Option Expiry, a 3-day Weekend and a Raid on Gold and Silver. What a Surprise!

It what should come as a shock to no one, the metals have been mercilessly driven lower today following a positive Comex open. All while the dollar was flat, too. Hmmmm. Who would have seen that coming?

Today is the third Friday of the month. This means that options on stocks and stock indices expire this afternoon. This includes all ETFs, most importantly GLD and SLV. So, after a surprisingly positive overnight and Comex open, the raid was ON. Further impacting the selling pressure is the 3-day weekend that lies ahead for the U.S. With all the crazy shit going on in the world these days, nervous and weak-handed longs would rather be out than in over the weekend and, in all honesty, can you blame them? Here at 10:30 EST, I expect the PMs to remain under pressure for a while longer, maybe stabilizing and trending higher toward the close and on the Globex. We'll see.

paper_2-17gold1.jpgpaper_2-17silv1.jpg

So, I'm sitting chilly right now. I don't want to fiddle with silver just yet because it faces its own option expiry next week. I'd like to buy some gold but I'm waiting for it to dip toward 1705 again and I still think (hope) that it could fall to 1680, as well. Again, we'll see.

paper_2-17gold6.jpgpaper_2-17silv6.jpg

Here's an updated chart of the POSX. For now, it looks like its wants to head lower. (Now that I've typed that, I'm sure it will head higher.) At any rate, until we get some kind of actual resolution in Greece next month, The Pig will likely continue to fluctuate around in this 79.60 + 1.00 area.

paper_2-17pig.jpg

A Turdite pointed out yesterday that main metal correlation is actually silver vs the euro. He has a valid point. Take a look at the charts below. For fun, do what I do: Print them. Put one on top of the other and then hold them up to the sun or some other bright light. (This is how we did it in the old days!) Note the ridiculously high correlation and then ask yourself this all-important question: WHY?? Why would these two, mostly-unrelated items trade in such close correlation? To me, the answer is WOPR. Some folks claim that 90%+ of the PM markets are HFT algos (WOPRs). These two charts would certainly seem to confirm that. Why else would a monetary and industrial metal move in lock-step with a particular currency? For instance, does silver mining capacity and production have anything to do with European stability and growth? Not really. So, again, if the fundos are unrelated, why do these two trade together?

paper_2-17eur.jpgpaper_2-17silvd.jpg

Crude is rolling again today. I have a high of 103.88 and a last of 103.26. The area around 103.50 is very significant resistance. Be on the lookout, though, for a false breakout that stops at 105. Above 105, it's headed back to 115 and $4.00/gallon gasoline. You've got to figure that The O'bottom Regime would very much like to avoid that eventuality.

paper_2-17crude.jpg

Lastly, I give you this ES (mini S&P) chart without further comment.

paper_2-17es.jpg

Just two "news" items for you today. First, there's this. In one sense, it's a happy story as the folks that found this stash will be rewarded. Primarily, though, this story makes me kind of sad. I imagine that someone, fearing confiscation by the Nazis, hid their gold. That person then never returned get it because, I imagine, he/she died in the conflict. In the end, it just goes to demonstrate once again that humans and fiat are mortal. Gold lives eternal.

http://news.yahoo.com/blogs/sideshow/raining-gold-secret-1-million-gold-stash-discovered-203724430.html

And then there's this. I saw this earlier today and now it's been picked up by ZH. I have no idea what the heck is going on here but something is seriously f'd up. First there was this:

http://zerohedge.blogspot.com/2009/06/open-letter-to-secretary-of-department.html

and this:

http://zerohedge.blogspot.com/2009/06/guardia-di-finanza-to-bloombergdie-welt.html

And now there's this:

http://www.zerohedge.com/news/6-trillion-us-bonds-seized-zurich

and this:

http://www.zerohedge.com/news/why-were-trillions-fake-bonds-held-chicago-fed-crates

Thoughts anyone??

That's all for now. I'm recording this week's podcast in an hour or so and I'll post it later this afternoon so please come back and listen to it. Also, keep a close eye on the CoT numbers and any changes in the silver lease rate heading into the weekend. Next week promises to be another wild one!

TF

271 Comments

Tyler's picture

@smiddy

if you're right, the hat won't make it there.

JimmyTheHand's picture

The FLAG

I posted in the podcast sticky post.. DOH.

Anyways,

Hahaha... just had a chance to really look at those pictures of the chest!  THE FLAG IS THE WRONG ONE FOR THE TIME PERIOD.

