CME got its marching orders...

Perhaps the last 4 days in the market are not what the Bernake and Co. (including the incumbent ruling class up for re-election as they have certainly been tied to margin adjustment in the past) expected?

It is well known that the CME/COMEX have shown some apparent favoritism in the past.

Remember the "Break JPM's Silver Short" campaign led by Max Keiser? The idea was if everyone in America bought 1 Silver Eagle, they could force JPM out of their short and all kinds of other effects that had to do with delivery and stock of actual silver for derivative funds/ETFs/etc.

Now, what exactly Jamie Dimon's (CEO of JP Morgan) relationship with Bennie is, I don't know? I know that when the Treasury under Hank Paulson and F_E_D under Bernie were looking for help with Bear Stearns, JPM stepped up (even though they received favorable treatment from both the above mentioned)  and in doing so, inherited a large SLV/silver short position from Bear. It was speculated at the time that if the silver vigilantes (who just wanted to see silver at the approximate adjusted ratio price of gold as set by the geologic ratio of supply). JPM's Blythe Masters was in control of JPM's new Silver/SLV short and defending it.

At the time, according to the vigilante, JPM's point of pain would be around $32-$34 for SLV, which would force them to cover and send SLV soaring. Here's what happened...

In less than 2 months...

The $30.40 area was resistance and SLV broke above and shot up 38% (not 58-sorry) from the resistance area, breaking above the $32-$34 area easily, then faster then it went up, it fell 30+% as COMEX silver margins went up 84% in 8 days, I believe there were 5 or 6 margin hikes in a matter of nearly just as many days, even after the silver move broke they kept raising margins. Was it a favor for JPM for doing the F_E_D and the Treasury a favor? I always thought the hikes were excessive, especially when they started kicking a dead horse.

The COMEX controls margin for metals, CME (The Chicago Mercantile Exchange) controls a host of margin for other assets like futures. The opposite of a margin hike is a margin cut and it is designed to do the opposite of what we saw in silver. It just so happens that tonight the CME lowered initial margin (that makes starting a new position in the effected assets cheaper) by 12%, shocker... They lowered ES Margins, along with a host of so many other products that I couldn't even count them, but I did see Dow Futures as well as NASDAQ Futures. Almost everything on the list of what must have been hundreds had next to it, "decreased" the only thing that I noticed that increased was ethanol (keep gas prices down before the election).

ES since the QE3 announcement has been in a downward sloping range after the initial day of gains on Thursday afternoon.

Strangely, ES has a leading negative divergence in after hours although it has gained some ground since 4 pm.

I also noticed something similar in Light Sweet Crude, but not in NASDAQ futures.

This is a 1 min chart of Crude with a similar leading negative divergence, but...

As you know I closed out the USO equity short as it had a decent 3C positive divergence in USO and on a 15 min chart of Light Sweet, it has a similar 15 min positive in the exact same area.

Other than Ethanol, I saw no crude margins changed and if anything judging by ethanol and talk about the SPR before the election, if the went anywhere it would likely be up if oil got too out of hand.

For now, I'm a bit surprised ES didn't react more to the margin cut, but give it a bit of time and lets see what comes out of it. It certainly seems strange that after QE3 was announced and the market hasn't done much, out of the blue comes an ES margin cut as the S&P is near multi-year highs!