of the old fiat. But neither journey is without its bumps. I suspect a big bump is coming. 

spankthebernank's picture

You're describing aapl to a tee major douche bag. Well done!

LynRobison's picture

Hey MDB, what analysis did you use to arrive at a fair value for silver at $5?

MillionDollarBonus_'s picture

 

I didn't say fair value was at $5. This would simply be a common sense entry point for professional arbitrageurs seeking fair value at four times mining costs. This is currently around $18.

 

TN Jed's picture

Scintillating silver sees common sense consensus commencing senseless common cents. 

TN Jed's picture

4:21 Aspergers does it every time

LynRobison's picture

So, the only value that silver has is the cost to dig it out of the ground?!?

EscapeKey's picture

Yes, because the Ricardian Labour Theory of Value is not full of fallacies.

LynRobison's picture

Well said! Big dollar-believers like MDB use a common tactic -- they begin their logic with an assumption that gold and silver are only worth some ridiculously low amount. Then, based on that assumption, they come to some ridiculous conclusion. When you ask them to explain the analysis behind their initial assumption, they never can. 

EscapeKey's picture

MDB is just a troll. The true crime is that Keynes himself built his entire flawed theory up around the Ricardian Labour Theory of Value.

His "work" is entirely full of holes, but conveniently written in an almost decipherable way. Hardcore socialism doesn't want you to understand its true principle.

LynRobison's picture

You sound like you could be one of those "self-righteous libertarians" that MDB mentioned. Don't those pesky libertarians realize that they are best ruled by their superiors in finance and politics? Why don't those libertarians consent to being ruled and told what to do and think like everybody else? Are those libertarians all so self-righteous that they actually believe they can be self-reliant and independent and free? How impertinent of them!

Al Gorerhythm's picture

See, MDB. That's sarcasm without the need for the <sarc> button.

EscapeKey's picture

Unbelievably, central planner who disagree with libertarian principles like to brand them with the 'fascist' label, despite the obvious irony.

A Nanny Moose's picture

Ricardo aside, I have trouble assimilating the economic postulations of a man (JMK) whose entire argument is the ultimate liquidation...death.

Chaffinch's picture

Multiplied by four, apparently ; )

Pay attention!

(sarcasm)

(Just in case anyone thinks I'm agreeing with this loony/ master of wit)

GubbermintWorker's picture

So, you're saying that since my DCA is $15, I don't have to lose sleep over it? Heh.

 

You already got yours, right?

 

Chaffinch's picture

Now you are clearly paying attention!

I reckon you only have to worry if the alleged cost of digging it out of the ground (not really relevant to anything since most mines which produce silver produce it as a by-product, but let's play along with MDB on this one!) drops to $3.75 or lower.

Maybe you should worry if the minimum wage drops. Or maybe you should worry because in some of the mines which produce silver as a by-product there is no minimum wage. I'm a bit fuzzy on the detail, but if in doubt, worry.

zerotohero's picture

"common sense" - well their you have it - what is completely missing since the beginning of 2000 is common sense in regards to world economics. We have gone down the tracks like a run away train - the engine has been able to maintain control of the attached and following cars so far but a lot of turmoil has been seen on the journey and the light at the end of the tunnel is not daylight but an on coming train.

economics1996's picture

But cost plus pricing is very rare.  Supply and DEMAND are how prices are made up.

prole's picture

Isn't AG more of a roller-coaster ride than just that?

Going from 1.30 to 50 back to 5 back to 50 down below 30 up to 37....

And  tomorrow?

GubbermintWorker's picture

Guess what MDB? Who cares? I've made enough trading in and out of SLV, that even if it goes to zero, I'll still have an amount in physical that well, leaves me very happy indeed! ...ROTFLMAO!!!

dogbreath's picture

its confirmed you are a troll but none the less you are 400+% to low for the number you use as the end of the linear uptrend.  5 dollar silver will be remembered as the days of free silver