Selling The War Premium
Following the attacks of September 11, precious metals ran up between 8%
and 13%, a somewhat predictable move as traders bought the perception of the
more enduring store of value that precious metals represent. America would
strike back, the only question was when. Metals remained high during the
period prior to US action, but notice how their fall from the recent highs
coincided with the beginning of the the US and NATO action in
Afghanistan.
Metals’ rise during a time of military action is a classic case of
pricing in a “war premium.” But now that the strikes are
proceeding as well as can be expected and that new buyers failed to enter
after a few days of anthrax scares, the war premium is steadily eroding.
Today’s cascade in silver demonstrates — at least for now — a
crushing of the war premium and a refocusing back on the fundamentals. And
the fundamentals had silver trading at contract lows as recently as August,
an area we almost touched today.
Metals closed lower with gold
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and
silver
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the two prior days by registering on the New 10-Day Lows list. The December
contract traded straight south from the morning’s opening tick in a one-day
delayed reaction to its downside momentum indication.
Weakness in metals demonstrates some calm is
returning to markets as traders shed positions initiated in flight-to-safety
bids.
Stock index futures closed mixed. December Nasdaq 100 futures
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recouping about one-third of yesterday’s loss. Nasdaq futures rallied 35.00
to 1343.50 with most of the most heavily weighted components closing in the
green. Cisco
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closed up ahead of its earnings released after Thursday’s close.
S&P futures
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below yesterday’s demise, finishing down 2.90 at 1073.10, and
Dow futures
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Currencies closed narrowly mixed, but notably, the Canadian dollar
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recent Futures Reports, energies have traced a series of outside days
near lows. Energies closed down for a fourth straight day to make good on
their “engulfing” indications. Unleaded gasoline
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from the
Implosion-5 List, struck a multi-month low
and heating oil
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New 10-Day Low List, matched a multi-month
low, forming double bottoms.