Commodities | May 09 2011
By Rudi Filapek-Vandyck
When the old master speaks, we, the younger market observers, eat our words, silence all background noises and make our ears and mind work overtime. Below are some valuable insights from wise and experienced market trader Denis Gartman as published in Friday's The Gartman Letter.
"The problem that the market has now is that the “boat” is crowded on the dollar short side and the boat now has been tipped on that side, throwing all passengers and crew overboard. The scramble is on. The EUR bulls will offer that the break from 1.4900 to 1.4500 was a perfect correction along a bullish trend line looking at the hourly charts. We could actually embrace that thesis for the trend is still upward and thus far since the EUR’s real low last summer at 1.1900 each high is still higher and so too each new interim low. But one gets the sense that the steeper, more severe upward sloping trend line on the chart (…) shall be broken sooner rather than later and that the much more broadly defined trend line that offers support far lower than at present shall be put to test.
"These days of liquidation in the precious metals have been egregiously violent, and although we are certain that the days of liquidation after the Hunt Affair in the early 80’s when the Dr. Henry Jarecki-led Board at the COMEX moved to allow trading for “liquidation only” might have rivaled what has happened recently we cannot remember any other period such as this. We really cannot. We’ve tried, but we can’t.
"Some are taking the CME/COMEX to task for raising margins four and now five times upon speculators for the reason for the market’s collapse. As a member of the Board of Directors of the Kansas City Board of Trade responsible for the setting of margins we can assure everyone everywhere that the exchanges raise margins only when necessary and then only to make certain that the integrity of the Clearing Corporation is maintained for all to see. Speculators know that margins can be increased at a moment’s notice, and this power has resided and must reside with the various Exchanges' Board’s of Directors. It is they who are closest to the trade; it is they who have the markets and the Exchanges best interest at hand. They make changes only at extremes, knowing that in so doing they curtail trade. So rather than take the CME’s Board to task we here congratulate them and say instead, “Well done, Gentleman and Ladies; Very well done, indeed.” This needed to be done; speculative fervor needed to have a bit of cold water splashed in its face. Rather than have government strong handedly force such decisions underduress, the Board of Directors acted in the Exchange’s best interest and in the market’s too.
"Who has any idea how far these things go once they start. All we know for certain is that the market has been given a massive 2 x 4 to the forehead, applied with rather great and blunt force. It shall take some while before clarity and order are restored. The market will stagger and stumble about a bit; it will rally; it will break, and it will take several weeks before health is restored and a bull market can obtain again. Bounces will be met with liquidation by those caught out but who’ve not liquidated yet. Their margin clerks will force that upon them. This then is THE fundamental of the day."
Find out why FNArena subscribers like the service so much: "Your Feedback (Thank You)" – Warning this story contains unashamedly positive feedback on the service provided.