The flag from that time period only had 48 states on it and the stars were in a perfect square.  Sorry if someone beat me to it, but I thought it was funny.

http://en.wikipedia.org/wiki/1934_in_the_United_States

beach_bum's picture

Note from Santa

I apologize for taking up valuable posting space with news that you could find on your own but for those that can't, won't, didn't, etc., here it is:

Dear Friends,  

Iran is to be dropped out of the Swift system in Belgium. That means Iran could neither send or receive bank money wires.

 

That would slam Iran's economy.

 

This is economic war at the highest level of conflict. This could start a greater move of central banks with fears of the West to increase and retrieve their gold positions. It certainly puts cash reserves held by central banks (which are computer entries anyway) into serious question as to security.

 

This is as serious as it gets in nuclear and economic terms. The only weapon that can be effective against Iran's nuclear industry is Western nuclear deep penetration bunker busters.

 

Hold tight to your insurance investment positions.

 

Regards,
Jim

zilverreiger's picture

beach_bum

Note Pakistan already sided with Iran and they will block all US attack movements through pakistan. (rt.com)

snoochieboochies's picture

I drew some charts up last

I drew some charts up last weekend while i was stoned, it was mission impossible to decipher them the next day but i think we're going back to $32 which seems to tally with my slow stocks daily reading. I'm hoping for a bounce from there.

jacey's picture

@Tyler Clif High

I posted a forum topic on him this morning...I was hoping there would be at least one person who wouldn't laugh me out of here :)

http://www.tfmetalsreport.com/forum/3403/webbot-projectclif-high

Not that I'm a crazy person or anything...just curious on the topic...ok, well not totally crazy...lol indecision

I Run Bartertown's picture

zilver

"Pakistan ... will block all US attack movements"

Wanna bet?

I don't want us to be there at all,

but hanging your inexplicable dutchboy 'destroy the great satan' hopes on Pakistan is a bit weak.

Granted, they'd kick your military's ass, but let's be realistic...

Edit: Wait, I might get it now...you're maybe not real Dutch? You're 'New Dutch', MultiKulti-Dutch maybe? The kind that real Dutch call 'temporary invader Pakis brought by the uber-liberal .gov as a sort of biological weapon? Am I close?

arcticfox's picture

From Tonight's Midas..Bill Murphy's Site

'Hi-Ho in Play'?..

Bill,

As both you and I have sensed in the last week or so, it looks increasingly possible to me that Silver is now in ‘Play’.

The strong reversal yesterday from it’s mid day breakdown below the $33 was further possible evidence to support this theory.

But there’s more!

As all who follow my musings for long enough know, one of my main areas of analysis has always been the COT picture.

What has been most unnerving to many of the Silver traders in the last month has been the significant rise in the Commercial short position, which has often been a signal to many that a price slam is coming close to hand!

Below is the updated Commercial Short-Long Ratio (Red line) against the Silver Price (Blue line). You can see how the Ratio has screamed higher in the last 4 weeks, albeit from extreme record lows.

Midas0217B.gif

One point immediately obvious from the chart, is that whilst this Ratio has rocketed higher (the Commercials increasing their net short position), it is still by historic standards very low. In other words, the Commercials are still very much LONGER in comparison to their average position in the last 8-10 years.

But now referring back to this issue of whether HI-HO is in ‘Play’ or not.

The last time it became increasingly obvious Silver was in ‘Play’ was during the early stages of the massive spike up which began in about September 2010. Every time it sold down mid day from it’s highs, it seemed to reverse back up again, much to the frustration I suspect of any Short hoping to benefit from it.

Was yesterday’s action a similar symptom? One Swallow does not make a Summer, but the price performance of Hi-Ho over the last 2 weeks has increasingly looked of similar nature. On past price declines of Gold and the Miners, Silver would have been butchered for 2-3 dollars, but so far it’s been drifting up and down by only about 30-70 cents a day!

So back to the COT set up,

Back in late August/early September 2010, Silver was setting up for a run on it’s previous multi-decade high of circa $21, a massive technical resistance level that anyone would expect to be fought against rigidly. What was unnerving then, just like today, was that the Commercial net short position rose aggressively into this period, as there was clearly a lot of ammo mobilised to hold back the tide.

Below is the COT chart over this period and see how the SHORT-LONG RATIO of the Commercials ballooned before the price of Silver started to rise!

