Spooked - is perhaps an understatement. Although considering the subject of late, isn't entirely out of character. After momentarily blipping higher at the open, silver lost the floor and fell some 7% before reflexively bouncing and rolling over into the Monday session. It would behoove us to remember next time we consciously admit along the lines of, "Although running against our better judgements..." - we follow those instincts. But alas, there's no crying in baseball - and certainly not with silver.
Comfortably creatures of contrast and comparison, the nature of Sunday's open - both the Friday lead-in, rapid loss of cabin pressures and retracement bounce - was eerily reminiscent of how silver first raptured back in May of 2011. With that said, the psychological underpinnings and capital comittments towards silver here are worlds apart and in our eyes simply don't merit chasing the downside.
What's also interesting - both in light of silver's Sunday swoon, the comparison with May 2011 and its typically leading relationship with the equity markets, is the comparative structures and now glaring motivations of the Fed's quantitative cow bell in both salvos. During the arc of QE2, risk appetites were indiscriminately (both commodities and stocks) motivated higher - initially by the telegraphed reporting of the Wall Street Journal's Jon Hilsenrath - and subsequently by Chairman Bernanke himself. This major asset run then culminated with a blowoff top first in the shallower ponds such as silver and then through the system's deeper waters.
While silver and the commodity and currency markets respective cascades have largely been ignored and qualified as just a change of guard and character - we continue to heed their warnings and consider the equity markets curling structure and driven behavioral bid by the Fed unhealthy to say the least. Notable, when even contrasted with the last time the equity markets irrationally broke through the long-term meridian in 1995.
As always - and perhaps more than ever - Stay Frosty.