Read This Now

No catchy title to this update. I just want you to read and ponder this post. Then, plan your trades accordingly.

Let's start with silver where the technical picture is more clear, at least in the traditional sense. Take a look at the chart below:

paper_8-30pmsilv8.jpg

I've shown this chart several times in the past week so it should look familiar. Something new caught my eye today. Have you seen the new OI numbers? Our friend, "Tesla" has taken it upon himself to update the comments section with the latest numbers each afternoon. (Thanks, Tesla!) Keep in mind that the OI numbers are always basis the close yesterday. So, today's numbers show us the OI from Monday. That said, the number is once again amazingly low at 112,795 contracts. Again, as a reference, the OI in late April was approaching 150,000. Fully 20-25% more! Now stick with me on this. Maybe I should lay this out chronologically to make it easy to follow? OK, here goes:

1) Since silver bottomed around $34 in early July, the channel I've drawn has contained price.

2) Note that on two occasions, 7/13 and 8/19 (points 1 and 2 on the chart), silver decisively broke through the mid-line and proceeded to move sharply toward the top line.

3) Total OI on 7/13 was about 113,000 contracts. By the peak on 8/5, it had risen to about 119,000.

4) Total OI on 8/19 was nearly 116,000 contracts. At least week's peak, it had risen to nearly 122,000.

5) Today's OI is all the way back down below 113,000.

6) Look closely. Price once again sits poised to burst through the mid-line, which is near $42.

Conclusion: Watch price and OI very closely for the next 48 hours. IF silver accelerates through $42 on rising open interest, there is a very high likelihood that it is once again making a move toward the top of the channel. A move that corresponds in magnitude to the previous two would take silver to 45.50-46.00, perhaps as early as next week.

Now let's move on to gold. When I say it's not as "traditional" technically, it's because I'm using this crazy, reverse pennant as a forecasting tool. I'm not sure you're going to find the "reverse pennant" in any books about TA but I'm quite sure that none of those books ever anticipated the end of the dollar, either.

paper_8-30pmgold8.jpg

Similar to silver, gold currently sits very close to the midline of the pattern. Note that the previous two occasions when gold broke through the midline (mid July and early August), gold proceeded to ride the upper trendline for about two weeks before falling back. IF gold can once again break through the midline, it will likely charge toward the top line again. This would take the price to near $2000. The OI numbers in gold are similar to silver, too. After peaking at 532,000 last Monday, total OI as of yesterday is all the way back to 501,000. A drop of almost 6% in one week!

Conclusion: We may be on on the verge of another massive rally in gold. Your signal will first be a move through yesterday's high of 1841.50 and then a burst through the midline, currently in the area around 1850. Should gold move conclusively through 1850, it should move to new highs in relatively short order and then continue to make new highs through mid-September.

WARNING: Don't go getting overly excited and carried away at this moment. Nothing is pending until the metals break through those midlines. The open interest numbers suggest that the breakthroughs will come in the next 24-48 hours. They may not. If they don't, I will continue to monitor these charts until they do.

I feel that this is pretty important info so I plan to leave it up all night as the lead, above-the-fold story. I will probably leave it up tomorrow, too. Be sure to refresh the homepage from time to time if you're looking for updates as they will be attached as addenda to this post.   TF

9:15 EDT UPDATE:

Sort of a bland trade this morning. The metals tried to rally overnight but they were beaten back at the regular, appointed hour of 3:00 am EDT. It appears, at this moment, that the metals will struggle to trade higher today. 1841.50 is still acting as a resistance point for gold and silver has yet to reach 42, yet alone 42.30. Let's just sit back and watch and see what the day brings us.

paper_8-31amgold.jpgpaper_8-31amsilv.jpg

A couple of other things...First, this silver update from GoldCore via ZH is worth your time:

http://www.zerohedge.com/news/silver-ready-breakout-technicals-and-fundamentals-suggest-50oz-early-autumn

Second, a friendly reader sent me this chart of the open interest in silver since March. I have neither the time, inclination or technical know-how to superimpose the actual price of silver onto this chart. However, it would probably be a rather insightful thing to do. Anyone want to take a stab at it?

large_silver_oi_1.jpg

That's all for now. TF

10:50 EDT UPDATE:

This is certainly something to watch over the next hour or so.

paper_8-31amgold10.jpg

620 Comments

treefrog's picture

first!

first!

turd,  there may not be a "reverse pennant" in the books, but there is a "megaphone."

