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The Powers That Be Slam Silver: Dave's Daily

Stocks in this article: USL DJP UDN SLV EWZ RSX EPI FXI

With the action in silver, you can expect some bloodied and battered victims to appear shortly. The COMEX was under pressure regarding silver and its contractual commitments. Many large banks were short and losing money (JPM per many reports) and no doubt were feeling the pressure from rising prices. Below, Jesse's Cafe Americain provides some good insight for you.

"This does not look like a market showing anything like classic buyer exhaustion. This is more like a speeding train, running higher in response to a short squeeze on a massive overhang of paper silver obligations that cannot be delivered at current prices. The exchange authorities are throwing everything but the kitchen sink at it to try and slow it down, to break its momentum. I obviously do not have a problem with that per se. But it would be nice to see the regulators and exchanges occasionally intervening on behalf of the broader class of investors, and not so exclusively for the benefit of their insiders.

 

The reason is fairly obvious. The Comex inventory is down to a new low of 33 million ounces of deliverable silver, at least according to their published records. It is tough to talk your way out of that one, without showing the metal to the market. Stand and deliver."

The slam lower in silver dragged all commodities down with it as the mad scramble was on to cover margin calls. It didn't help that BRIC markets were also in shambles thanks to government tightening measures in these countries rightfully worried about "real" inflation versus our "pretend" readings. (Flash: The CME has just raised silver margins by 17%, the 4th time in 8 trading days. Hardly reducing volatility or maintaining an orderly market.)

Perhaps not so oddly the dollar fell sharply (recovering late) as precious metals and commodities in general declined. Stocks also fell as economic data (ISM Services ADP Payrolls) were poor indicating more economic softness. The ADP data in particular convinced many Jobless Claims Thursday and Friday's unemployment report would disappoint.

I'm more impressed by the S&P "monthly" DeMark 9 posted in yesterday's commentary not to mention the "sell in May and go away" maxim.

Some stocks held their own Apple (AAPL) with a new "I got to have it" MAC and Intel (INTC) with a new chip released.

In short, what we have right now is confusion, sloppy markets and a potential bout of stagflation.

Volume increased on selling which is typical during sell-offs as stops get hit. Breadth per the WSJ was quite negative.

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

 

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