The Sunday Night Massacre, One Year Later

What we you doing one year ago this instant? I, for one, was preparing to leave for another one of LT#2's soccer games and a relaxing, birthday dinner with MrsF. Little did I know, or even suspect, that this was coming around the bend:

paper_5-1silv1.jpg

I set out today to write a retrospective. Too full of brim and bluster for a Sunday, I thought a thorough recapping of last year's events was in order. A funny thing happened along the way, though. As I read through the archives, not only of The Watchtower but of sites like ZH and others, I lost my enthusiasm. The more I read about the past, the more I thought about the present and the near future. So, instead of rehashing the single greatest manipulative theft I'd ever seen, I decided instead to move on.

Look, we all know what happened. The chart above tells the story and what's done is done. All we can do now is use the events of last year as a learning tool. What happened in silver in the days and weeks leading up to Sunday night, April 30, 2011? Are any of the same market conditions prevalent today? Has anything changed? Where do we go from here?

I have always and will always contend that the dramatic price gains made by silver in April 2011 were not the result of a speculative bubble. A simple review of the CoT structure from that time bears this out.

CoT date 4/5/11

Price: $38.50

Large Specs: 48,890 long and 12,105 short. Net long ratio of 4.04:1

Small Specs: 35,002 long and 15,373 short. Net long ratio of 2.28:1

The Silver Cartel: 89,827 short and 33,413 long. Net short ratio of 2.69:1

CoT date 4/26/11

Price: $49.50 (up 28%)

Large Specs: 43,078 long and 18,083 short. Net long ratio of 2.38:1 (a drop of 54%)

Small Specs: 36,144 long and 18605 short. Net long ratio of 1.94:1 (a drop of 25%)

The Silver Cartel: 78,297 short and 35,763 long. Net short ratio of 2.19:1 (a drop of 29%)

If a speculative bubble had occurred, we should have seen an opposite CoT reaction. Spec long ratios should have been exploding, not contracting, and the net short ratio of The Evil Empire should have expanded.

Instead, price rose dramatically throughout April. "Speculators" were covering positions and adding shorts into the rise that was being induced by the Cartel's covering of 11,530 contracts while simultaneously buying 2,35o new longs.

Why was The Silver Cartel panicking last April? Much of the concern seems to have centered around physical delivery. There was much talk that month about an impending silver Comex default. Was it all hype and mindless speculation or were the bullion banks fully aware of the situation and trying to extricate themselves as quickly as possible? Well, go back and read this:

http://www.zerohedge.com/article/45-scotia-mocattas-registered-silver-transferred-eligible-status

and this:

http://www.zerohedge.com/article/how-comex-lost-20-its-registered-silver-one-week-or-where-theres-smoke-run-theres-probably-r

From the 4/27/11 link directly above, here's the "money paragraph":

"To our (lack of) surprise, a quick glance at today's silver holdings at the Comex confirms that the trend of reclassification is continuing unabated, and total "physical" silver across the entire Comex universe has now plunged by almost 20%, or from 41 million ounces to 33 million ounces, in the span of one week! And while last week it was Scotia Mocatta, today it is HSBC and the Delaware Depository, and the reason given: "Adjustments include reporting classifications of t oz that were moved from Registered to Eligible.  Please see Special Executive Report reference 5736 for additional information.  http://www.cmegroup.com/tools-information/advisorySearch.html#." And a further drill down reveals the following link. Many have speculated that there could well be a run on physical silver. But for those looking for a smoking gun, this is probably as close as you will get to one, short of JPM actually declaring "force majeure."

By late April, the banks had successfully decreased their net position by 14,000 contracts but had driven price UP by 28% in the process and now all indications were that physical silver for delivery was being hoarded. Then, on Monday, April 25, the CME raised margin requirements for silver by over 10%. Was this move an attempt to coerce May11 contract holders away from taking delivery? By Thursday, April 28, price had not fallen materially and open interest in the May11 was still at 10,963, one day before first notice day. Is this why the CME raised margins again (another 15%) that evening, effective at the close on Friday, the 29th? Regardless, one year ago tonight it was obvious to The Cartel that they couldn't continue on their present course and it was time for dramatic action, consequences be damned.

It's now one year later. Silver has seen additional wild price swings and other dramatic beatdowns but where is price currently? In the days immediately following The Sunday Night Massacre, silver traded as low at $32.60 before rebounding. When trading reopens this evening, silver is at $31.30. (Interestingly, gold over the same time period bottomed at $1471 yet stands tonight at $1665.) Since the paper price of silver hasn't changed much since from those panic lows of early May last year, maybe we should look at the market internals again.

