Saturday, February 19, 2011

Itz Week End Review 2-20-11

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Itz left off in last week's review noting the Middle East... 'demonstrations could be new bricks in the bull's wall of worry'. The domino's are falling as protests have indeed escalated and of these weekend become very deadly.  Reports that demonstrations in Bahrain, Yemen, Jordan, Algeria and Libya have left more than 100 killed by the security forces so far in Libya and several hundred more wounded. Reports out of Iran claimed between 2 and 10 protesters were killed.  As each domino falls it puts more pressure on those remaining countries. If these protests continue to gain strength it will eventually weigh on the U.S. markets again. Up until now Israel as been quiet, but has voiced concern on news that Iranian gunboats were preparing to cross the Suez canal, headed toward Syria.
Geopolitical and economic news didn't just center around the Middle East, news on Friday China boosted its reserve rate by 50 basis points only ten days after raising interest rates. Friday's move will force banks to send another $55 billion to the central bank and take that money out of circulation.

The China inflation story plus the tensions in the Middle East combined to push the precious metals back to their highs. In the case of silver that is a 30-year high at $32.  Gold returned to $1389 and within shouting distance of resistance highs at $1425. The oil market was also as volatile, with Brent crude now taking the drivers seat as the global oil benchmark, while West Texas Intermediate WTI continued to hold around $85. The Brent/WTI spread was at historical highs over $16, but managed to narrow in on Friday.

What's Fueling Oil's Wild Disconnect?
Discussing the unrest in Bahrain and some momentum plays in oil, with John Kilduff, Again Capital; Daniel Dicker, independent oil trader/ and CNBC's Yousef Gamal El Din.

Silver futures have more than doubled, the metal has been in a secular bull market for over a year. This is not a fear trade or a trade to control risk. While gold prices hit a nominal all-time high above $1400 an ounce earlier this year, silver is still nearly $20 shy of its record peak. Itz continues to believe silver has far more room to run, PT $37. There maybe a pullback this coming week after last weeks rally,producers may lock in some of the recent price gains with forward sales.

Discussing how much the geopolitical risk is playing into the price spikes in metals, with Jim Steel, HSBC, and Andre Julian, Opvest Wealth Management. [Silver Wheaton SLW]

BofA Merrill Lynch Global Research recently raised its 2011 earnings-per-share estimates on the S&P 500. Both Credit Suisse and UBS AG boosted its year-end projection for the S&P. Credit Suisse is looking for 1,450, while UBS expects 1,425. The Volatility Index $VIX has been low recently, some complancency has set in, There is definitely high anxiety because everyday it looks like the market is at the top and it's going to have to correct. Are we due for a pullback? Yes. When? that's the big question. Money just keeps flowing into equities.

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