Jan 5, 2011. Start of a slide in commodities?

Jan 5.  Big slides in gold and silver yesterday, which may portend a more general commodity pullback and dollar strength.  Red/green euro$ pack spread had been making new highs over past several sessions; it also came under profit taking pressure, with red pack -3 bps and greens +3.5.
–There’s a note on ZeroHedge about the CFTC taking a renewed look at position limits.  Per Reuters: “Under the system, if a trader’s holdings in a commodity reaches a certain threshold, it triggers a new level of heightened regulatory scrutiny by the CFTC where commissioners could vote to require the trader to reduce their positions.” This may be the story of 2011. The aftermath of oil’s moonshot to $140 in 2007 was ugly, and now ETFs are prevalent in just about every commodity.  I know it’s against the free market mantra, but I think position limits have a place in basic commodities.  I also recall crazy moves associated with “corners”, like the Hunts in silver and Ferruzzi Grain in soybeans in 1989.  There’s a passage in Reminiscences of a Stock Operator where Livermore says government actions can always be a wildcard in trading positions.  China with rare earths is perhaps the best current example. The entire economy is a wildcard currently…
–Saw a piece cited on Drudge that says real estate investors now have to fill out many more tax forms and maintain onerous record keeping, sending 1099’s to anyone that does work.  That ought to help the housing market.
—-ADP and Non-mfg ISM today, expected 56 from 55.

Posted on January 5, 2011 at 5:02 am by alexmanzara · Permalink
In: Eurodollar Options

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