Closing The Books
What a crazy week this was. Like you, I'm glad it's over.
For me, the action is somewhat bittersweet. I have no open trading positions so the decline in paper didn't impact me at all. Additionally, The Great and Powerful Turd had a pretty solid week of prognostication. I can't think of a single, paid subscription service that even came close to rivaling us this week. On the down side, though, I know that this week's action impacted some of you considerably and that's a drag. Relax and rest well, however. I'm extremely confident that the lows of the September-December "correction" are now in. If I'm right, your account will soon recover.
The action today only served to increase my confidence that the double-bottom in gold of yesterday and Wednesday was the selling crescendo of the correction. Silver looks good, too, as you can clearly see a reverse head-and-should bottom on the chart below. Barring financial or biblical armageddon over the weekend, I expect the metals to trade higher on Monday. Gold will move through 1600 and silver will pierce 30. From there, they will appreciate nicely and we will soon be able to officially declare the "all clear".
The other item that increases my confidence is the continuing OI saga that we've been following here for the past week or so. Check this out:
- Dec11 OI continues to rise. Yesterday, the OI had risen to 2317 contracts. The Comex then served 1823 contracts. This dropped the total OI to 494. Today, the OI has risen again by almost 500 contracts to 981. Now, all these people "jumping the queue" by taking delivery this month will likely not break the Comex. However, the simple fact that we've added almost 2000 new contracts this week should certainly pique your interest. A very interesting development, indeed.
- You'll recall that yesterday's action in gold was a churning, base-building, bottom-making day. Gold traded in a $30 range but finished virtually unchanged. On a day like that, you'd expect front-month OI to remain unchanged, too, but that's not what happened! The Feb12 OI actually fell by 4000 contracts. To me, this is almost certainly due to The Cartel closing of short positions at the bottom. You can imagine there were also some spec longs that threw in the towel, too. Remember the critical adage: Follow the smart (bank) money and fade the dumb (spec) money. In this case, if I'm right, yesterday the banks were buying and the last remaining vulnerable specs sold. Exactly the OI action you'd expect at a bottom.
Lastly, check out the latest lease rate chart. The one-month has now "dropped" from -0.57% all the way back to -0.3%. Additionally, the 12-month rate is almost at its high of the year at just over +0.4%.
So, there you go. I hope that we've been able to help this week and that any fiat you've been able to preserve will fatten your holiday gift fund. If you haven't yet btfd, you should watch the action next week very closely and prepare to do so. Physical is always best, of course, but since the paper market doesn't appear to be collapsing just yet, there may still be time to make some additional fiat in closed-end funds and the like. I'll have a special edition, guest post for you tomorrow so please be sure to check in over the weekend.
Thanks for an interesting week! TF