Wednesday, July 18, 2007

...And The Sh*t Hits The Fan

MSNBC - 21 minutes agoBy FT reporters Ben Bernanke acknowledged for the first time on Wednesday that credit concerns were spreading beyond the subprime mortgage market as investors showed their worries with a flight to quality, seeking refuge in government bonds and other ...

There's little more anybody could add to what was said today...the sh*t is hitting the fan people. Every effort will be made to "control" the situation. That became evident late this afternoon as the stock market turned around on a dime. The Exchange Stabilization Fund to the rescue! How much longer can this nonsense last? The Treasury will soon be unable to print money fast enough to stave off a rush towards the exits once the "foreigners" who poured money into the markets on Wall Street the past three months take their ball and go home.

Gold and Silver broke solidly from their recent trading ranges today. The mining stocks put a serious ass whuppin on those foolish enough to still be short in that sector. The Precious Metals Bull has awakened!

Gold hurdled key Fibonacci resistance at 668 today, and as expected found a new cap at June's highs around 673. A break of a major downtrend line looms ever closer near 677. RSI remains supportive of a move higher at this time.

Silver hurdled key Fibonacci resistance today at 13.05 and 13.10. Keep a close eye on Silver's RSI as it approaches the downtrend line there off of April's highs. RSI is a leading indicator, and a downtrend break there often proceeds and predicts a downtrend break in price within days. I suspect that there is a bevy of shorts in Silver at 13.33ish and they will be screaming if Silver takes out the March downtrend line and the June highs simultaneously. Be long and strong should this occur.

With these moves today both Gold and Silver have turned old resistance into new support. Gold is now supported first at 668. For Silver, initial support comes in between 13.05 and 13.10.

With all that has been happening the past 48 hours, the "Yen carry trade" has seldom been mentioned. An interesting development late last week that may have slipped under your radar was Iran's demand that Japan now pay for ALL of their Oil purchased from Iran in Yen ONLY. This is certainly BAD news for the good 'ol greenback, and potentially even worse news for the "Yen carry trade". Keep an eye on this. It should be noted that despite what you hear in the press, funds obtained in the "Yen carry trade" are NOT used to purchase Gold. That would be ridiculous. They are primarily used to purchase higher yielding securities. Can you say "mortgage backed securities"? This demand of Japan by Iran could be the spark that burns that house down. This story should be followed.

For an excellent essay on the current Oil Market a MUST read is this essay by Gary Dorsch:

How High Can Crude Oil Fly?

Now in a very interesting turn of events, Ayatollah Khamenei is demanding that Tokyo pay for its Iranian oil imports in Japanese yen, rather than US dollars. The request for payment of Iranian oil payments in yen is believed to be part of Tehran’s fear of a possible seizure of its assets by the US government amid tensions over its nuclear weapons program. So far, the dollar has shown little reaction to the Ayatollah’s latest gambit, holding steady above 122-yen.
Japanese oil imports from Iran have fallen sharply to 323,000 bpd in May 2007, from roughly 532,000 bpd in 2005. Still, with the cost of OPEC’s benchmark crude oil basket spiraling upwards to a record high of 8,800 yen per barrel, Japanese oil imports from Iran would cost around $10 billion to $12 billion per year. That could make life a bit more difficult for “yen carry” traders, speculating in global markets.

Gary details a lot of what goes on behind the scenes in the OPEC world, and why the price of oil is rising steadily. Goldman Sachs yesterday predicted $95 Oil by the end of the year. I highly recommend reading Mr. Dorsch's essay in it's entirety.

No comments:

Post a Comment