Prepping For The Week Ahead

And it's shaping up to be a wild one. From the worsening situation in the Middle East to the looming meeting of the EU "leaders", this week holds the potential for great volatility. Which way? Both, probably.

By now, regular readers have noticed that, at the present time, I'm far more interested in gold than silver. The charts for gold are certainly more favorable but the CoT report bears out this rationale, too. In fact, the latest CoT report looks extremely bullish to me. Check this out:

Survey period 11/22/11 - 11/29/11

Spec longs declined by 8,035 contracts to 186,031 for a drop of over 4%! We are now just 4,000 spec long contracts away from falling all the way back to the 182,000 spec long level last seen at the capitulation price lows back in September.

The drop in commercial longs is even more extreme. At the late September lows, the comm long number was around 192,000 contracts. As of this latest report, it stands at 152,000. That's a drop of over 20%!

The Forces of Darkness were sitting on 359,000 shorts back in late September. After covering a whopping 17,000 contracts last week, the comm shorts are at 345,474.

Lastly, total OI in late September stood at 465,000. This report has it at 423,000 or 10% less.

What do we make of this? First of all, it's decidedly bullish. Longs are pitching contracts and The Cartel is covering. This is exactly what you want to see in preparation for the next, significant leg upward. The only potential flaw in this argument is the MFing Global situation. You have two things to consider:

1) Are longs quitting the market for good for fear another cash-grab, theft job by some well-connected crony of the CFTC and the O'bottom administration?

2) Will the longs soon return? Will they be lured back in by greed, asset allocation and/or the desire for to diversify and insure?

Time will tell. I, for one, suspect that #2 is the more likely scenario. As we roll into 2012, the prospect of overt QE will become increasingly apparent. As gold turns higher, specs will come streaming back into gold and UP will go the price.

You can see this playing out on the charts, too. I'll be following this pennant very closely over the next couple of weeks. Once gold finally breaks out of it and the closes above $1800, it will finally be time to get excited again.

paper_12-5amgold.jpg

As mentioned above, silver just isn't nearly as interesting. Someday soon it will be but that day is not today. First of all, the COT isn't as compelling. The spec longs are at 24,000 (versus a late September low of 25,000) and actually increased by a handful of contracts last week. The total comm longs are almost identical to where they were in September and the EE shorts have only decreased from 62,000 to 59,000. Additionally, total OI in late September was 102,000 and now it stands at 99,000.

The CoT tells me that more time is needed for silver to form a bottom. The charts show this, too. Price continues to trade in the $30-36 range that we've been discussing. Look for this to continue. You can plainly see where price could stay in this range through almost the entire first quarter of 2012. Let's hope not but don't be surprised if it's March or so before I finally get excited again about the short-term prospects for silver.

paper_12-5amsilv.jpg

And here you go...While I've been typing, look what has hit the tape:

http://www.zerohedge.com/news/euro-soars-merkozy-announcement-full-agreement-live-press-conference-webcast

This ought to be enough to bring a little "risk on" action, at least for a few hours.

That's all for now. Have a great Monday! TF

210 Comments

RedRover's picture

1st

1st

Marblesonac's picture

Thurd?

Thurd???

Gil's picture

Attaboy 41!

Attaboy 41!

¤'s picture

Thanks for that TF

Interesting indeed! 

Oil is something to keep our eye's on. A spike on some hard news seems likely at some point this week imo. I hope not.

I like what I'm seeing so far in the PM's/USD/HUI and I'm bullish at this point also.

Green Lantern's picture

WW2 was fought over the

WW2 was fought over the economic reparations put against Germany by the allies.   Will France, Greece and Italy agree to the harsh discipline being asked by the ECB w/out bloodshed?   It is gonna get interesting soon.

RaRaRasputin's picture

Thanks Turd

Now Merkozy has just got to convince the other 15 Euro countries - good luck with that!

Until they put their money where their mouth is this means nothing - just more hopium for the vapour markets to inhale

humbleprofits's picture

Uh Huh EU

Lipstick on a pig.

Thanks Turd for all of your hard work.

Eric Original's picture

I'll try my hand at a little technical analysis

One of the charts I watch is the GDXJ vs GDX.  Small miners vs big miners.  I think it is a good barometer of the overall "excitement" in these markets.  When it's rising, that is to say when small miners are outperforming, then people are getting more and more excited.  I'm not set up to post charts, so here's the link, and I'll try to walk us through what I'm looking at.

http://stockcharts.com/h-sc/ui?s=gdxj%3Agdx

The link should take you to the daily.  Excitement levels have been in the dumper, plumbing new lows in early October, and again just recently.  But is there some sign of life?  Maybe, maybe not.  The MACD (bottom of the chart) just turned positive, and we did get above the 50 day last Friday, but fell back.  Nowhere near any clear horizontal resistance numbers either.  Too soon to proclaim "It's On!", but it's interesting.

