Buckle Up

As Barney Fife would say: "Boyohboyohboyohboyohboyohboyohboyohboy". Do we ever have a humdinger of a week ahead of us. So, to get our heads screwed on straight and prepare, I thought it best to roll out a little Sunday afternoon warm up.

First things first. Since December, many have commented and emailed looking for me to call another "Turd's Bottom". In a way, I did. After the breakdown last September, I kept trying to warn everyone that gold and silver could fall all of the way to their long-term trendlines, projected to be near 1550 and 25. As we now know, they came pretty close. Gold got to about 1535 in the last week of December, silver reached down and double-tapped 26 and that was that. I could have rolled out another grandiose bottom call but I chose, instead, to use it as a teaching moment. Judging by the emails I received, only a few of you seemed to notice what I was doing. To recap, here is the path upon which I was trying to lead you:

http://www.tfmetalsreport.com/blog/3211/revise-and-extend

http://www.tfmetalsreport.com/blog/3218/how-bout-some-charts

http://www.tfmetalsreport.com/blog/3240/study-open-interest

http://www.tfmetalsreport.com/blog/3246/other-technical-indicators

http://www.tfmetalsreport.com/blog/3249/breakout-coming-important-24-hours-begins-now

http://www.tfmetalsreport.com/blog/3254/proceeding-planned

Anyway, the point is, I've been trying to provide you with the tools to pick your own bottom. (That sounds nasty.) Next time...and, believe me, there will always be a next time...you won't need me or anyone else to tell you. Perhaps you'll be able to figure it out for yourself.

And the bottom is in. I don't give a damn what some $75/month paid subscription guy says. For that matter, I don't care what Jim Rogers says, either. Anyone waiting or hoping for gold to trade down to 1500 or 1200 is crazy. And silver definitely is not trading back to the single digits. What kind of fool believed that shit anyway? When did the fundos change? Did I miss something? Was the U.S. suddenly on a path toward fiscal sanity? Of course not. Markets "correct". It happens all the time. In the precious metals, this latest correction was particularly nasty because the rallies that preceded the correction scared the bejeezus out of the bullion banks. Now that they have lightened a substantial part of their long-standing short positions, the PMs are once again trading higher.

In the short term, where do we go from here? Well, first, take a look at these 15-minute charts from Friday:

paper_1-22gold15.jpgpaper_1-22silv15.jpg

The metals don't resume trading for another 2 hours but, based on these charts, I expect them to trade higher overnight and into tomorrow. Gold should finally break through 1665 and silver will begin a move toward 33. I expect things to grind to a halt there, though, particularly in silver. Longtime Turdites will recall that the $33 level in silver is a very significant number. It was the bottom back in May and silver has oscillated around 33 many times in the past 8 months. It will likely do so again. Look for the EE to retreat early but then mount some defense at or near $33. Whether or not it charges right through that level will go a long way toward answering the primary question regarding the explosive move back on Friday. Namely, was the huge rally caused by excitement over the expansion of PSLV and maybe Sprott himself (which nearly everyone thinks) OR was the rally primarily a massive EE short-covering rally (which I think)? How silver reacts near 33 will help answer the question. A review of the open interest numbers tomorrow will help, too. We'll see.

From a longer term perspective, it's now clear that we are in a sort of "Phase Two" area. What I mean by that is:

  • The metals have bottomed and the correction is over.
  • The metals are now grinding higher in a sort of "no mans land" between the bottom and the real breakout.
  • The real breakout will occur when gold trades through 1705 and then 1800. The real breakout in silver begins when it trades through 35 and then breaks the downtrend line from the highs of last April.

paper_1-22goldd.jpgpaper_1-22silvd.jpg

Lastly, there will be a lot of talk this week about the potential for QE3. For me, the primary items to watch are the POSX, the 10-year note and the long bond. Recall that we began discussing these last week:

http://www.tfmetalsreport.com/blog/3274/all-about-pig

Remember, overt QE is all about supporting the U.S. treasury market and keeping rates low. Interest rates cannot be allowed to rise for a multitude of reasons. Keep in mind that falling bond prices mean higher interest rates and, like anything else, bond prices fall when sellers outnumber buyers. The Fed, as the buyer of last resort, will restart overt QE to keep bond prices from falling.

