Brian's Wednesday recap: Up a day, down a day, traders' 12-step and gold to $800?

The last 5 days of trade in the S&P 500 have been back to the “up a day, down a day” price action: Thursday +5, Friday -5.8, Monday -38.4, Tuesday +25.2 and today, down 22.6 handles. See MrTopStep Trading Rules 101 for our rule “Up a day/down a day” during the expiration. Trading Rules 101 or visit us at and bounce around, click on the Education Hub tab and take a look.

Collective Intelligence!
Sorry we are a bit short with today’s coverage, the trading desk was busy throughout much of the day.

Cirrus [CRUS]...stock was down 10% after bad the bad earnings report...Apple is their biggest customer and Cirrus cited inventory issues (close to 90% of CRUS revs come from AAPL) – reported. The company also announced that it will record a total net inventory reserve of $23.3 million of which approximately $20.7 million is due to a decreased forecast for a high volume product as the customer migrates to one of Cirrus Logic's newer components.

Gold Ties to Inflation Point Toward $800 Price: Chart of the Day 2013-04-17 04:00:01.0 GMT By David Wilson April 17 (Bloomberg) -- Gold has room to fall much further when the pace of inflation is taken into account, according to Duke University Professor Campbell R. Harvey, a co-author of a study on the precious metal. The CHART OF THE DAY shows how he drew the conclusion: by tracking the ratio of gold’s price in New York futures trading to the consumer price index, compiled by the Labor Department. Gold for June delivery settled yesterday at $1,387.40 an ounce, equivalent to 5.97 times the value of the March CPI. The ratio is far above the monthly average of 3.35 since 1975, when futures were introduced on the Comex, even though the metal’s price has dropped 13 percent this month.
“People are talking about this huge selloff in gold,” Harvey, part of the Durham, North Carolina-based university’s Fuqua School of Business and also a research associate at the National Bureau of Economic Research, said yesterday in an interview. “It’s not really that substantial.” For the gold-CPI ratio to reach its historical average, the precious metal would have to fall below $800 an ounce. That may occur over time, Harvey said, especially as more investors sell shares of exchange-traded gold funds. “You don’t need a lot of action on the demand side to have big changes in price,” he said, because the supply of gold is relatively constant. Harvey and Claude Erb, a former commodity-fund manager at Trust Co. of the West in Los Angeles, included the ratio in a research paper published in June. An updated version of the study was made available two days ago on the Social Science Research Network, an online archive.

Not this week:
Will the Pit Bull’s expiration observation kick in? "The market generally makes its low the Thursday or Friday before expiry." For a guide to the S&P market tendencies

On Monday at (08:39a.m. CT) William Blount offered GUN TO HEAD -- we will trade 1600 cash before 1538 cash and that is the Elliott Wave LEAN. The bears don't do jack crapola until they convert 1559.

Kathy Garber: I wrote this over a year ago, a friend was being stubborn about staying in a trade, so pulled it up. 12 Steps of Traders Anonymous:

Wednesday’s S&P 500 index trade started with 390k ESM and 1.9k SPM traded on Globex. On the 8:30 open the SPM came in 10 handles lower at the 1558.70 -1558 level and then started getting hit by wave after wave of index arbitrage sell programs as [GS], [JPM], [BAC], [C] all struggled and Europe powered lower. Apple [AAPL] also helped add weakness to the index, falling $28.00s. Cirrus [CRUS] stock was down 10% after the bad earnings report (see above). AAPL went on to test the $398 area, down $27, weighing on the tech sector and the Nasdaq. The first big sell program took the SPM down to the 1553 area. After a small bounce the SPM made a series of new lows all the way down to 1546 and then down to the 1541 area. The bounce took the SPM back up to the 1547.50-15480 area but was unable to hold the 1541 low and hit sell stops down to a new daily low at 1538.50, matching Monday’s 1539 low. At (13:57CT) matthew pointed out paper, off the floor customer was back in buying ten year July, TYN 134 calls 16 on 10,000 now...TYU3 132-09. After the low the SPM slowly rallied back up to the 1547.50 area, pulled back and then late in the day popped up above the opening range and traded up to the 1549.50 area just before the 2:45 cash close. At 2:45 the imbalance showed MOC buy $65mil going into the 3:00 cash close. On the cash close the SPM traded 1546.70 and then went on to settle at 1546.10, down 22.6 handles on the close.

Brian Shepard is a 20-year exchange member of the CME Group.

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