Oil Prices Have Been Levitating

As if Bernanke himself used his NY Fed's Jedi mind tricks to bring the price up. We'll see tomorrow what out USO/Oil long position looks like, tonight it looks good, but  lot can happen overnight.

Blythe Masters Swan Song?

The ongoing story of JP Morgan's position cornering the Silver market with a massive short seems to be over with JPM losing out. Several times psychologically important levels ($29-$30) in SLV were broken (Friday closing at $31.79 - silver last I checked at $34.26) seeming to end the battle and vanquish JPM, only to see JPM once again send silver lower. Now Silver has made significant new highs ($34.26 at last check) and the leveraged JPM shorts most probably heavily margined are finally putting this battle between JPM and the silver bugs to a conclusion.

However, as seemingly evident as it is that this battle has been lost by JPM, the same has been side 3 or 4 other times so be careful in entering any long positions on Silver. If the metal is to break free and run, they'll be plenty of upside.

The question remains how a loss will effect JPM? The current JPM chart doesn't put it in a great place to take a solid hit right now.

This weekly chart shows what could become a double top in JPM, we know there have been other non-silver related court rulings that have not been positive to JPM's overall profitability including the recent MERS defeat. Last time JPM made a high around $47.80 there was a clear "Dark Cloud Cover" Reversal Candle and volume was quite heavy throughout the decline. This time JPM has approached the same level after over a month of consolidation and made a one week solid surge higher, much like the last time although that consolidation was only two weeks, then the surge followed by the Dark Cloud candle. As XLF was looking a bit week late last week any way, there's pressure on the financial sector, most likely coming from the MERS decision and the announcement last week that the FED has asked the top 19 largest banks to conduct stress tests at 11% unemployment. A strange request for a Fed that seems to believe the recovery is on pace while ignoring rising input costs and largely stable prices paid, meaning margins are being squeezed which causes higher unemployment, lesser quality materials, and smaller portions. However the evidence is mounting as input costs continue to rise that inflation will hit in  stealthy, but powerful way.

In any case, JPM does not look well positioned to lose this battle. You have to understand, this isn't just a large position, it's a large position on massive margin. I would not be too quick to say it's over but watching SLV and JPM this week could add some clues.

Going into this area of resistance, JPM looked well positioned from the looks of the 5-day 3C chart which showed the negative divergence at the previous top.

on the daily chart above you can see a Harami reversal signal in the red box. You can also see the long consolidation zone I mentioned before the breakout. If JPM were to fall, $46 is the crucial level of support and where stops will be lined up, a high volume breakdown there may make it very difficult for JPM to recover from the break and thus make it an interesting short trade to consider.

We'll see if Ms. Masters Swan Song has finally played.

Euro Entering a sub-intermediate downtrend

Angela Merkel from Germany's ruling Christian Democrat Union suffered a spectacular, historic defeat in Hamburg's recent elections (which are the first of 7 state votes), not seen since World War 2. It has been made abundantly clear that the people of Germany will not stand for any more bailouts of the PIIGS countries, not that Merkel was leading the charge, but the German want no more involvement. The Social Democrats took in nearly half the vote and more then double Merkel's party, allowing them to set up a government of their own, no coalition needed.

This will certainly change the dynamics for the European periphery that has been the cause of concern regarding contagion. This should keep pressure on the E.U. as one of the main mechanisms in getting an alternative bailout vehicle in place, just had it's political autonomy "knee capped"

While the markets in the US are closed, the FX markets are open and here' a daily chart of the EUR/USD

Note the most recent bounce failed to make a higher high keeping the downtrend intact since the start of February. The downside may even be more vicious as these new development play out and are discounted against the euro's stability as plans that have been laid are likely to be scrapped by the influential Germans.