Stocks, Metals Plunge as Dollar Gains on Debt, Jobs Concerns

European shares extended an earlier slide triggered when a disappointing Spanish bond auction added to concern some European nations will struggle to finance their budget deficits

Spanish and Greek economic problems slam across every news wire. The Euro slides relative to the dollar, and panic returns. Bear in mind, that California, New York, all part of USA, Inc also have as severe budget problems. MOPE, however, never encourages you to think.

There little I can add on days such as these other than this headline spin is being faded. Retail money (nonreportable traders), often characterized as the weak hand is being setup by the commercials in the U.S. dollar.

The money gets into position. Next, media-driven MOPE is used to beat the grass to startle the snakes - general retail money. Retail money long position as a percentage of open interest had climbed 12% on 01/26/2009. This percentage could very well match or exceed nonreportables long participation of 15% at the highs on 9/19/2006, a comparable time frame, as the dollar continues to rally. As they say, it's alway most bullish before the slaughter in retail money.

U.S. Dollar Index and the Nonreportable Traders COT Futures and Options Long As A % of Open Interest:


Strong hands continue increase and decrease their short and long positions into the strength. In other words, they are fading MOPE and quietly watch the panic. The following charts illustrates that they control around 10% longs relative to open interest. This is much smaller than the October 2006 compartive period that marked the swing high.

U.S. Dollar Index and the Commercial Traders COT Futures and Options Short As A % of Open Interest:


Source: bloomberg.com