Testy Tuesday – Do We Need More Stimulus Already?

Do we need more cowbelll?

After 48 hours of market euphoria last week have the markets already sobered up over the weekend and need another fix?  We had a minor pullback (so far – see Dave Fry's chart) in the US and Europe but China's Shanghai Composite index has fallen 3% in the first two days of the week, giving up all of the gains of QE3 (not to mention China's own generous stimulus last week) and falling back to levels not seen since 2009.  

Our own data continues to come in terribly, with yesterday's Empire State Manufacturing Survey a disaster at -10.41, putting us steeply into contraction with another round of Global PMI reading coming later in the week to possibly confirm the Global Recession.  

Of course with no manufacturing activity it's the materials sector that's priced way too high.  Gold and oil were two of our remaining short positions in the $25,000 Portfolio (see Friday's Post) and yesterday morning I mentioned how excited we were to short oil at $100.  That worked out very well already as it plunged back to $95 yesterday afternoon – paying futures players (/CL contracts) $5,000 per contract in one fell swoop.  

At PSW, we find it very amusing that "Analysts scrambled to explain Monday's dramatic plunge" when this is exactly the plunge we've been waiting for based on our premise that the NYMEX traders are nothing more than con men running a shell game and faking demand for hundreds of millions of barrels contracts they have no intention of accepting delivery of in order to drive up prices and rob the American people of hundreds of Billions of Dollars each year.  In that context, yesterday's move was EXACTLY what we expected since last month.

For all those "confused" analysts, we are happy to point out the only chart that matters and that's how many open October contracts remain on the NYMEX, which expire on Friday – forcing traders to accept delivery of barrels (1,000 per contract) that they have no actual use for, no authorization to buy and no intention of owning.  

In fact, despite trading over 6Bn October contracts back and forth in the past month, in the end, traders will only accept delivery of about 30M barrels – reflecting the ACTUAL demand – the rest is just faked…