Now go to the top of the chart where it says "Periods", change daily to weekly and hit update.  Now there is an interesting chart!  Wow, what a beautifully rounded top.  Coincides precisely with our experience in the markets this year.  2010 was good, and things stayed good into the spring, but it's been nothing but disappointment since. But how much worse can it get?  Seems like the pattern is completed.  The RSI is coming up off the lows.  The MACD appears to be just about to turn positive.  

Again, too soon to proclaim "It's On!"but I'm even more convinced that the worst is behind us, that there really is not a lot of downside from here.  I'll be dialing up my risk in here.  I might not hit a home run immediately, but I think perhaps there's a change in the weather on the way. 

Good Luck all, and be careful out there!

EO

buzlightening's picture

More chaos. Trouble in the fiat bubble.

http://www.kingworldnews.com/kingworldnews/King_World_News.html

Read Richard Russell's latest at KWN.  Old sages not being fooled by the print to infinity crowd; gov goon debt gone wild to financial destruction.  6 months for even more self evident truth of rampid  inflation and the end game Kaboom of fiat.  No turdite should be left bag holding worthless debt; gov goon bonds being spread out among the sheeple.  western bankstering will spread the risk out upon the sheeple to foot the bill as always, from collapsing fiat systems historically documented.  Liars will kick the can down the road but at some point it hits a wall of granite mathematical failure.  End game will happen and debt based fiat gets vaporized.  Keep stocking those economic life boats for the epic depression which will soon sweep this nation coast to raost. 

vivekmert5's picture

Hyperinflation Warning, Preserve Value with Gold

In the latest turn of events the Fed has mastermind another rescue in conjunction with the ECB. Europe hurting for cash, particularly US dollars, brought England, Japan, Switzerland and Canada and ECB into their latest money creation scheme. They will lower prices on dollar liquidity swaps on 12/2/11 and extend these swap subsidies until 12/01/13. What has happened as we pointed out previously is that US money market and pension funds dropped participation in short-term bond markets in Europe from 55% of assets to about 20% of assets. That meant European banks couldn’t function. The eventual outcome would be no dollar investments in Europe until their financial house is put in order.

In addition there are on again off again stories that the IMF has been talking with Italy and Spain. Both sides deny it and behind the scenes we are told talks have in fact been going on for weeks.

We can assure you that the dollar swap is really all coming from the Fed. England and Japan are probably window dressing and Switzerland and Canada may participate. This is a Fed operation. What confuses the public is misdirection engendered in utterances by policy makers. There is absolutely no coordination, which belies confusion, which leads to lack of belief in any statements. Again, the problem is not liquidity, but solvency. They are all broke and reorganization would take years to accomplish. They cannot do what they should do, and that is purge the system, because they’ll lose control and that is the key and seat of elitist power. If they do the right thing the public will then discover what they have been up too and they’ll end up where they belong, in jail.

These dollar loans will be run through the ECB, the European Central Bank, giving euro zone banks direct access to dollars. It is all subterfuge in order to continue the force short term. Additional liquidity is a stopgap measure, which not only deceives, but also is injurious in the long run. The result is the Fed will continue to prop up European financial markets with no solution in sight moving from one calamity to another until the systemically insolvent conditions take the system down. These players have many things they can pull yet, so don’t think the system can fail soon. It could take several more years and the result will be inflation, hyperinflation and higher gold and silver prices.

If we may interject here along those lines this advance toward hyperinflation, probably in 2014 or 2015, will entail the destruction of not only the US dollar and the euro, but to some degree all currencies versus gold and silver. For the average person worldwide they should have their wealth in gold and silver related assets and as little as possible in any currency. For businesses that is less practical because they need a flow of funds to function. If that is the case stick to the Swiss franc, which is no longer what it once was, but the best of the lot. The alternatives are the Norwegian corona, and the Australian and Canadian dollars.

The coordinated disbursement of dollars and perhaps other currencies is not the cure all for what ails the banking community in Europe. Major European banks are broke just as major UK and US banks are. They gambled big and lost and somehow they expect the Fed, the American taxpayer, to bail them out. What happened was when money market and pension funds pulled their short-term dollar deposits out of these European banks it was almost like having a bank run. The US lenders simply feared insolvency. That certainly is understandable. That entrapped European banks, particularly French banks, even though they were and had been selling bonds of unsound nations, they still do not have enough liquid capital particularly US dollars. That meant that if the Fed did not create money for them they would have to sell and call in loans to businesses in Europe and the US.

