The Madness Continues

After a wild night that saw crude drop all the way to $76, the S&P has now rallied about 50 points and brought everything along with it except, of course, the PMs.

Before we get started, a caveat. If you come to this site expecting me to tell you exactly what is going to happen in the short-term metals trade, I suggest you leave now. NO ONE can do that in these unprecedented times. I'm trying my best but, with no history upon which to base opinion, the job is nearly impossible. Knowing that, I built this site so that a visitor can easily glean knowledge from the experience documented within. Check the forums. Visit the chatroom. You will find all kinds of diverse and wise opinions there. You can measure the potential "worthiness" of the opinion by the cumulative number of "hat tips" the poster has received over the past two months. As I stated Sunday, no one can predict 24-48 hour moves in the PMs at this point. What I do know, however, is that the metals will be higher a month from now, three months from now and six months from now. Trade if you must but your best strategy is still, and will always be, to buy physical and take delivery.

Onto the trade. After reaching 1782.50 overnight, gold has come off by about $50. Holy cow! That's enough to keep your stools loose! Santa has told you to expect unprecedented volatility and you are seeing some of that. For today, do not be surprised if gold goes even lower. I could see it reaching all the way down to 1720 or so but, obviously, none of the fundamentals have changed, so it could rally back just as fast. There is, however, one thing you need to keep in mind. All of this volatility almost begs the criminal CME to raise margins. Do not be surprised if it happens. As we all know from recent experience, the CME doesn't necessarily stop with one margin hike, either. IF it happens, we'll have to re-assess. Do you recall the first time the criminal C/C/C raised margins on silver back in November of last year? Silver dropped 15% in a week but the price still went on to double over the next six months and is still 30% higher even today. My point is, one margin hike is not the end of the world. Five? Well, that's another story.

paper_8-9amgold.jpg

With that as a segue...doesn't silver just piss you off? Not the metal so much but the The Forces of Darkness that control it. Helped along by the dopey hedgies and their WOPR machines, The Evil Empire just stands back and laughs while all of us pull our collective hair out. Market bad = silver down. Market good = silver down. You can't win. Well, we'll see about that. To me (again read the caveat that began this note), silver is poised to explode. The drop in total open interest is fantastically bullish. As of Friday night, OI was back to late May levels. This tells you two things:

1) The shakeout from $42 to here blew out all of the new longs that came into the market in July.

2) Those who are going to sell have now sold. The remaining longs will likely be resolute. Declines from here will have the effect of pressing on a spring.

I expect silver to hold the lows of last week near 37.50. If it doesn't, there should be strong support near 37. I'm a buyer. The Wicked Witch may be able to suppress price for another day, another week or another month. I don't know how long she can last and I don't really care. The fundos are overwhelmingly positive and will, eventually, win the day. Of that, you can be certain.

paper_8-9amsilv.jpg

That's all for now. Today should be particularly exciting so hang in there and try not to let your emotions get the better of you.  TF

1:00 EDT UPDATE:

Gold found a bottom this morning right about where I'd hoped it would. You can see it on the chart below. Gold bounced twice at 1722.50. Very nice. From here, watch this current range very closely. A move up through 1750 would signal a move back toward the overnight highs. A move down through 1735 will signal a retest of 1720. Silver continues to struggle from a lack of buyers. It just sucks. A move back up through 38.60 may lead to some short-covering, however, and that may be enough to generate come excitement and drive it back toward 39.50.

paper_8-9amgold15.jpgpaper_8-9amsilv15.jpg

More later, after we hear from The Bernank and his minions. TF

p.s. I should add that I no longer have any spreads on. I am open-ended and long Sept $42 silver calls, Oct $1800 gold calls and Dec $1800 gold calls. I expect that either outcome from The Bernank is gold bullish. Fed announces some QE: gold goes up. Fed announces nothing unusual: market goes down, gold goes up.

258 Comments

Colonel Angus's picture

First?

maybe?

Tyler's picture

you win colonel

nice

Josephj36's picture

thanks turd

thanks turd

Tesla's picture

Thank You Turd & Burn In Hell Blythe

3_girl-burning-in-hell.jpg

(God forgive me for being so pissed off)

sir's picture

It's going to be a

It's going to be a rollercoaster for a while now!

BTFD!!

exiledbear's picture

Think we were due for a correction at some point

And if you look at previous hyperinflations, volatility was a constant companion during the whole process.