MadMayor's picture

Second

Darn, second.

Debbie Downer's picture

Third :)

Third :)

Dr Jerome's picture

Thank You

Insightful analysis! Its one of many good reasons why we come to this site.

Many thanks to Turd and Tesla. 

Dr G's picture

Great analysis as usual. This

Great analysis as usual. This move in silver is primed, and it comes at the start of the traditional buying season for many of our friends around the world.

Turd's charting says silver moving to $46 based on the upper trendline, but it seems once we approach that region we may get more action, much larger OI, and a burst through $50. Sounds crazy, but I believe it will play out that way. I think $50 will act as a magnet to pull silver up. After that undoubtedly some profit taking and a drop back, but this move will merely instill confidence that silver isn't dead and is ready to roll.

Those OI numbers we are seening could be the lowest we see in silver for months.

infinite_easing's picture

so would we be looking at

so would we be looking at profit taking around 1975-2000? Seems like a logical development, barring more grim news out of the EU.

dolphindude's picture

I got powder to burn. Maybe

I got powder to burn. Maybe Sprott physical gold, half and half with Sprott physical silver. Thanks Turd and Turd Nation.

Tesla's picture

Burst Baby BURST!

Thanks for the shout out Turd - I hope this market EXPLODES !!! =]

SilverWealth's picture

thank you

Thanks to Turd for spotting the midline phenomena.

Granny sold gold and silver into strength today in increments and now awaits to see if a breakout or a pullback is the next order of business.

If a breakout, Granny may do the least likely thing. Climb into UGL and take a ride. Its like the old GTO she has parked out in the garage, the one thats gathering rust now and crawling with upholstry bugs. The one her daughter lost her virginity in. It still has the 442 hemi though and Granny takes her out on those sleepless hot nights in the late summer when she is reving up to trade the preMarket and hardly a soul is on the road, just that drunk,fat ole traffic cop Mr Peepers who is too busy leafing thru his old "Juggs" collection to notice me as I whiz by doing 135mph at 3 a.m.

¤'s picture

Thanking you

Thanks TF for deciphering the O/I numbers and putting them in context.

Thanks to Tesla also for doing this daily for us.

This is what is about to happen to the shorts by the PM bull once they start to rocket...

ScottJ's picture

Playing Devil's Advocat...

I will play devil's advocate to the Turd's point of view of the next imminent breakout in gold/silver, as I am under the impression we may not have such a smooth ride up in the next couple of days.... but my portfolio and my interest would love to see the following be nothing more than theory.

--

First of all, there is non farm payroll report on Friday, which the subsequent days before has usually lead to a downward movement in price so the price can "recover" instead of "make new highs" on days which "judge the economy."  For further information/graphs, I posted about it on the previous thread here and said this in the last thread:

http://www.tfmetalsreport.com/comment/41251#comment-41251

If there is going to be a smack-down for Non Farm Payroll (as there ritualistically is), does that mean that we have Wednesday/Thursday EE raids coming our way (that means starts tomorrow (or even today?).  I think it would be safe to assume this until we see this pattern break, we should respect the fact that it often occurs.  They smack-down gold/silver prior to payroll numbers so it can rise back to prior highs, therefore mitigating the damage.  After all, they can't have gold and silver hitting new highs on weak data at such a critical crux such as this time.

Second of all, gold and silver have yet to break out to new "higher highs" for any sustained amount of time.  Look at the gold and silver charts, especially after today when the FED has admitted they are at a loss, and yet gold can not make new higher highs...

--

And the thing that bothers me the most.  Silver took a mid-day raid to stop its bullish ascent, and since has made lower highs.  As much as I would like to believe, I don't think that the EE are wasting firepower here without additional firepower to come behind it.... just my thoughts, as I have seen these "mini raids" as a way to set up for larger raids.  You must neutralize the short-term up-trend before you can break the trend down (from the perspective of the EE).

