Traders may be prepared for a flash crash in stocks, but not commodities. Today we discovered that with a small move in the dollar and margin increases, we can create dislocation in oil and gold just as easily as we can in silver. Are the hedge funds puking up the long commodities and short dollar trade? And it spilled over to stocks after initial buy attempts failed late in the day.
The logic is: if you borrowed money to play oil and silver, you probably borrowed money to play stocks, or futures. The SPY is back at the 20 day moving average and silver is close to unchanged for the year. We are certainly oversold enough for a bounce especially on further jobs number disappointment tomorrow morning, but as we have learned from 2008, forced liquidation may take a while to unwind.
In order for equities to sustain a move higher, commodities need to stabilize and halt their free fall. ****Wordpress was down last night, so posting this one a bit late. There are also a rumor out last night that apple may switch to ARMH for its laptop. Here’s the link. I do currently own armh and may sell it any minute.****
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