For a month that's normally quiet, sideways and down for gold, these fireworks we've seen are NOT normal.

fats's picture

C-BRICK CLUB

C-Brick's FTW!

edge's picture

illogical silver

It is quite mind boggling that if you look to silver as a commodity, yesterday it was showing great relative strength to other commodities,  and as a currency performing close to the same level as gold on a percentage basis.  Then with gold screaming higher and everything else higher, logically it should be making a moon shot as well, but isn't.  It does wreak of manipulation to the core.  Maybe silver should be neither classified as a commodity or currency, it needs a special classification. 

silvergoldsilver's picture

All Comods Green

except silver.  Put the women and children to bed, 2:15 is quickly approaching.

edge's picture

I got it ...silver's new classification

CURRMODITY

JamboMamboBill's picture

Berny's gona set the tune for

Berny's gona set the tune for the next month or so--->

QE = gold 1850 and silver 45

NO QE with some other BS QE undercover = gold 1850 and silver 39

None of the above = gold 2500+, silver 45 and God help us!

Alex's picture

Boy did I miss this site!

Turd, thanks for the great post.  Great to be back here and I love the new site but I don't think I can get caught up with the thousands of posts I seem to have missed!

I sold my positions and took some time off- cottage is great in the summer! (hence my dissapearance).  I have no positions in AG at the moment and I didn't plan on being back here so soon either to be frank but the events of the last few days have aroused me from my slumber.   It doesn't take a rocket scientist to figgure out there is alot of sidelined cash at the moment - countless investors who "sold in May and went away".

Silver isn't rocketing to the moon because of 08 in my opinion.  It is inherently more volatile than gold and neither performed well heading into the recession in 08 although both recovered quickly.  I would imagine the same thing applies here which is why cash isn't fleeing into Silver and is heading into gold instead. 

Once investors feel selling has abated I think we will likely see the sidelined money come in to scoop up some cheap silver.  I also would expect those who flew for the safety of gold to reposition somewhat into silver for the next run.  I think both factors especially when combined with QE3 will make for some tremendously healthy gains over the next 6 months but all that sidelined money is simply waiting gor a good entry point and there may still be some selling to come. By the way, nice to see all the old names still around here.  Congrats on the new site Turd!

SilverWealth's picture

silver

The Silver market is small and relatively easy to manipulate. So the Empire compresses price here for the time being which is also a method of attempting to compress Gold price. Patience is all. The volatility from here on will be huge and buying dips on a regular basis will be the harrowing but profitable trade with patience each time imo.

Regarding the GDX and GDXJ. They have to be taken off their meds. One more thrust up by Gold should do the trick, that or a healthy,wild bounce in the Equity markets which I am looking for today. Who knows?

TitanAe's picture

TURD !!!!!!!!!

Great JOB KEEP IT UP !!!!!!!

Strongsidejedi's picture

Finviz chart 8-9-11

So, here we are on 8-9-11

Makes you wonder what 8-11-11 will bring.

They do like to play with numbers and dates, don't they.

Magpie's picture

re: cancelled speech

I imagined it more like this:

Advisor blocking doorway, grasping doorjambs pleading with Zero, "No! No more speeches.  Do you know how much your effin' speech cost me yesterday??!!  STFU you idiot!"

Shill's picture

LOL

So @ 11k the buying goes sideways no real movement, lol what a joke.

matthenue's picture

There's a chat room?!

Didn't realise! jack pot!

SilverTree's picture

Madness!

.at-the-mountains-of-madness.jpg

ginger's picture

Just a very cautious feeling

Just a very cautious feeling .. ..The likes of JPM is trying to steer us to buy gold: http://www.zerohedge.com/news/jp-morgan-warns-gold-go-parabolic-and-rise-2500-year-end

..and gold is on a tear: http://www.reuters.com/article/2011/08/09/us-markets-precious-idUSTRE7781Q420110809

..and silver and miner shares are being mightily suppressed.. (go look at your account for that one)

.. and London is burning: http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2011/8/9_Nigel_Farage_-_London_on_Fire,_So_is_Gold,_Millions_are_Terrified.html

To top it all off ..the president has cleared his schedule for today and Jay Carney cancels the WH briefing without explanation so far.

I would not chase price on trades or buys. Lots of stuff is going to shake out over the next several weeks. I appreciate everyone here who has helped to educate me. I am getting smarter about all of this ......but can't help thinking something big is coming soon.. especially with one of Santa's angelic numbers being reached overnight. .......Keep your tray tables in their upright and locked positions and your seat belts fastened I guess. ......And no wandering around the cabin as turbulence up here at the 1764 area is going to be historical.