First, review again this chart from last week:

paper_1-18am10yrw_0.jpg

Now look at these latest charts from Friday:

paper_1-20pm30yr_0.jpgpaper_1-20pm10yr_0.jpg

and here's a chart of The Pig, for good measure:

paper_1-22pig.jpg

The point is: The bond and Pig charts do not yet signal that QE3 is imminent but it sure looks a lot more likely than it did just one short week ago. As you might imagine, I'm very much looking forward to seeing how these items trade this week. Very interested, indeed.

OK, that's all for now. The markets re-open in just 75 minutes so I think I'll head out to gym in order to blow off some steam and prepare. You should do the same. The next five days are going to be consequential. Get ready.

TF

9:20  am EST UPDATE:

Just a couple of notes as we start the day. First of all, The Pig. After falling precipitously in the overnight, it will likely find support around 80 on the Mar12 (79.75-80 cash). A bounce from there will likely serve to keep some pressure on the metals.

paper_1-23ampig.jpg

Speaking of pressure, get a load of this garbage! Rarely do you see such dramatic opening ticks as these below. Often, the EE will give the Comex about 10 minutes to suck in a few extra buyers before the Monkeys attack. Not today!

paper_1-23amgold.jpgpaper_1-23amsilv.jpg

So now the big question is: Will a couple of FUBMs be painted onto these charts as we go through the morning? It's going to be tough to do, especially if I'm right about a short-term bounce in the POSX. Today's action in silver will also go a long ways to helping us determine what caused Friday's big rally. A Sprott-induced rally should have further legs today. A short-covering rally would peak at some pre-determined resistance and then stall and consolidate. We'll see. As you know, my hunch is choice #2 and the silver rally overnight did stop at almost exactly the lows of last May. Some charts show the May lows to be 32.60 but I seem to recall 32.80. Either way, that's exactly where things stopped early this morning. I'll also be patiently awaiting Friday's OI numbers today. If the Friday rally was Sprott-induced, then the total OI should have expanded considerably, something like 4000-5000 contracts. If it was instead the result of some buying and some short-covering, then we'll see a relatively flat OI change of -500 to +1000 contracts. The numbers usually come out around 3:00 EST and I'll be sure to report them in the comments section of this thread.

Here's a little Mark Steyn to help you pass the time:

http://www.nationalreview.com/articles/288778/sinking-west-mark-steyn

Have a great day! TF

224 Comments

TheGoodDoctor's picture

First?

First? Yay! Should be an interesting evening with silver popping up at the end of the day on Friday.

Ferd Torgerson's picture

How Does this Keep Happening?

Second.

Make a Stand!!  Join STPWATPF!!

Join the Society to Prevent Whining about Turdites Posting First!!

cashmast5's picture

great post Turd.

Keep up the excellent reporting

bvwalker1's picture

SHFE Holiday

I wonder if the fact that the Asian futures exchange is on holiday the entire week will be an influence on silver price.

¤'s picture

The bottoms

I remember and saw it also. It's been up since then.

Thanks for the new threadcool

The bottoms are London closes

au0030lnb.gif
 

and for some reason I can't find a 30 day for Ag at Kitco. Shows the same thing for the most part.

OK...found it. Silver Price Chart 30 days in USD per Troy Oz

 
RaRaRasputin's picture

Go Turd!

I like consequential - 'bout time something began to reflect how REALLY f**ked up everything is ....

ReadyRaRa

beinki's picture

It's time for silver to shine

Harald's picture

I saw a worn out Morgan like

I saw a worn out Morgan like that yesterday at the LCS.  Only one they had.  Only $29.50.

Justin's picture

Gym Time

Hopefully Turd is doing some posterior exercises tonight to give his bottom some added support, couldn't hurt!  I recommend following the advice of Zuzana if you need some pointers, she knows her stuff when it comes to bottoms:

Definitely looks to be an interesting week with so many charts nearing critical levels. My lack of involvement in the markets lately has left me clueless when it comes to the technical side of the house.  Thanks for the Sunday update, back to the game now!

Teach's picture

Read and learn...

Ninth....but I'm just glad I am here at all.  Here's the latest Celente link:  http://poorrichards-blog.blogspot.com/2012/01/gerald-celente-on-trend-forecasting-and.html

I like this guy, and include him in my reading whenever he shows up...just like Turd, he is one of the good guys.

silverparatrooper's picture

gonna get while its good

I'm likely going to add to my ASE stash this week. I'm feeling frisky and need to stack some before I buy that house the misses likes. Damn the non falling housing prices here in Lafayette la

dgstage's picture

Question

Does anyone here get the feeling Jim Rickards is part of the banking cartel. In one of his last interviews he recommended not holding more of 10 to 20% of one asset's in gold. He also stated one should hold 40 to 50 percent in cash. That seems a little odd to me. Any thoughts? Turd it would be great to hear your thoughts as well.