And....

Everyone seems very bullish and are not giving credit to the ritualistic takedowns that have happened routinely over the past year (and more I'm sure?).  This is the perfect situation to crush sentiment of Gold/Silver vigilantes. 

Just be careful is all I am saying....

I think very soon we will be moving much higher, but I unfortunately think a few more spirits and accounts must be broken.

There is no way to know EE manipulation is coming, except from prior evidence applied to current day situations.  Using recent price cycles as the case, the next two days have a great amount of potential for such attacks.

Kricke's picture

Re: Megaphone pattern

Is this the same as the "reverse pennant"? http://www.tradechartpatterns.com/?p=573

Dark Matter's picture

Don't know how to say it

Sorry to say it, but as much as I appreciate your work (Hey, it's free of charge for us!), I feel duped.

That's why:

"From Thursday, August 25:

7) Silver declines early next week, perhaps back down to 39.50 or even 39. Gold trades back down to near 1725.

8) This is your buying opportunity. It will take courage to step in and buy at this point but, those who do, will be rewarded."

I waited for 1725 - and I am still waiting. I missed to get into Gold and now am very sad.

Please don't get me wrong. But I don't know how to act, if the next day everything that has been said is of no use at all. frown

How should I proceed? Have you any good advice for a novice like me?

SilverTree's picture

  SHANKS TURD!  

 

SHANKS TURD!

images?q=tbn:ANd9GcT1PdXZ6NVNnU0IQ-A0V8s

 

Captain Silver's picture

Thanks Turd

Agree and with all of the QE3 talk today went back long paper silver and gold this morning looking for a good spike.   Thanks for the great analysis!

silverbleve's picture

reverse pennant

write your own book turd! The reverse pennant is badass. I posted it on the last thread and am a big fan.  You should name it a turd pennant!

argent rampant's picture

It's silver season!

Someone posted a great 37 year silver pattern chart a couple of days ago which I saved to my files, but I can't get it to post. If you see this, please post that chart again. Everyone needs to see it. SEP is a month to be on board the silver train!

Thanks, Turd!!

¤'s picture

Rand Paul says Obama’s new econ aide must quit

Rand Paul says Obama’s new econ aide must quit

August 30, 2011, 4:37 PM

Tea-party-backed Republican Sen. Rand Paul wants Alan Krueger to leave a job he hasn’t even started yet: chairing the White House Council of Economic Advisers.

Krueger, a Princeton University economist and former Treasury official, was tapped by President Barack Obama on Monday to head the White House council. A labor specialist, he’s expected to become involved in a raging Washington debate about job creation and economic growth if confirmed by the Senate.

But Krueger won’t even take office if Paul gets his way.

“Alan Krueger is nothing more than an extreme government interventionist, cut from the same cloth as those who have failed to correctly predict, diagnose, and manage our economic problem,” Paul said in a statement Tuesday.

Paul has also called on Treasury Secretary Timothy Geithner to resign.

Paul’s view is hardly shared by all conservatives. Krueger’s nomination was met with praise from Gregory Mankiw, who chaired the CEA during the George W. Bush administration, and Douglas Holtz-Eakin, who advised Sen. John McCain’s presidential campaign in 2008.

If nothing else, however, Paul’s call for Krueger to give up a job he hasn’t begun underscores the intensity of the coming debate this fall over bringing down the nation’s 9.1% unemployment rate and kick-starting economic growth.

– Robert Schroeder

bensgone's picture

I hate summer vacation !

Yeah, every fool and his uncle is on vacation while the country is burning.  Little do they know what is about to slap them up side the head in the next few months.  I'm saying this because look at the attempt to cap silver under the 41.60 mark five times since the Comex opened and three of which has occurred in the after hours Globex.  It's disgusting but directly the result of the fact that there are not enough buyers to overcome this artificial capping process that the EE engages in all the time.  I just can't wait until this lousy summer is over.  Yes, I know it's really been good considering.  Just look at the price of Gold.  But, silver should be up there right with it.  I should have some patients because it's going to get there starting after the 5th of September. Yeahhhh !