This Fed money machine will never stop until the result of hyperinflation brings it to collapse and that is where we are headed. Not this year, but in 2014 and 2015. Currencies, particularly the dollar, will be ravaged and the only safe place to be will be in gold and silver shares, coins and bullion. The bankers are trapped. They cannot stop the money machine. If they do the whole edifice collapses. The antidote for European and US banks as well as the Treasury is that, is that, as we have stated over and over again that the Fed has never stopped providing swap funds to the ECB, funds to US banks and continuing to purchase US Treasuries.

Eric Original's picture

Update on My Miners

I did a major update to my Miner Thread over the weekend.  Just the first thing that comes to mind regarding my  entire universe of 78 different medium to small size miners and explorers.  Please stop by.  The beer is cold.

Six parts, starting here;

http://www.tfmetalsreport.com/comment/97538#comment-97538

pforth's picture

Taking money out of all brokerages?? or not?

I get that one shouldn't play silver in the futures markets using leverage because orchestrated smash downs and margin hikes can come without warning and destroy your account.

Miners appear like they can be naked shorted forever and if that doesn't work the government can always declare a windfall profits tax or nationalization.

Buying physical is good because it takes away ammunition from the bankers and makes it harder for them to continue their suppression activities.

For a variety of reasons but primarily since JPM & HSBC are the custodians, SLV and GLD are not trustworthy investments.

I buy into all of the above statements.  But recently I've had a harder time with the following logic "MFGlobal stole from it's customers therefore every commodity or stock brokerage in the US is doing the same thing... quick get your assets out of all of them."  Not to be argumentative, but is there any evidence or suspicious behaviour from other brokerage firms that they are doing the same thing?  It just seems like a logical fallacy that just because one firm was stealing client funds, all of them are.  My IRAs and RRSP (I'm a Canadian who also worked in the US) are filled with CEF, PHYS, PSLV and a little dabbling of miners (for old times sake).  Although I certainly have some physical silver in my name, I'm still not quite yet convinced it's necessary to pull all these other funds out to buy physical to bury in my backyard.

 

Blue Sky's picture

Rye Patch gold

Halted.  Don't own any but for those who do.

JackPutter's picture

CFTC Making a Ruling?

On how customer funds are used.  A little late I would say, but at least it may steady the structure of the futures market;

http://www.bloomberg.com/news/2011-12-05/cftc-may-vote-on-client-protection-rule-after-mf-global-collapse.html

jonbutterfly's picture

Really interesting discussion

Really interesting discussion about the global economy with Chris Martenson and GoldMoney's James Turk: http://djia.tv/james-turk/chris-martenson-and-james-turk-talk-about-europe-and-the-global-economy/

jonbutterfly's picture

Really interesting discussion

Really interesting discussion about the global economy with Chris Martenson and GoldMoney's James Turk: http://djia.tv/james-turk/chris-martenson-and-james-turk-talk-about-europe-and-the-global-economy/

BostonMatrix's picture

the battle for $33

Someone is very interested in keeping Ag sub-$33 right now.

Last hour has been pretty epic to watch.

@DPH; I hear ya re: oil spike. It did jump about 60c on last night's open and has been over $102 much of the day. I was surprised we didn't see it jump a bit higher after noise re: Iran over the weekend.

Arjen's picture

convincing the rest

I see some sceptical comments about merkozy convincing the rest of europe and getting their plans to work. I am not so sceptical about that at all. The rest of european governments are sheep. Those who could have been difficult have been replaced last month. Now the road is free. In the end, as austerity is simply beyond reach, the only way out of debt without collapsing the whole system is printing money, just like the US has been doing for a while now. And that is where europe is heading too. Its just some of the details that go about how much northern europe wants to suffer from southern europe that are being evened out.

So yes, a few more years to sit on our PM's while inflation grows. And then we'll see where the world will be going.

JHNewman's picture

Gold headed to 1511 - 1420, next 5 weeks

Gold/silver/miners are going to be GOING DOWN BIG over the next 5 weeks or so, IMO. (I mentioned this in a short post on Friday.)
 
My main evidence for saying this won't be very satisfying to you though (and I apologize for that), because this prediction is mainly based on a proprietary indicator combination that I've developed. I'm happy to share the signals with everyone, but I hope you'll understand if I don't share the nitty-gritty details on what these indicators are, because they took me an INCREDIBLE amount of time to develop. (A lot of Edison-style experimenting.)
 
