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.

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Continue to U.S. Sector, Stocks & Bond ETFs

Continue to Currency & Commodity Market ETFs

Continue to Overseas Sectors & ETFs

The NYMO is a market breadth indicator that is based on the difference between the number of advancing and declining issues on the NYSE. When readings are +60/-60 markets are extended short-term.

The McClellan Summation Index is a long-term version of the McClellan Oscillator. It is a market breadth indicator, and interpretation is similar to that of the McClellan Oscillator, except that it is more suited to major trends. I believe readings of +1000/-1000 reveal markets as much extended.

The VIX is a widely used measure of market risk and is often referred to as the "investor fear gauge". Our own interpretation is highlighted in the chart above. The VIX measures the level of put option activity over a 30-day period. Greater buying of put options (protection) causes the index to rise.

Continue to Concluding Remarks

It's one thing for the futures exchange to modify margin requirements to keep markets "orderly," it's another to serve a different constituency versus others. In this case it's large banks being short silver and complaining no doubt. Added to this is the exchange being without enough deliverable silver to match potential demands for physical delivery. Further, it would be naive to think the administration, Fed or Treasury aren't keen on getting commodity prices lower. Who is the exchanges customer? Their actions, including raising margin requirements again tonight, are doing anything but maintaining orderly markets.

Wednesday was a margin selling event occasioned by silver price drops which rippled through markets. You might expect more of this tomorrow.

If it matters tomorrow is Jobless Claims

Let's see what happens.

Disclaimer: The ETF Digest maintains active ETF trading portfolio and a wide selection of ETFs away from portfolios in an independent listing. Current positions if any are embedded within charts. Our Lazy & Hedged Lazy Portfolios maintain the follow positions: VT, MGV, BND, BSV, VGT, VWO, VNO, IAU, DJCI, DJP, VMBS, VIG, ILF, EWA, IEV, EWC, EWJ, EWG, EWU, BWD, GXG, THD, AFK, BRAQ, CHIQ, TUR, & VNM.


The charts and comments are only the author's view of market activity and aren't recommendations to buy or sell any security.  Market sectors and related ETFs are selected based on his opinion as to their importance in providing the viewer a comprehensive summary of market conditions for the featured period.  Chart annotations aren't predictive of any future market action rather they only demonstrate the author's opinion as to a range of possibilities going forward. More detailed information, including actionable alerts, are available to subscribers at www.etfdigest.com .

This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.

Dave Fry is founder and publisher of ETF Digest, Dave's Daily blog and the best-selling book author of Create Your Own ETF Hedge Fund, A DIY Strategy for Private Wealth Management, published by Wiley Finance in 2008. A detailed bio is here: Dave Fry.

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