CoT date 4/24/12

Price: $30.75

Large Specs: 28,913 long and 12,442 short. Net long ratio of 2.32:1

Small Specs: 19,247 long and 13,365 short. Net long ratio of 1.44:1

The Silver Cartel: 70,697 short and 48,344 long. Net short ratio of 1.46:1

From the peak of The Great Cartel Panic of 2011, paper price has fallen almost 40%. Over the same time period, large spec longs have cut their positions by 32% while maintaining a nearly identical net long ratio near 2.3:1. The small specs have trimmed their long exposure nearly in half while decreasing their net long ratio by 25%. The real change in The Cartel position. The total short position has declined from nearly 90,000 in early April 2011, to 78,000 by late April to just 70,697 today. This is a drop of over 20%. Conversely, The Cartel long position has grown from nearly 33,000 in early April last year to 48,344 today for a growth of almost 50%! And the Cartel net short position, which peaked at 2.7:1 last year has been cut nearly in half. WOW! From the perspective of The Silver Bullion Banking Cartel, the past 12 months have been a smashing success!

So, now, let's try to sum this up. I believe that in the spring of 2011, The Silver Cartel began to fear a run on physical silver as evidenced by their moves to reclassify silver in April 2011. Their hasty attempts to cover their long-standing futures positions were causing a spike in price and actually increasing the likelihood of physical stock depletion and a "run" on the Comex. Faced with no other alternative, The Cartel conspired with the Comex-owning CME to rig prices lower through margin hikes (5 in 9 days) and massive price manipulation (The Sunday Night Massacre). The resulting and subsequent paper price declines have allowed The Cartel the time needed to decrease their net paper silver exposure by over 70%.

The question becomes: Are they done? Will price be allowed to rise next time without Cartel interference? Is their ultimate goal to have a 1:1 net short ratio? Time will tell. What's interesting, however, is how the physical delivery picture has not changed. First, this article from Jesse last week showing the dealer inventory changes over time. Note that, last year at this time, in the midst of The Panic, the registered inventory was around 35,000,000 ounces. By late last week, the total registered inventory was under 30,000,000.

http://jessescrossroadscafe.blogspot.com/2012/04/comex-silver-inventory-watch-heading.html

Now, as of Thursday, we still have 9,026 open contracts in the May12. Though it's unlikely that more than 2000 or so of these will stand for delivery, what are we to make of this:

http://www.silverdoctors.com/jp-morgan-increases-registered-silver-inventories-500-overnight/

Notice that this is silver moving in the opposite direction of last year. Instead of dealers pulling and reducing the stock of registered (used for delivery) silver, here's JPM adding 5,000,000 ounces. That's enough silver to settle 1,000 contracts and the move has left JPM with just under 9,000,000 eligible ounces. What the heck? Why would they do that? Did JPM get wind late last week that someone or something is intent upon taking delivery next month, above and beyond the usual amount? Maybe. Regardless, with only 9,000,000 eligible ounces left to switch to registered if necessary, JPM can only settle another 1,900 contracts with the supply they allegedly have on hand. If Ted Butler is correct in claiming that JPM alone is short at least 18,000 silver contracts, Blythe and Jamie are currently left with only three options:

  1. Stage another massive raid. However, I believe that the very strong physical demand at $30 precludes this option and even lower paper prices will only serve to increase physical demand.
  2. Get their hands on millions of ounces of new silver to replenish their inventory. Also unlikely as this would only add to the ongoing "problem" of excess demand.
  3. Cover. This, really, is the only viable option. They must continue to cover and exit their short position. But can they do this in an orderly manner?

Last April, an 14,000 contract flip moved price 30%. At today's price levels, a similar surge would simply take price back to $40. To me, this is their only viable option. Once flat, they can allow silver to trade freely. The next time it goes back to $50, they will be financially indifferent.

CONCLUSION: It appears to me that the current demand for silver is strong and that the current supply is tight. Even tighter than last year at this time. Equally important, price has fallen 40% while The Silver Cartel has effectively trimmed their net short position by 70%. The only sensible, business option for The Cartel is to continue to cover their short position, regardless of price action going forward. Given the ongoing possibility and continuing concern for delivery default, The Cartel must utilize this final dip in price to flatten their books. If they do, silver will rise through this process and then accelerate, once Cartel price interference has been removed. If The Cartel fails to get flat here (or if they are not allowed to), they ultimately risk a default and collapse that will not only bring down their individual firms but, also, bring about a financial calamity the size and scope of which has not been seen since 2008.

TF

261 Comments

swampgas's picture

First?

Hey I'll play along

Great update TF. I was at the gym when it all went down a year ago.

AlienEyes's picture

Second?

Second?

Check out the back to back UFO's. 

smiley

swampgas's picture

Hey Alien Eyes

Don't ya love those silver orbs?

TexasStacker's picture

Thurd-ish?