Basically, I took 2 standard indicators and changed them in various ways, and then learned to use them together -- in combination -- in such a way that they show me Hidden Weakness or Hidden Strength in price. 
 
Hidden Weakness = "No matter what it looks like, this price rally is a fakeout of sorts, and price will be heading back to the downside".
 
And Hidden Strength is just the opposite:  "No matter what it looks like, this price decline is a fakeout of sorts, and price will be heading back to the upside".
 
Of course, much of the time, these indicators are not throwing off signals. Much of the time they're saying:  "This price rally is for real" or "This price decline is for real". They only sometimes show Hidden Weakness or Hidden Strength in price.
 
To give you some basis for judging what I'm saying:  I've only been using this indicator combination for about 9 months now. And I haven't done extensive backtesting for them. In the 9 months I've been using them, they've been reliable, especially when they appear on the longer-term daily and weekly charts.
 
Anyway, this indicator combination has been screaming Hidden Weakness in gold on the daily chart ever since the big 1533 low (all prices I use are spot gold) in September:  "This rally in gold is a fakeout of sorts, and price will be heading back to the downside in a big way". This signal and this Hidden Weakness pattern on the daily chart are very strong. Even as gold rallied all the way to 1803, this signal and this pattern never disappeared, and they're still very much on the chart right now.
 
With this, to me, very strong piece of evidence in hand, I feel I'm then able to judge the validity of a large possible Elliott Wave pattern I've been following in gold for about 8 weeks now. 
 
A classic big correction in Elliott Wave is 3 waves down:
 
*A wave down:  made up of 5 waves;
 
*B wave up:  made up of 3 waves;
 
*C wave down:  made up of 5 waves.
 
Gold has been following this pattern very closely since the 1921 all-time high, IMO. (All of this stuff is much easier seen on 24-hour spot or futures charts than on the "spotty" GLD charts.)
 
*A wave down:  5 waves down from 1921 to 1583 on September 28, which was a truncated 5th wave. The big 1533 low was the bottom of the large 3rd wave down;
 
*B wave up:  3 waves up from that 1583 to the 1803 high on November 7;
 
*C wave down:  5 waves down from that 1803 high..........
 
When I combine this Hidden Weakness signal that is very strong in gold, with this possible Elliott Wave pattern, I conclude that that EW pattern is for real and will play itself out (because that Hidden Weakness signal says gold is definitely heading back to the downside, and that EW pattern also says we're heading to the downside. The Hidden Weakness signal confirms the EW pattern.)
 
That would mean we're now already in the big C wave down -- made up of 5 waves --  of this massive correction in gold. We've had Wave 1 down from 1803 on November 7 to 1666 (the daily cycle low) on November 20. And then we've had Wave 2 up, which probably ended on Friday at 1763. Which means gold should be in the process of rolling over to enter the big Wave 3 down, to be eventually followed by Wave 4 up and Wave 5 down to finally finish off this huge correction. (Check today's, Monday's, stochastics on the daily chart for GLD and you'll see the rollover in gold I'm talking about.)
 
As to where gold will bottom if all this is true:  Alf Field, who Jim Sinclair has called the best and most accurate gold analyst in the world, has set out 3 downside targets for gold (he said 2 1/2 weeks ago that he thought there was a 40% chance that gold would re-visit the downside. I think it's more on the order of an 85 - 90% chance):
 
*1511 (21% correction);
 
*1478 (where gold bottomed in late June (the Intermediate Cycle low) before launching a rocket to the upside);
 
*1416 (26% correction. And Alf doesn't mention it, but if the C wave down = the A wave down (-389 points), gold would get to this level.)
 
When I looked at this question of downside targets 3 or 4 weeks ago, I came up with 1450 - 1420 as the most likely bottom. 1450 is a big round number down in the likely bottoming range. And 1430 - 1420 is the zone where gold topped back in December. So this area of strong horizontal resistance should now be strong horizontal support.
 
Anyway, the long and the short of it is that I believe gold is definitely still in its big D wave correction, and that this new daily cycle we're in has basically just topped and is rolling over into an extreme left-translated and long (35 days?) daily cycle. It will bottom in about 5 weeks somewhere around one of the above bottom targets, and that bottom will be the end of the D wave and this Intermediate Cycle. We will then start the A wave up and a new Intermediate Cycle.
 
I apologize to Turd and everyone here for the length of this post and for the fact that I haven't yet learned how to post my charts on the Internet. (Just haven't had the time.)
 
I just wanted to share this signal and this prediction with everyone, so you could at least be on your toes for what might happen (and for what I think has a very high probability of happening).
 
Gotta run. Good trading to all!
 
