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Author has a degree in Engineering and is an avid investor in the market. Experience in industrial materials and structures. In college studied atomic & nuclear physics as well as material engineering. Eastern European
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  • Rising margin requirements? Hopefully the Short hedges had nothing to do with this.  0 comments
    May 5, 2011 8:55 AM | about stocks: SPY, QQQ, TNA, SPXL, MIDU, TZA, SPXS, MIDZ, DOG, SLV, OIL, USO, ERX, DIG, GLD, PALL, COPX, SIL, DTO, ERY, DUG, ZSL

    Is it just coincedence that margin requirements are being raised by exchanges just in time for the "Sell in May and go away crowd to Profit"? I dislike theories like this as much as the other guy but the coincedence is just too much to ignore. Its market manipulation on a grand scale. Basically its like playing a baseball game with fences at 250 feet at the beginning of the season and then the opposing team after seeing that your loaded with homerun hitters and average pitchers decides that for them to win they need to adjust the fences further to 350 feet.

    A game changing move right in the middle of the game without any prior warning.

    Gasoline, Heating Oil Slide Along With Crude, Metals, Equities By Barbara Powell - May, 2011 

    Gasoline and heating oil fell as crude oil tumbled amid expectations for higher supplies, equities retreated and silver plunged on higher margin requirements.

    Heating oil sank 1.9 percent and gasoline lost 0.6 percent as crude oil slipped. Analysts surveyed by Bloomberg News projected U.S. oil stockpiles rose last week to a six-month high. Silver for July delivery declined 7.6 percent and the Standard & Poor’s 500 Index lost 0.7 percent as of 2:33 p.m. in New York.

    “We were very overbought,” said Ray Carbone, president of Paramount Options Inc. in New York. “Raising the margin on some commodities created a good excuse to take profits and now it’s snowballing.”

    Gasoline for June delivery dropped 1.85 cents, or 0.6 percent, to settle at $3.3294 a gallon on the New York Mercantile Exchange. That’s the first time prices have declined for two straight days since April 19.

    Silver slid as exchange owner CME Group Inc. (NASDAQ:CME) raised margin requirements for the second time in less than a week.

    “There were very large trading accounts long in precious metals and crude oil that are selling and it’s bleeding into other markets,” said James Cordier, portfolio manager at OptionSellers.com in Tampa, Florida. “Raising the margins on silver started the selloff. People are taking risk off the table.”

    June-delivery crude dropped $2.47, or 2.2 percent, to settle at $111.05 a barrel on the Nymex. Brent crude for June settlement lost $2.67 to settle at $122.45 on London’s ICE Futures Europe exchange.

    Manufacturing

    Futures also slipped after reports indicated slower manufacturing growth in the U.S. and China, which could reduce fuel demand. The Institute for Supply Management’s manufacturing index fell to a four-month low in April. China’s Purchasing Managers’ index fell to 52.9 in April from 53.4 the prior month.

    Gasoline supplies probably fell 500,000 barrels last week, according to the median estimate of 15 analysts in the survey by Bloomberg. Stockpiles were at a 20-month low in the week ended April 22, according to Energy Department data, after falling 35.5 million barrels since Feb. 11. The department is scheduled to report on stockpiles at 10:30 a.m. tomorrow in Washington.

    “The expectation that product inventories are going to draw based on the refining problems is the most bullish factor today,” said Andy Lipow, president of Lipow Oil Associates LLC in Houston, who estimated supplies fell 1.5 million last week. “But that might be outweighed by the bearish manufacturing indexes here and in China.”

    Inventories of distillates, including heating oil and diesel, likely rose 500,000 barrels, according to the survey. Refinery rates increased 0.5 percentage point.

    Regular retail gasoline rose 1.5 cents to $3.967 a gallon yesterday, AAA said on its website. That’s the highest price since July 26, 2008. The record was $4.114 on July 15 of that year.

    Heating oil for June delivery sank 6.13 cents, or 1.9 percent, to settle at $3.1908 a gallon on the exchange.

    To contact the reporter on this story: Barbara J Powell in Dallas at bpowell4@bloomberg.net.

    To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net


    Stocks: SPY, QQQ, TNA, SPXL, MIDU, TZA, SPXS, MIDZ, DOG, SLV, OIL, USO, ERX, DIG, GLD, PALL, COPX, SIL, DTO, ERY, DUG, ZSL
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