I was at the Greenbrier resort in West Virginia on a company-sponsored retreat, of course I had my computer on TF metals report and couldn't believe what I'd seen.  Then got the news on BinLaden later that night, figured it was a knee-jerk reaction to this news.  Little did I know...

It sure didn't ruin my trip though, God I love the Greenbrier!

AlienEyes's picture

@swampgas

Yes I do. That's how I got here. That and Don Julio.  

¤'s picture

7

Well...I might be 6th but I am 7.

Thanks for reminding us of that nasty take down 1 year ago. crying

It seems like it was even longer ago than that. It's been a long 365 days from then until now. I think we start to trend up out of the 'bowl' by weeks end and then continue so over the next 60-75 days into July.

And yes, something is up with JPM and that inventory move. That's a bhuge move and it was either very calculated or a necessary knee jerk reaction to something else. We're going to find out soon. Sounds like someone big is taking delivery soon.

Eric Sprott?

TexasStacker's picture

PS: Note to Cartel

Our company retreat is a little later this year, two weeks from now in Georgia.  Two weeks from tonight I'll be accessing TF metals from a hotel room in Atlanta.  Pls don't pull that crap again!  How about UP $6 this year!

agNau's picture

I was actually watching as the drop began.

It seems unreal that a year has passed.
What of the Anniversary? Will we now see the mirror image?

S Roche's picture

Sickth?

People who write they are first, second thurd, fourth and even fifth, make me sickth!

Honest_Money's picture

They needed the 5M ounces for delivery

"here's JPM adding 5,000,000 ounces. That's enough silver to settle 1,000 contracts"

From Harvey Organ:

***Last last night, the CME notified us as to the first day intent to deliver for first day notices:



Gold notices: 296  (for 29,600 oz of gold)

silver:  957    ( for 4.785 million oz.)

So there you go, JPM needed that silver to make delivery.

BUDDHA PRINCESS's picture

Hundreds of thousands may lose Internet in July

WASHINGTON (AP) - For computer users, a few mouse clicks could mean the difference between staying online and losing Internet connections this summer.

Unknown to most of them, their problem began when international hackers ran an online advertising scam to take control of infected computers around the world. In a highly unusual response, the FBI set up a safety net months ago using government computers to prevent Internet disruptions for those infected users. But that system is to be shut down.

The FBI is encouraging users to visit a website run by its security partner,that will inform them whether they're infected and explain how to fix the problem. After July 9, infected users won't be able to connect to the Internet.

http://www.ksl.com/?nid=1014&sid=20072551

Dr Jerome's picture

One year ago

I watched the waterfall happen and then got real smart. I bought the dip at 44.     sigh.

BUDDHA PRINCESS's picture

Ron Paul on CNBC

Always very interesting listening what Ron Paul has to say

The link to youtube.com video is here

Ed_Phlegm's picture

First Again!

Whoa!  me FIRST!

TexasStacker's picture

@ Dr. Jerome

Right there with you as regards SLV.   Bought some at $43-ish cause I knew silver HAD TO snap back during the week after Sunday.  Still got it...

BUDDHA PRINCESS's picture

Draghi's 'Growth Pact'-Austerity Backlash Unites EuropeanLeaders

It's so nice to see Europe in agreement once again. Whether it's German Chancellor Angela Merkel, European Commission President José Manuel Barroso or French presidential candidates François Hollande and Nicolas Sarkozy -- everyone seems to think a "growth pact" for the continent is a good idea. But it is precisely this agreement that should make one skeptical -- because all the vague phrase really does is verbally lump together Europe's tremendous conflicts of interest.

The suggestion came from European Central Bank (ECB) President Mario Draghi. "We have had a fiscal compact," Draghi told the economic and monetary affairs committee of the European Parliament on Wednesday, referring to the treaty European governments signed in March, pledging to toughen their spending rules. "What is most present in my mind now is to have a growth compact."

Since then, the concept has garnered acceptance from all sides. "Growth is the key, growth is the answer," European Commission President Barroso said in a speech. In France, where the presidential campaign continues, both conservative incumbent Sarkozy and his Socialist challenger Hollande saw affirmation of their own positions on the issue. Hollande said it went in the same direction as his earlier policy suggestions, while Sarkozy said that a policy based on austerity alone would be a mistake.

Devil in the Details

But the unanimous approval of Draghi's suggestion conceals just how far apart its proponents are on details. What ECB President Draghi has in mind has little to do with Socialist Hollande's notions. "He doesn't necessarily have the same measures in mind as me to foster growth," Hollande admitted in a radio interview on Thursday. But this disagreement has somehow been overlooked.

Posted at the spiegel.de website

The link is here.

BUDDHA PRINCESS's picture

Gold posts biggest weekly rise since late February

Gold rose for a fourth consecutive session on Friday and posted its biggest weekly gain since late February, as disappointing U.S. growth and European debt jitters boosted investment demand for the precious metal.