Midas0217C.gif

Just like in September 2010 when the price was approaching the important resistance level of it’s 2008 high, so now we can see that Silver is fast approaching another heavy line of resistance, the upper declining trend line in the flag formation that has been ‘flying’ from the birth of this correction.

Midas0217D.gif

From a technical perspective, once/should the flag be broken to the upside, we should see a similar move in height as the original Flagpole, circa $32! That’s going to vault Silver well past $60 under such circumstances.

Also to note, the Bollinger Bands on the Silver Daily Chart are now as tight as they’ve been for 12 months or more, suggesting a big move is getting close at hand!

Midas0217E.gif

These sure are interesting times!

Very best,
Rich (Live from 'The Bridge of the Silver Rocket Ship')

zilverreiger's picture

@I Run Bartertown

I live in the Netherlands yes but don't feel particularily nationalist about it like you seem to about your nation of active agressive plunderers.

What I'm getting at is that Pakistan is a nuclear power. (US pyric victory at best, mutually assured destruction at worst)

http://rt.com/news/pakistan-support-iran-us-attack-593/

arcticfox's picture

This morning's Art Cashin comments

Feb. 16, 2012, 10:06 AM ART CASHIN: Forget Greece, Traders Are Worried About Something That Could Send Us Back To The Middle Ages

In this morning's Cashin's Comments, UBS's Art Cashin addresses what worries traders these days.

A Greek default has been on everyone's minds lately. But the traders Cashin has talked to think that it's just the tip of the iceberg.

The bigger fear is what happens in the credit default swap CDS markets. No one knows how big it is, who the counterparties are, and, worst of all, whether the CDS contracts will actually trigger in what many would consider a default.

Here's an excerpt from Cashin's note:

Is There More At Risk Than Greece In A Greek Default - Recently, there has been a buzz building on trading desks and trading floors that there may be a lot more at stake in a potential Greek default than the media has been talking about.

As of now, most of the public discussion has centered on potential contagion among the banks as most of the Greek sovereign debit is held by the European banking community.

Traders, however, fear that the real risk is in the area of credit default swaps (CDS). They are insurance policies, individually written, that basically say - if Greece defaults, we’ll pay you what they should have.

Credit default swaps have grown exponentially over the last decade. Since they are individually written, there is no clear visible record of how many CDS contracts are outstanding. Also unknown is who is involved. The two parties obviously know who the counter-party is but there is no public record that would allow a regulator or a third party to find out who was involved.
...
No one knows how much CDS exposure there is on Greek debt but is assumed to be a lot. Banks and others looked at the very high and attractive yields on Greek bonds and began salivating. But, what about that risk - better buy some insurance.
...
Recall that, months ago, negotiators on the Greek debt bumped into part of the CDS problem. If the holders agreed to take 50 cents on the dollar, would that trigger their CDS on that bond (paying them the conceded 50 cents and making them whole).

At that time, many contended that if the bondholder "accepted" the offer of 50 cents on the dollar, that made the event voluntary and it would not "trigger" the CDS payout. That caused lots of folks to ask for a ruling from the ISDA (the ruling group on CDS contracts). If you "accepted" an offer with a gun to your head, was it really voluntary?
...
But, traders fear a worse outcome might occur if the CDS contracts do not kick in.
What good is insurance that doesn’t pay off. That could lead to the assumption that all CDS insurance was useless. That would stratify debt around the globe. Great credits could get all the money they wanted, but less than great credit would be shut out because it could not be insured. That could make the future one in which "the haves" will have whatever they want and all others nothing. Welcome back to the Middle Ages.

donnojackshit's picture

@SRSrocco

I really appreciate your thoughtful, well researched posts.

I don't spend much time in analysing Oil and energy, but without sounding like a complete loony tunes, here are a couple of questions I wonder if you have any thoughts or analysis on?

1. Lindsay Williams keeps talking about vast capped oilfields in Alaska from the '70's.

2.Other Americans tell me about oilfields in The USA similarly capped (Dakota?)?

3. Reports about Abiotic oil and how the chemical composition is very different from that of "conventional" oil, and how this oil coming form the decaying of dinosaur beasties and million year old plant matter is the greatest scientific fraud on our planet?