Be Prepared's picture

Let's get Physical!

That's right.... a Double entendre!

Personally, I thnk I scored a Triple entrendre!  Judges?

ReachWest's picture

Exciting Week Ahead.

Thanks, Turd. Looking forward to an interesting week. The fundamentals have most assuredly not changed.

FOMC mid week - I'm sure all problems will be solved then.

EDIT: Here's the Cartoon video for this weekend. (We visit the JPM Commodity trading floor).

Pigmendontplayfair's picture

rates are so low right now the long bond is not issue

they need a bond sell off a little to move that money into equities...they can let rates come up for the time being...its not home selling season...

Greece deal didn't happen and pressure is on euro already this evening..Dollar should move up...unless they decide to create a nice little gift for obama speech....

TheGoodDoctor's picture

Eastman Kodak BK, 300 million in silver

Eastman Kodak BK, 300 million in silver. (From previous thread)

Well, if you haven't heard the news, Eastman Kodak is going bankrupt. However, I found this to be interesting. Last year they bought 300 million in silver. Approximately 85 million oz. Well upon a little research I found this article which should foster some discussion.

http://www.beaconequity.com/eastman-kodak-silver-scandal-2012-01-21/

Here's another link for you all.

http://www.dailyherald.com/article/20120119/business/701199886/

JimmyTheHand's picture

@TheGoodDoctor

Just a minor correction for your post, it should be 8.5 million ounces, not 85.

Thanks for the article, I'm curious how much they used over the course of the last year and how much is still sitting there?

I also wonder if they actually held the metal themselves or if the bought it on paper intending to claim it at some future time?

And to Turd, thanks for teaching us how to fish man! I'm still learning from everyone here, but I've come a long way over the last year and a half. Now if I can just recover from all those damn boating accidents...

exiledbear's picture

I said back when the correction was young

That it wouldn't be obvious until a few weeks had passed that the correction was indeed over. These things tend to drag on longer than you anticipate. If you're not one of those in-n-out people, best to find something else to look at while the correction runs its course.

People calling for $1200 weren't completely nuts though, Turd. It was 68% of 1920, which isn't a crazy stab in the dark. I wasn't too sure where the correction would end myself. The trendline was a good place to look for, but you have to watch yourself with gold - this ain't stocks and it handles like a 74 cadillac - mushy and all over the place.

The really important thing to keep in mind through all of this - unless you're one of those assholes in NYC that's plugged in with inside info on everything, keep your eye on the fundamentals. In a bull market, the funnymentals trump everything else. In a bear market, throw all the fundos out the window and only look at TA.

How to tell whether something is in a bull or bear, well, that's more of an art than a science and experience trumps everything there.

DaddyO's picture

Everyone was discussing...

how things may play out in the future regarding confiscation, devaluation and new currencies. 

I found this article on how the elites are going to do away with capitalism and implement a new world paradigm.

I have found over the years that TPTB always telegraph the direction they are going and how they will get there.

It is articles like these that give insight into what lies ahead and who is driving the bus.

Read and enjoy...

http://www.breitbart.com/article.php?id=CNG.be33fda73987ff722e71ca3a18f1bfaf.351&show_article=1

DaddyO

¤'s picture

Speaking of "Buckle Up"...check this out

Militarization of Texas Highway Patrol

How long until all of these fancy speed boat and armored personnel carriers these towns are buying under the war on “drugs” and “terror” be turned on us?

http://dont-tread-on.me/?p=12675

PerMenger's picture

GDX Overnight Long/Intraday Short Gold

Do you guys remember this article at Zero Hedge from a week ago?

Overnight Long/Intraday Short Gold Fund More Than Doubles In Just Over A Year: Generates 43% Annualized Return

I recently did pretty much the same calculations for Market Vectors Gold Miners ETF (GDX). The strategy is the same: go long overnight, and short it during the day. I used the open/close price that was downloadable from Yahoo Finance and opened MS Excel... wow! Turns out the annual return is about 160% since the inception in May 2006. That's an average daily profit of 0.377%. Sure, that does not include losses from the bid/ask spread or fees, but still...

I also compiled a histogram for the rolling 20-day return. Seems to have a gaussian distribution around a 7% monthly return... except for a ​massive spike at above +30%. The positive skew is pretty extreme (most of comes from September/October 2008).

