Is The "Geithner Curse" Over?

Geithner's got a coach! That's what a lot of traders are saying about his testimony. Remember the Geithner curse, a follow-up of the Paulson curse: every time they open their mouths, the market drops.

Not today. Geithner is not saying anything that is roiling the markets. Why not? "He is sounding like a textbook, large generalities, very vague," one trader said.

What's up with gold? Gee, with all the worry, with all the ads on TV urging you to buy gold bullion, or turn in your old gold jewelry, or talk of "gold parties" replacing Tupperware parties (hostesses take gold jewelry from the guests, pay a set price, sends in the gold to a bulk buyer and pockets the difference) you would think gold would be flying, but since hitting $1,000 an ounce on February 20th it's been down 7 days in a row.

George Gero at RBC notes several issues:

1) Liquidation from funds to pay off margin calls is the major pressure on gold. As stocks began falling apart at the end of February, many funds began getting margin calls. To pay off the calls, they sold gold.

2) Momentum traders getting out. A lot of momentum players were sucked in when gold hit $1,000; but these momentum players are weak holders; as more sophisticated traders sold into the rally the weak hands also got out when sell stops were hit.

3) Technical factors affected other traders: after $1,000, we saw lower volume, lower open interest, and lower prices, all of which is a recipe for profit taking.

4) What about gold holders turning in jewelry worldwide to cash in on high gold prices? Gero acknowledged this was happening, particularly in the Middle East and India, where gold prices are high in local currencies, but said these additional supplies were not a major factor.

President Obama goes long the markets. Lots of trader remarks about the President's statement that

"Buying stocks is a potentially good deal if you've got a long term perspective."

While some cheered his support of the markets, a number shook their heads in disbelief at an endorsement of a long-term buy and hold perspective when the major indices are at 12 year lows.



Questions? Comments?