I only subscribe to the possibility of these ideas because of the criminality controlling the planet, where if there is a buck to be made, then anything is possible. If there is quadrillions of buck to be made, well you get the picture....?

donnojackshit's picture

@SRSrocco

I really appreciate your thoughtful, well researched posts. I don't spend much time in analysing Oil and energy, but without sounding like a complete loony tunes, here are a couple of questions I wonder if you have any thoughts or analysis on? 1. Lindsay Williams keeps talking about vast capped oilfields in Alaska from the '70's. 2.Other Americans tell me about oilfields in The USA similarly capped (Dakota?)? 3. Reports about Abiotic oil and how the chemical composition is very different from that of "conventional" oil, and how this oil coming form the decaying of dinosaur beasties and million year old plant matter is the greatest scientific fraud on our planet? I only subscribe to the possibility of these ideas because of the criminality controlling the planet, where if there is a buck to be made, then anything is possible. If there is quadrillions of buck to be made, well you get the picture....?

Gold Five's picture

Clif High

I don't know anything about this guy, but I did pick up on some key phrases in the (possibly drug-addled) post:

"Mainstream media"

"truth attack"

"torrents (hint hint) of the breaking dam"

Possibly something is about to be (wiki)leaked via bittorrent that will have the MSM spin machine working overtime?

¤'s picture

Tin Man - America

recaptureamerica's picture

Jacey, I commented on the forum

You started..

recaptureamerica's picture

Gold five, yes there are some

Gold five, yes there are some on the webbotforum that are in same boat as you..that the key to unlock the vast file that wikileaks put out will be released. We shall see..

KC's picture

@donnojackshit - watch

@donnojackshit,

I think Chris Martenson's presentation addresses your questions, see the last 30 minutes of the video.  If you haven't seen this video yet, or if you are not familiar with Martenson's work, I highly recommend that you watch.  I've read some of the abiotic theory from the Russians, and I still concur with Martenson (valid or not, the major fields are not being replenished at anywhere near a sufficient rate to meet demands).  The global elite to not benefit from sky high oil prices.  Without cheap energy, we can't grow economically and the whole system collapses upon itself.

kc

Dr G's picture

Fellow friends, as I type

Fellow friends, as I type this my wife and I are at the ER with our youngest daughter. If you are so inclined, please pray for our little one.

I may not be around for several days. Thanks to all of you for being excellent cyber friends.

¤'s picture

Dr G

Saying a prayer and wishing you and daughter  the best.  Try and stay positive.

Be Prepared's picture

@Dr G....... Best Wishes

I hope you know that we all will be sending you our best thoughts and wishes.... I only hope it is nothing too serious!

Pining 4 the Fjords's picture

Prayers on the way Doc

Hang in there partner. All the very best to you, your family, the medical staff, and most especially to your little one.

Swift Boat Vet's picture

Dr G

All of you have my most heartfelt prayer for an "all is well".  God Bless that precious daughter of yours.

Swifty

Tyler's picture

be well dr g

blessings

Fred Hayek's picture

Best of luck to you, Dr G

May your child return to full health.

Regarding the oil issue, one technology that somehow is commonly ignored is the production of gasoline from coal using the Fischer-Tropsch process pioneered by Nazi Germany.  This method of production provided approximately half of the petroleum needs of South Africa in the 1980's before the collapse of the apartheid system when South Africa could not rely upon getting oil from other nations.

I think Karl Denninger has talked about the weird silence about Fischer-Tropsch.  But I'm not sure if anyone else has.  Essentially, all you need for it is coal.  The U.S. has plenty of coal.  I'm not sure how the price of gas produced using the Fischer-Tropsch process compares to present prices. 

Here's the Wiki page:  http://en.wikipedia.org/wiki/Fischer%E2%80%93Tropsch_process

Ferd Torgerson's picture

Dr. G

Know that you and your family have all our most fervent prayers.  May our Holy Father watch over your daughter and bring reassurance to you and your wife.

eyeswideopen's picture

@ Dr. G.

Good wishes and thoughts from me to you and yours

Be Prepared's picture

@Fred Hayek - Coal Gasification Plants

Fred, I worked on remediating old Coal Gasification plant sites from the 1920s & 30s.  I will just say that the process can throw off a lot of toxic substances if the waste streams are not managed well.  The issue is that it is still a much more expensive proposition than oil for now, but I agree that this process could see a come back as oil goes over $200 barrel.  :-)

survivalwstyle's picture

Dr G

sending aLL the gOOd i got in your liTTle girls direction

tranquillity's picture

My heart goes out to you

My heart goes out to you, your wife and especially your daughter.

Hope everything turns out okey!

//Mikael

clueless one's picture

Dr G...

thoughts and prayers headed your way.  hoping all turns out ok...

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