DaddyO's picture

DPH, maybe I can get some help...

from these boat operators to help me recover some of my precious coins that were lost in that horrific jon boat accident on the river a few months back.

I am still suffering from being paralyzed from the neck up.

I was uninsured at the time as I was too cheap to engage Torgersons for PM insurance. I believe the fire power on this THP boat will come in handy for providing escort protection after we recover my stash. No need to worry about pirates trying to make off with our booty after we raise it from the deep.

DaddyO

DaddyO's picture

Looks like...

a little profit taking in the metals opening this evening. It will be worth watching the overnight to determine how much of the action is profit taking and how much is from shorting pressure by the LBMA Monkeys as they open.

Weeee and off we go as we roll out of the start house.

DaddyO

Brotha Bob's picture

Friday silver due to short covering.

Turd, interesting you say the Friday move in Silver was due to a short covering. After looking at the recent CoT report, the banksters weren't supplying any shorts in Silver. Where they did in Gold.

I would credit Sprott with the Friday move. He certainly is look to buy an awful lot of physical.

I am expecting to see Gold drive higher this week, with the banksters covering their dirty shorts. Which, should pull Silver higher. Last Friday Silver was the big winner, this week it will be Gold

Same facts, different conclusion.

GenXer's picture

RE: Question dgstage

I am no where near an expert...but I think his hypothesis might be something along the lines of no one knows exactly how this thing is going to play out. Nearly all of us would be in agreement that the financial situation in the World is ominous and fragile.

A lot of blogs and experts are selling the idea that they do know exactly how it's going to play out - and some of those might be proved right.

I would say Jim Rickards is hedging his bets by recommending a diversified position. This is inline with someone like Marc Faber who recommends people having a portfolio that amounts to 25% Precious metals, 25% Cash, 25% equities (favoring companies with strong balance sheet, upside advantages in downturns and that pay a dividend) and 25% in Real estate - favoring agricultural/farm land especially with water rights.

Obviously in an inflationary/hyperinflationary situation the best thing is going to be Gold and Silver. The expected QE3 medicine is seen by most as the perfect tonic for putting this inflationary movement in motion. The risk would seem to be that the QE "medicine" is increasingly being rejected by the markets (patient). QE1 provided a rally and positive markets for around 6 months, QE2 was closer to 3 months.

It may be the case that QE3 (in whatever form it takes) will have only a short 1-2 month period of rallying the market. This momentary inflation could be overwhelmed by deflationary situation that follows.

Anyone who managed to battle through the exceptional piece on ZH http://www.zerohedge.com/news/subordination-101-walkthru-sovereign-bond-markets-post-greek-default-world would see how doomed and serious the Greek bond situation is - there are no good decisions that can be made now. The Greek default hangs over the market like the last snowflake falling on a critical mass of snow to set in motion an avalanche (to use Rickards analogy).

A major deflationary event set off like the crash in 29 or the Lehman brothers collapse would give plenty of ammo for cash holders to purchase distressed assets and make their wealth by buying the market index, real estate and other assets (including PM's). A lot of people used this simple buy low method in the 30's to become very wealthy.

Holding cash and assuming no bank collapse or bank runs happen is a very strong position to be in if a large deflationary event happens. Gold and Silver will initially go down with the rest of the market allowing for the cashed up to take advantage of a very strong BTFD.

The US government has precedent in confiscating Gold so having a portfolio all in PM's runs the risk of this. If the SHTF in a massive way with bank collapses, currency collapses etc having a self sufficient rural property will be the ideal asset. If companies survive you would still hold a piece of ownership of them which can grow as they grow coming out of the crash (a case for equities).

This long post doesn't actually answer whether Rickards is a bank insider, but hopefully it illustrates that a diversified portfolio isn't the silliest thing being recommended at the moment. We are surrounded by Domino's and no one knows which one will fall first.

SuperLeggera's picture

My fingers smell like silver

"Anyway, the point is, I've been trying to provide you with the tools to pick your own bottom. (That sounds nasty.)"

LOL.  Thanks, man.  Your sense of humor is greatly appreciated.

Another one of Murphy's Laws I'm sure many of us are familiar with:

If Pro is the opposite of Con, then Progress is the opposite Congress.

