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Goldman Stomps Commodities: Dave's Daily

The IMF (close Goldman Sachs (GS - Get Report) associations) lowered global economic growth expectations perhaps lowering demand for commodities; Fed Governor Dudley (ex-GS) pronounced inflation as "transitory"; rumors swirled the CFTC (Chairman Gensler ex-GS) would raise margin requirements on energy and, "presto"! Goldman Sachs told clients to close long commodity tracking positions. That's the power GS has with ex-employees planted like moles throughout the industry. 

Whether you believe it or not, the bear raid on most commodities and commodity related sectors took a hit today. Goldman will report its gains based on "when" they uttered their call and not on your ability to execute and transaction.

Alcoa (AA - Get Report) just kicked-off the earnings season after the bell and results were mixed. There is some selling in After Hours trading.

Bonds rallied with a small uptick in the dollar, commodity selling and weaker stocks overall.

Volume remains pathetically light and one must wonder where everybody is or if this is now the "new normal" for trading. Breadth per the WSJ was negative overall.

You can follow our pithy comments on twitter and join the conversation with me on facebook.

The chart below is courtesy of our trading associate Scott Pluschau and is comments are as follows:

Prior to today the S&P futures contract has had six consecutive days of topping tails looking at Japanese Candlesticks for the daily price action, highlighted by a blue rectangle on the attached chart.  This is a clear sign of upside price rejection. An increase in demand or an exhaustion of the supply in this area, and due to the length of sideways movement we may see a strong breakout to the upside, as those who are on the short side will likely feel the pressure to cover their losses quickly, while the higher price above resistance may also attract further long speculation.

Volume on the Emini's has been below average the past two day's as we have made a set of lower lows and negative price action at the end of the day from the prior close, so I am not overly bearish at this time either.

The last minor resistance level was around 1315 on March 25 and March 28, 2011, highlighted with a grey trendline. This is an important area to see hold for the bulls in my opinion.  Using Auction Market Principles I think the S&P is forming a mature balance area, or is in a Horizontal Development phase establishing value, and it will be very important to pay close attention to the volume, if and when the price breaks out from this range to the upside or breaks down below 1315.

I believe the market is likely to enter a phase of strong vertical development seeking new value soon.

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