Thursday, July 28, 2011

Respect the action

6:26 am (Hawaii) It doesn't matter what I think of the CME mafia or the obvious lack of conviction on the part of paper silver traders today. All I know is spot silver just ripped higher after AGQ hovered at 208-210 for more than an hour. That left my small position in ZSL rising to 13.85, then to 13.49. I got out at 13.51 for a slim profit (24¢). Break out the harmonica, I'm feeling rich!

With the kabuki actors on Capitol Hill going through procedural stuff now, and the public stuff to start in 2 1/2 hours, none of that is exactly bearish for precious metals. I don't expect a meteor shot for gold or silver, either. But the downside for PMs should be over for today, as Brother Turd Ferguson alluded to in his chat room. The only thing that would hurt PMs is a surprise agreement or delay announcement.

The last time I paid this much attention to a pseudo hedge pairing was May of 2009, when the flash crash hit and my AAPL shares got kneecapped. At the same time, my miniscule position in VXX almost kept me at break-even through the chaos. It was something to behold. By the time I got out of VXX, it had lost most of its gains, but AAPL had made up most of its losses, so I was both exhausted and relieved. I was on the road at the time, so that was one crazy early morning in a hotel room.

Right now, XG is showing signs of life, down "only" 2.7% (35¢) after dipping 75¢ earlier. The last big dip, just a week or two ago, took shares to 12.00 intraday. Today's low was 12.35, and it's now at 12.75.

ZSL is back to 12.58, but I'll be an observer from here to the bell. I'll be away from the computer doing some work, and that's probably for the best ... unless a deal is reached in DC and the market takes off without me. Is Scott Blier right? Will the market actually do the opposite of what most of us expect? Will it sell into any news of a debt ceiling deal?

As for rare earths, the big boys were sky high and not playable when SHZ showed some signs of catching up. Ultimately, it lacked staying power and couldn't stay above 3.25 for long. I stayed out and now it's at 3.12, still up nicely (+1%) for the day so far. Chasing is almost always a sure route to pain.

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