¤'s picture

5 Stages of the Awakening

5 Stages of the Awakening

“Thinking is the hardest work there is, which is probably the reason why so few engage in it.” -Henry Ford

One of the greatest challenges to becoming Totally Free is to be able to think independently from everyone else. You know instinctively that no one cares about you, as much as you care about yourself. Yet we constantly listen to others about what is best for us, instead of thinking about what is best for us. That is because we live in a world where everyone tells you what to think, but no one tells you how to think. We are blasted everyday with advertising, financial sales pitches, political media propaganda, religious dictates and more and more social pressure to conform. Most of our lives we don’t make any real decisions we kind of just fall into a routine. You see when you do not really think, you leave your mind open to those who do think. The real and most often unnoticed danger is a class of predators manipulating societies for their own selfish benefits. If you go along to get along and not think outside of the box, you risk being caught in the undertow of a doomed society or worse.

“In our dreams, people yield themselves with perfect docility to our molding hands. The present education conventions of intellectual and character education, fade from their minds and unhampered by tradition, we work our own good will upon a grateful and responsive folk. We shall not try to make these people, or any of their children, into philosophers, or men of science. We have not to raise up from them authors, educators, poets or men of letters. We shall not search for great artists, painters, musicians nor lawyers, doctors, preachers, politicians, statesmen — of whom we have an ample supply. The task is simple. We will organize children and teach them in a perfect way the things their fathers and mothers are doing in an imperfect way.” - John D Rockefeller

The five stages of  awakening....

http://dont-tread-on.me/?p=454

DaddyO's picture

Here's a big laugh...

http://www.cbsatlanta.com/story/16567672/ga-judge-orders-president-to-appear-at-hearing

This judge may find himself rolled up in a rug in the parking lot of a Chick Fil A in downtown HotLanta somewhere with 3 self inflicted gunshot wounds to the back of his head and the gun in his back pocket!

DaddyO

onewileyz's picture

Right on DPH, Right on....

Here's where your "Homeland Security" dollars are going....even in small town PD's. The small town cops get lotsa cash, just for the asking. They hire more cops that have nothing to do but go after DUI's and public intox criminals.

Be Prepared's picture

One Swift Event

When the Fed and its Bankster Cohorts decide they can no longer keep the current valuation scheme pegged at the existing level, their action will be swift and it will be mighty. They can't afford to have anyone front-run them or, at least, they need to minimize it to a very small group. This action, of course, excludes any front running they do to protect and put themselves in position to win the lion's share of any advantage they can play in order to gain more power and more control.

This "Swift" Event needs to take everyone off at the knees in order to ensure its maximum effectiveness. They will want to maintain the "illusion" that this action was warranted and necessary for the greater good of all American citizens...blah...blah... insert more propaganda here. For me, the question is how the Financial and the Political will coalesce into the hammer strike at this event horizon. More specifically, the Banks revalue the currency and the Government executes a "Coup" through martial law that never goes away. The United States has been in a non-stop "state of emergency" for decades now with each subsequent President renewing said "Emergency" due to the dictorial powers they gain by being in such a "state."

I would struggle to believe that the "Swift" Event doesn't happen within the next 10 years and, for me, it seems probable within the next 3 years. Too many data points are aligning not to see that the U.S. currency is being isolated from trade from the dominent creditor nations. The staggering U.S. debt growing at the upward bounds of its exponential inflection point. All of this to keep money being created enough so that interest can rob production and prevent monetary destruction.

There will be subsequent events after the "Swift" Event, but the major damage will have to be done all at once. Many of us talk about the "EROI" or the Energy Return on Investment when we take about commodites, but the tipping point for our own person "EROI" comes into play as well. There is a point where the Energy Costs compared to earned income inverts to a place where you're spending more money to work than just being on the dole with the rest of the 50 million people. I am not just talking about the cost of gas, but how energy costs translate into our hole carbon based society. A U.S. household earning a median income spent 11.5% on gas. Every dollar increase in gas price per gallon, the average consumer reduces shopping frequency by approximately 7.5% and total expenditure by about 4.4%. I'm rambling slightly.... the point is when the dollar loses value in the commodity world...there is a correlation of how this cascades into ramping costs up in all aspects of U.S. life to point where it shuts the ability for anyone to function without a substantial increase in base wages or the implementation of new currency (digital or otherwise).

I don't see them playing with adding zeros to the old currency. It will be very easily....an edict from the President... all purchases will now be made by Debt or Credit Cards until such time as new currency may be issued. All stores shall be required to take cards to do business. All cash must be deposited within a bank with 7 days. Any hoarding or price gouging will be dealt with harshly..... and as the TV screen fades... an announcer says "These have been the words of wisdom sent to us from Our Dear Leader."

(*landed on last thread as new one was posted)

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