Gold slumps to 5 Yr. Low as equities and Dollar rallies

Financials: Sept. Bonds are currently 13 lower at 151’11, 10 Yrt. Notes 3 lower at 125’25.5 and 5 Yr. Notes unchanged at 118’31. The Sept. Bund is currently unchanged at 152.90. For the time being Greece is having a benign effect on the market as banks are reopened, albeit with capital controls, and the focus is once again on the prospects of higher rates sometime in 4th quarter here in the U.S. I am still recommending the short side of Bonds above 151’00, 10 Yr. Notes above 126’16, 5 Yr. Notes above 119’24 and Bunds above 54.00. I am also once again recommending the long 5 Yr./short 10 Yr. spread as well as the yield curve spread of long 5-5Yr. Notes/short 3-10 yr. notes now that the spread in yield has come in from 72 basis points to about 66 basis points premium the 10 Yr. Note. Keep in mind that Bonds are the riskiest of these strategies given the rise in volatility and decline in liquidity over the last few months.

Grains: Dec. Corn is currently fractionally higher 419’0, Nov. Beans 6’0 higher at 1005’4 and Dec. Wheat unchanged at 542’4. We have been positioned with a combination of short Dec. Corn/ long Nov. Bean 1200’0 calls with a ratio of at least 2 Bean calls to 1 Dec. Corn short. We have now had a 30 cent break in Corn and recommend covering the short Corn and staying long the Bean calls.

Cattle: In my last “Report” (July 16th I recommended reinstating a short position in Dec. LC above 152.00 and Oct. FC above 213.50. If you went short the Dec. LC above 152.00 either take profits or use a protective buy stop in the 151.75 area. I am still waiting for an opportunity to sell FC.

Silver: Sept. Silver is currently 4 cents higher at 14.80 and Aug. Gold 3.00 lower at 1104.00. Needless to say we were stopped out of recent longs in Gold once it traded below the 1130.00 level, makingh a more than 5 year low in the 1080.00 area as this metal suffered declines due to a higher Dollar and long liquidation. Silver has held together declining to the 14.50 area before bouncing back to current levels. I must admit to being a bit stubborn with Silver and have broken the adage of “do you want to be right or make money?”. We remain long a small position and CAUTION AGAINST ADDING TO THE POSITION AT THIS TIME.

S&P's: Sept. S&P’s are currently 2.00 lower at 2120.00. The S&P’s have had low volume and have failed in the last few sessions to make new highs as the tech heavy NASDQ indices has soared more than 6% on higher than expected earnings of such tech stocks as Google and Netflix. We are still short after having lifted the short put leg of the combination of short futures and short near the money (at the time of trade iniation) July 2080 puts. I am now looking to sell the Aug. 2080 put at 32.00 against a current short futures position.

Currencies: As of this writing the Sept. Euro is currently 30 higher at 1.0867, the Yen 6 lower at 0.8045 and the Pound 11 lower at 1.5551. I am currently on the sidelines with a negative bias to the Euro and am patiently awaiting an opportunity to go short in the 1.1150-1.1250 level. I will be a buyer in the Pound below 1.5350.