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Tons of Steel

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"And walk among long dappled grass,
And pluck till time and times are done
The silver apples of the moon,
The golden apples of the sun."

(W.B. Yates)


Good morning. With the curtain now closed on the two-day Greenspan show, the market shifts its attention back to the earnings picture. Corporate report cards have essentially been ok, although largely ignored by the market. The action lately underscores the important point that macro events (Greenspan/economy/geopolitics) typically trump shorter-term measures such as technicals, earnings, and news flow. Just a little common sense reminder in case you're too focused on levels and missing the bigger picture. It also demonstrates the fact that old news can become new news depending on the collective interpretation by the market. I guess that's the reason why the Chairman has been able to master the art of talking without really saying anything.


The hump day session was a drifty one set off by the many cross currents. Volume flows picked up to their highest levels since 3/11 with 1.7 bln shares changing hands on the Big Board and 2.04 bln on the Nasdaq. For its part, breadth ran at 1558 advancers to 1777 decliners on the NYSE and 1831 advancers to 1280 decliners on the Nasdaq.


The metal meltage was the most notable standout in the market action (aluminum, copper, lead, nickel and tin were all down around 4%-6%). The big loser was silver which finished the day down 11% to close at $6.17 / oz. That's a tumble of 25% from the April highs (in only the last 12 trading sessions) and we've gone from an 8 handle to a 6 handle pronto, Tonto. Gold was off $4.80 / oz. yesterday and is now down -$35.95 from the 3/31 high ($426). The Philly Gold & Silver Index (XAU), after slicing thru key support at 92 we highlighted yesterday, shed another 1.5%. That index is now off about 17% from the Mar highs. For further analysis, please take a look at last night's Fleck Rap for valuable insight into the action.


I wonder about issues I've highlighted on the Buzz regarding China lately (Hang Seng down 8% in last week) and their potential impact on all of this - as they've been big commodity buyers. If the banking system in that country is taking measures to curb over-investment and cool an overheating economy, what are the implications then on commodity prices? Not sure if that is part of the equation, but it's a situation to monitor nonetheless given the broader implications on the global economy and fixed income/currency markets.


Chart Check


The NDX and S&P 500 hovered around important levels during the afternoon trade tickling 1450 and 1123 respectively.


Motorola
(MOT:NYSE) raised eyebrows on their earnings surprise and that helped buoy sentiment in tech and drag the SOX Index nearly 2% higher (thru the 200-day ma (475.50)). The KLA Tencor (KLAC:NASD) numbers were ok last night but the key factor, order guidance, had the market spooked in the after hours. We'll see how that gets digested and the impact on the tech tape. I highlighted the Amex Internet Index (IIX) edging thru the 50-day ma (150.38), and that index finished up 1.10%.


I'll continue to watch the Russell 2000 Index (RTY) which caught a lift (+1.29%) yesterday and is testing resistance at the 50-day ma (584.22). Note the S&P 600 Index (SML) worked thru resistance at the 50-day ma (283.56). The action there could help to identify a potential leadership handoff from the high flier's to more stable, defensive names. Not sure if that is in the cards, but it's something to monitor.


The rate debate has made the brokers (XBD) a tough place to be from the long side lately. They are clinging to support here at the recent lows so we'll see if they can hold and bounce or simply continue the trounce. The oils pulled back, as we had wondered, but slickly finished off the lows yesterday. The homies (HGX) held the recent low (for now) at 374. The MS REIT Index (RMS) got stuffed at the 200-day ma (566.82). We saw relative outperformance in the transports (TRAN) and they finished strong to add 1.50% on the day (staring at recent highs). Crude oil, after shying away from $38 brl on a closing basis, got drilled for 3% toward $36.50. The cyclicals (CYC) edged thru the 50-day ma (681.73). The drugs (DRG) caught a high thru the 50-day ma (332.72). The biotechs were slightly green but the action in Amgen (AMGN:NASD) was sickly (pricing concerns about Aranesp). They've got earnings tonight, watch how that name acts ahead of / after the numbers as a sign of whether its ill's spill onto group sentiment. I'm also keeping an eye on Wal-Mart (WMT:NYSE) as a indicator on the consumer / retail pulse as it's scanning resistance at the 50-day ma (58.68). General Electric (GE:NYSE) pierced the 200-day ma (30.36) intraday but came back in line with the market's drift higher.


We've got a number of important earnings reports out today. Beeks also drops by with the initial claims at 8:30. Al Green turns over the microphone to his fellow Fed heads today, with chatter expected from Bernanke, Bies, and Hoeing. We'll check the wires to see if his economic cronies fall into line on the inflation, interest rate, economic outlook banter.


As always, we'll scan the action and highlight the relevant info as it all unfolds. Good luck.

position in silver

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