Bullion buying accelerated after a report showed U.S. economic growth cooled in the first quarter as businesses cut back on investment.

Some safe-haven demand also supported prices after a credit downgrade of Spain's sovereign debt by Standard & Poor's.

Gold's four-day rise was underpinned by option-related buying and after Federal Reserve Chairman Ben Bernanke said on Wednesday the U.S. central bank would not hesitate to launch another round of bond purchases to boost growth if necessary.

​Gold's rise in the face of renewed Spanish debt fears was also seen as bullish, as the metal has tended to follow equities and riskier markets most of this year, Steel said.

Posted on  reuters.com

The link is here.

The man who stole a leopard's picture

"without a first poster... there wouldn't be a second post"

SRSrocco's picture

EXCELLENT POST TURD..

I liked the way you put everything together.  This was interesting:

Last April, an 14,000 contract flip moved price 30%. At today's price levels, a similar surge would simply take price back to $40. To me, this is their only viable option. Once flat, they can allow silver to trade freely. The next time it goes back to $50, they will be financially indifferent.

Haole Guy's picture

The drop

Unfortunately for me, I had just bought 30 oz about 15 minutes before the the drop began so I was SoL.  Fortunately for me I have about 250 oz that I either paid face value for or I got when the price was $5 oz and another 200 oz that I bought between $26 to $30 oz.  So my average didn't get too messed up.  Live and learn I guess.  I've been selling peaks and buying dips ever since.

Xty's picture

at the cottage

didn't know it had happened till we got home.  Sickening.  But anyone who doesn't believe in manipulation should try to explain that chart.

El Gordo's picture

But what if...

But what if the Morgue's ultimate Godfather is the Fed, and what if the Fed tell the Morgue to just continue to play the game, and that the Fed will backstop them against losses (by printing even more fiat) but under no circumstances is the price of PM allowed to rise any significant amount, etc.......That's for people smarter than me to work on, meanwhile, I'm trying to snag a few fiat bills that Ben's going to toss out of a helicopter any minute now so I can stack a couple more ASE's.

El Gordo's picture

I bought at ever station

along the way, because I just knew that it had to turn back up and I didn't want to miss any buying opportunities.  Still doing that, BTW.

Jasound's picture

WTF?

Zoltan's picture

One Year Anniversary

I remember well checking the screen at supper time here to see the beat down in progress.  Just muttered a few curse words and turned it off.

I notice the silver chart this year at kitco shows a dollar spike up at the open.  FUBM.

The spike didn't last but is still viewable if you go to the chart.  Didn't show up at netdania so may be faulty data.

Z

Fulgurite's picture

My guess: what worked so well

My guess: what worked so well last year just might work well again this year, so I'm bracing for another raid in some shape or form.

I'm afraid that option 3 (cover and push up prices) is just too good to be true and would play directly into the hands of the silver/gold bugs, something that will not be allowed to happen.

Where I was last year at this time of the year? I dunno, stacking more silver and BTFD probably! wink

R man J's picture

Talking with jeweler about silver price

Silver had just hit $47-something and I was at a social gathering with a jewelry store owner. I thought I would quiz him and asked if he knew the price of silver. He was clueless, I think he said "about $30/oz."

When I told him it was almost $48 he was shocked. Not more than an hour later the price dropped to $42. My turn to be shocked. 

shaz's picture

Hundreds of thousands may

Hundreds of thousands may lose Internet in July

i would not recommend following a FBI partner security link to check your computer for Trojans

instead

download malwarebytes, MS essentials and spybot search and destroy

learn how to make an image of your operating system

purchase the installation disk of your fav operating system (or get a mac or run a linux distro)

check things over with hijackthis proggy

and send questionable running processes to bleepingcomputer website

(if your not sure what to look for)

or some other internet free malware help website

with an image u can be back up and running in no time at all in the event of a nasty infection

(helpful to have the operating system on a separate drive or sep partition on the same drive)

providing u took the image after a clean install

oh yeah

and back up everything

twice

P

Dr Jerome's picture

El Gordo

I have been wondering that vary thing--that the Fed will backstop JPM for losses just to keep the comex system afloat. The FED must maintain their ability to manipulate key commodities to argue for the pretense of only 2% inflation with no attention being drawn to key items--like gasoline and precious metals. 

I have had to move my metals investments from the "make money quickly" part of my brain to the "just in case of a collapse" part. I'll find other ways to earn fiat  for prepping and metals.

Took my 17 yr old daughter for a driving lesson tonight. We made a deal to correct her tendency to roll thorough stop signs. I will fine her! Then I'll take her fines and buy metals to give back to her in 10 years. But, maybe that plan will backfire...

Urban Roman's picture

Hello, what's this?

Kitco silver chart

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