Metals Market Wrap-Up

1. What the hell is going on with gold stocks? Yesterday gold was up big and the HUI finished in the red. Today, Gold is barely holding on to the lows of the recent move, and gold stocks look like they are positively diverging. C'mon!

2. Jimmy Rogers has turned bearish on Gold for the intermediate term, citing too high COT open interest and general excessive speculation. Jimmy has always argued that there is more money to be made in other commodities, and recently, in particular, the agricultural commodities. But nevertheless, he's an important voice on commodities in general, including Gold.

3. It's not easy to argue that NEM is still the bellwether for the industry, since it is no longer the largest cap stock and since now ABX is a lot less hedged, but, for whatever it is worth, NEM looks like it has been positively diverging in the last few days.

4. Looks like the Chinese regulators are taking the right approach: trying to prick the stock bubble before it gets completely out of hand. I think that is the right move and it will ensure that there is no real "crash". Still, a correction of 20 to 25% is definitely possible. Unlike some analysts who believe now that the Chinese market is the be all and end all, the critical linchpin that, when gone, will cause massive sell offs in other markets, including world stock and commodities markets, I think the Chinese market is just one big irrelevant red herring.

• (i). The Chinese market had nothing to do with anything until about 1 year ago. The current bull market in commodities and in other stock markets owed nothing to Chinese stock market, which was a phenomenon that arose barely in the last year. How did the Chinese market suddenly become so important for everything?

• (ii). The Chinese market still has significant restrictions on foreign ownership. Sure, some foreigners are able to override that, but it's nothing like Tokyo or NYSE. Foreigners haven't penetrated that market enough for it to have any real collateral significance.
  

The Chinese market is one big red herring. I'm surprised that so many people believe it's now a linchpin for world markets and the world economy as a whole. It's right up there with the "unwinding of the yen carry trade" scare for the dumbest popular ideas floating around the markets these days.