WineGuy's picture

8/11/11

Strongesidejedi, 

My son and I watched "Battle of Los Angeles" last night. If you like aliens and war stuff it was a decent flick. Of note, in the movie the aliens invaded the earth on 8/11/11. As a side note, the movie was released on 3/11/11. Cheers

margaritatime's picture

Thanks TF! My first pull this

Thanks TF!

My first pull this morning was trading a few AGE's to ASE's, granted it's not a great gsr trade, but I believe in taking small steady steps, and 45:1 isn't bad.

Second thing I am looking for is a dip in Ag so I can buy. With all the weirdness in the past week I am thinking it is going to be difficult to find them if anything happens in the 35 range, not to mention premiums will up go as inventory on hand goes down... So technically it is a penny-wise / dollar-stupid move to wait for a low dip.. for ASE's anyway.

On the bright side, I was able to order in a case of canned bacon from my local King Soopers (they will do special orders, but there is a minimum). Thanks to E 'O for getting me addicted. Of course I will probably finish these off on camping trips soon - because they are the bomb in omelettes! Almost as good as s'mores..almost.

Daedalus Mugged's picture

Gold and Miners

Silver Wealth, I am not at all convinced one more 'thrust up' will do any good.

I bought the GDX in December of 2010, while gold was bouncing above and below 1400.    I wanted exposure to gold mining because I thought gold was going higher.  I didn't want specific company risk so I bought the index of major gold miners. 

Gold is now above 1700.  I am down 6.5% on that GDX position. 

I got that mining exposure I was looking for good and hard.    

Boomerang Johnson's picture

Gold down

Right now gold is ​down to 1,725.00.  Damn, that is a funny thing to wrap my brain around.  Down to 1,725!

Hard to be upset about it and actually, wouldn't mind a few days where we were a bit more slow & steady rather than these parabolic moves which are most likely unsustainable.

50Jim's picture

Silver -My first Comment

I am 100% into Silver.  The last two days just about made me rethink my position.  I have read everything I could on "why this is happening"  "what is going on" and here  this is what I came up with.   (1) listen to the #7 bears    (2) listen to Turd   (3) sit tight .   What I got from the bears video is that the market is being moved by the cartel at this point, the large buyers are buying directly from the mines and it does not reflect in the price.     Turd said the price will be higher next month, year etc. and it will.  On one of the other sites there is a video from "brother john"  and he expains it very well, using graphs, overlays etc. His conculusion is that silver is ready to explode. 

The best we can do is sit tight.  My delema is that I am building a house and sell silver to pay for it.   So, I will just sell only what I need and sit tight and wait. 

thanks for looking at my first post.  50Jim

survivalwstyle's picture

the tf band of meRRy men kEEp playing our song

everyday we get closer to the end. stay with it my friends. 3rd night in a row of rioting acroSS the UK....aLL jail ceLLs in LONDON, fuLL. Copycat riots in Birmingham, Bristol, Nottingham, Liverpool and Leeds...what do you think is coming to the gOOd ol...

http://www.dailymail.co.uk/news/article-2023874/LONDON-RIOTS-David-Cameron-returns-home-police-face-gangs-petrol-bombs.html

AG just ticked 37.49.

IMVFHO now is the time to make sure you have yourself and family protected with at least 6 months of everything you nEEd if you could not leave home and stock up on suPPlies for awhile. 

agrEE w/ mr.F that the 37.50 level is important suPPort. 36, then 33.5o would foLLow. having bEEn to the coin shop twice this wEEk, thursday and sat. i wiLL not be heading today unleSS we get close to the 33.50 zone. this is where we bought in june, remember.

continue to improve.

stoneeh's picture

Agree on the margin hikes, at

Agree on the margin hikes, at least timing wise we would be overdue. However I don't know if they can keep raising them on silver. I mean, it would do them no good, after a brief selloff they would just have strengthened the remaining longs. In gold however it is a weapon they still very much have and that they could still very much use.

- Markus

debtless's picture

How's this for the next six

How's this for the next six months...let the G/S ratio go back up to 70+, swap, rinse repeat. Make another fortune.

metalhead's picture

Looking at the silver action...

I can only assume that Blythe finally paid a visit to her blog. She's clearly pissed.

silver foil hat's picture

Not an "Onion" headline

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