Dear CIGAs,

Yesterday it was the CPI numbers that shot the deflationists in the butt and resulted in a rip roaring rally in the Euro and the commodity currencies. Today it was the Philadelphia Fed Manufacturing Index which promptly returned the favor and kneed the inflationists in the groin sending the bond market up a full point at one time during the session and knocking the stuffing out of the commodity currencies allowing the Yen to take back just about all of its losses from the previous day. The YO-YO is alive and well.

Once again the hedgies and their algorithms are alive and well with their thoroughly analyzed, strategic approach to the market based on their excruciating detailed studies of long term macroeconomics (long term with them is 30 minutes) on full display as they reversed just about everything they had done the previous day. What more can one say? The Casino is alive and well!

The Dollar was stable going into today’s early New York session but as soon as the Philly Fed numbers hit the screen, up it went as did the Yen which literally SOARED higher as all the risk takers of yesterday became little chipmunks today and ran for the comfort of their burrows. Even knowing what these idiots are going to do does not take away the feeling of wonder and awe that grown-up, otherwise intelligent human beings could act in such a schizophrenic and irrational manner and do it day after day after day. I know I have said it in jest but I am beginning to wonder if we are seeing the long term effects of overexposure to computer video games and how they damage the human brain.

All these hedgies need is a two-sided coin and they could play the part of Harvey Dent, alias Two-Face, in the next Batman movie.

Back to gold however – the resistance zone from yesterday that appeared near $940 is still intact and until gold can manage a closing breach above that level, it will not be able to garner sufficient buying from these momentum based funds to drive it up and through $950 which would give it a chance at breaking out of the range trade that currently defines it. Any sign of “safe haven” buying in the US Dollar emboldens the bullion banks and some of the predatory quant funds to come in and sell the metal. Support lies initially back down near the $920 level. Some rolling of positions out of August and into December gold are already occurring.

Additionally, gold still needs help from the crude oil market to help propel it through the offers that sit above the market. News out of China that its stimulus was apparently working and generating growth helped bring in some buyers to crude that offset some of the selling initially associated with the Philly Fed numbers. Incidentally, that same Chinese news buoyed the copper market today and kept it rather insulated against the other outside market influences.

Considering the weakness in gold the mining shares have held up relatively well thus far into the session.