Quote Originally Posted by lulzasaur View Post
Pascal,

What are your thoughts on the magnitude of the price jump compared to the change of the MF? Is this something worth noting or irrelevant?

Thanks
In a strong gap, what is important to watch is the direction of the MF and not the strength.
The MF is only the MF after the price gap. Therefore, if it is positive, it shows that the market has bought the gap (probably a combination of shorts covering and new long players.) If it is negative, then it shows that the much higher prices have attracted profit taking. As of now, the MF is positive.

In this kind of market, since the new swaps are supposed to be inflationary, it is interesting to look at the money entering the materials/energy/gold sectors in the futures market. Once selling starts showing up in these sectors, then we will know that the fear of inflation will be gone.

You might have noted the the Euro Futures and the swiss Franc are being sold. TBT and LQD also show a negative LEV pattern. Fertilizers have a negative MF (due to CF), Copper miners do not attract much money. On the other hand, all the energy complex is soaking up money, except pipe-lines (money printing usually does not increase the flow of liquids in the tubes.)



Pascal