EE uses every summer, since God knows when, to smash the price of PM's when fundamentally there is no excuse or reason for this neither technical nor fundamental for this to happen any more than  any of the other market sectors.  In fact oil goes up, or at least the price of gas.  Yes, I know there are fundamental influences like people on vacation and not really interested in buying silver to save their collective asses when the SHTF in October, but instead demanding more gas this time of year to gallivant the country.  Still, the suppression is readily and disgustingly visible.

OC15's picture

The EE

can take advantage in about 3 days right after I cash out my calls for fiat on this silver run up.

Iowegian's picture

Nice Interview

Nice interview of Stephen Leeb in King World News today.  Frankly, I am not a Stephen Leeb fan as I find his stock portfolio picks at odds with his gloomy mindset for the US.  IE) - Too much of a focus on obscure small cap companies that IMO have little to offer in a capital strapped global economy.  JMHO, though.

Here is the interview.  It really drives homes the point that all non-resource dominated countries are trying to debase their currency faster so that they will be more competitive in the global economy.  The alternative to this objective is obviously the metals.

http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2011/8/30_Stephen_Leeb_-_Gold_Skying_Because_of_Bernanke_Desperation.html

silverbleve's picture

@Dark Matter

You will find following Turds commentary that the price action does not always go all the way down to his low numbers. It is actually relatively rare that we touch turds bottom, so to speak. I think he is just being conservative sometimes. That being said we were below 1800 last night where were you? Pay attention!

Inbetween is pain's picture

No Shame--Only Hubris (OT)

California Lawyer made some great points in the last blog about how the U.S. is perhaps the only country in the world that has never been humbled by defeat.  We have been defeated, but curiously we've refused to register those defeats for very long.  I'm talking about Korea and Viet Nam.  It's amazed me but I've read letters to the editor in the WSJ that have opined that we could have won both of those wars if we only had the political will.  These right-wing re-historians have suggested that MacArthur was right--we should have used the atomic bomb in Korea, and in Viet Nam we should have carpet bombed Hanoi and other population centers.  I belong to an investment website where other right-wingers also support these crazy beliefs.  For many Americans winning is all that matters, despite the moral bankruptcy that might ensue.  Our winning-at-all-costs attitude served America well for perhaps the first 200 years, but it's clear this philosophy has cost us dearly, and it's not working now.  Our inability to admit "defeat" has kept us in Afghanistan, a war that should never have been expanded beyond the original goal of getting Binladen.  Although I voted for Obama, I realized for sure he was an idiot when he chose to expand the war rather than exit.

Our country has many flaws and is terribly self righteous, but if you dare to criticize it in a crowd you're likely to get punched in the mouth.

Sanchez's picture

Thumbs up for the Big

Thumbs up for the Big Turd.

Silver Wealth- Your Granny stories crack me up.  By any chance was she in Palm Springs this past weekend.  A Granny hit me up asking me where I'm from.  blush But my girl saw me and pull me away.  I told her I'm trying to get on her Will. cheeky Na, she was a nice lady just relaxing and getting away, God bless her.

OC15's picture

My boss's

nephew works at a Subway.  He said the other day an old lady came in and bought a combo meal or something.  In the change she gave him 3 silver quarters.  My first thoughts were, that poor old lady just paid $30 for her combo meal, hyperinflation anyone?

Kumanari's picture

Great on ya T&T

This is why we are here, to get the 411 we will find NOWHERE else.

Mahalo nui loa 'oukou.

terri5125's picture

thanks Harold and flex for

thanks Harold and flex for the info on selling covered calls! 

woewa's picture

Do not forget the miners

Showing nice breaks on broad basis, especially silver miners. A good pre-sign. And cheap leverage on silver.

Look at:

First Majestic (break out today)

Endeavour (today)

Fresnillo (first mover adv.)

Yamana (one of Master Turd's recom.)

Iamgold (looks very nice)

even DRDGold (late but better late than never)

near break levels: Eldorado. Randgold. Fortuna.

not to forget my favorite: Banro

SilverDude's picture

TEST

TEST

woewa's picture

thx

thx to the master of the PM universe ..... Turd

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