P.S. Alf Field's downside targets and analysis appear at the end of this speech:  http://www.safehaven.com/article/23442/alf-field-sees-gold-going-to-4500-heres-why
 
P.P.S. I use cycle analysis, among other things, and apologize for some of the jargon. Gold also has waves which are specific to itself: A, B, C, D. Some of which I've also mentioned. 
 
Economical Disaster's picture

@jhnewman

You wasted a lot of space on that false info. Gold will not be going anywhere near those levels. I think that wave hit you on the side of the head made your thinking blurry creating you to write a pile of mumbo jumbo. Good luck with that crazy theory

JHNewman's picture

@ Economical Disaster

Thanks for your reasoned response.

GoldMania3000's picture

Jhnewman

Hey Jhnewman, you sound exactly like jon nader from kitco. he said the same thing you said and he's always wrong..always. 

o yeah hear's what ALF said:

There is a possibility that the spike drop to $1531 on 26 September marked the low point of the correction in gold. The midpoint of the correction from $1576 to $1478 is $1527, close to $1531. If $1531 was the low, it was a decline of 20%. This is slightly below expectations, but it still qualifies as one degree larger than 13%.

Xty's picture

I think this precious metals thing is going mainstream!

Found the most bullish sign yet:

Xty's picture

jhnewman

You lost me at not sharing the details with me - and with the bold face.

"I took 2 standard indicators and changed them in various ways, and then learned to use them together."

Either trust me with your methods, or don't expect me to agree with you.  There is a great deal of well-thought out analysis around here, and it doesn't usually begin with "just trust me".

diegeiro's picture

Kyle Bass Interview

This has probably been posted already, but I only got to it last night, linking from another site. It is long, over an hour, but gives added insight into what is going on in Europe and recent actions by the FED.

For a written very brief summary:

http://www.dailymarkets.com/stock/2011/12/05/kyle-bass-in-depth-interview-on-the-european-debt-crisis/

diegeiro's picture

Kyle Bass Interview

duplicate post, site seems rather slow lately.

blknblu1's picture

Reply to pforth

I reside in Canada, so I'll talk to your RRSP's.  IMO, they are a ruse.  The bait is the reduction on taxable income for the year, and the bigger refund (& % for your tax guy as well) payable at tax time.  RRSP's are guaranteed income for the tax man in years to come.  They are great for income smoothing, if needed, but upon withdrawl, all "monies" are taxed as income instead of capital gains.  If you're sitting on a 10 bagger, would you rather pay tax on 100% of you profit, or 50%?

ALL capital gains are taxable as income upon withdrawl from an RRSP.  There's the rub.  If held as securities in a cash acc't, you will pay tax on 1/2 the capital gains.  That's a considerable difference.  Also, you cannot DRS or take delivery of certs (to my knowledge) in any way, so you are at risk with the clearing agent between you and your assets for the entire term.  Then, you have to trust <-  cheeky --> the gov't won't try to get their greedy little mitts on it like what just happenend in Porutgal (google search page) --> http://www.google.ca/#hl=en&cp=22&gs_id=3z&xhr=t&q=portugal+pension+confiscation&pf=p&sclient=psy-ab&source=hp&pbx=1&oq=portugal+pension+confi&aq=0w&aqi=q-w2&aql=&gs_sm=&gs_upl=&bav=on.2,or.r_gc.r_pw.,cf.osb&fp=455266ad55003024&biw=859&bih=700

I de-register them in 10G lots the next year (assuming I have that much), and in doing so, cut my payable in half.  I mean no insult, you have good choices as investment, but if held to maturity, to me RRSP's are a clear case of penny wise and pound foolish .

Best 

Boardwalk's picture

New Trend

I'm trying to start a new trend and T-Town ritual.

Eric you used to win this one on an almost daily basis on the old blog.

http://www.tfmetalsreport.com/comment/98239#comment-98239

cpnscarlet's picture

@jhnewman - Thanks for the

@jhnewman - Thanks for the analysis and link to Alf's article. I tend to look at the current Au chart and disagree. We may very well be at the start of a major wave up NOW and not in the midst of a deepening correction.

And that last statement SOUNDS very reasonable for the simple fact that EW analysis has so many inflection point possibilities that any number of cyclic patterns will fit. Therefore, the Fourier analysis has too much freedom. I simply don't see it as a good analysis tool especially with the large number of rules that need to be followed to use it. This tells me that the "proof" of its success is buried in post-pattern curve fits and has only worked in a particular market mode - just like Bob Brinker's Timing Model. That broke down in 2008. I see the same future for EW.

Thanks for the post and analysis, I just don't agree with it. Care to wager?

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