Wrapping An Extraordinary Week

Friday, May 18, 2012 at 4:03 pm

And why do I get the feeling that next week is going to be even more wild??

Before we get started, I thought I'd give away one more hat. I'm sure you've noticed by now that, once again, the financial world seems to be staring into the abyss. Of course, though, with all of da diffewent and scawey tings dat CNBS could tawk about, they instead are all-Facebook, all-the-time. So here's the new contest: On what day will the closing Comex price of an ounce of silver exceed the NASD closing price of Facebook? Please use this thread to log your guesses and I'll close it to new entries on Monday morning. (and can someone please log all of the guesses onto a spreadsheet? please??)

Great follow-through in the metals today. As you know, I was expecting this rally but I was also expecting a brief pullback and double-bottom. We didn't get that and that's a very good sign. Additionally, I was expecting a somewhat flat OI change for yesterday and boy-oh-boy was I wrong there. In the near $40 rally yesterday, total OI expanded by 17,000. WOW!

So, what's the deal? Well, there was certainly the short-covering that we talked about. However, there was obviously a HUGE surge in new longs, too. It's almost as if a spec short not only covered that contract, he/she/it then turned around and went long. This is GREAT NEWS. But 17,000 cannot be written off solely to this idea. Clearly, brand new longs came into the picture and who are they? In my opinion, most likely The Cartel. Adding longs to start the short squeeze but likely adding even more later in the day. As usual, we won't really even be able to make an educated guess until next Friday's CoT but this sure seems plausible right now.

On the other hand, silver OI from yesterday was exactly as predicted. While price was jumping 83c, total OI rose by just 100 contracts. Here's your pure short squeeze. Longs add new, shorts cover old, net effect is no change.

Again, though, the fact that we continued to add to the gains today, moving through expected resistance at 1580 and $28 is very encouraging. We eventually ran out of gas near more serious resistance of 1600 and 29. That's OK. It's perfectly normal for a few folks to ring the register after such a strong move, particularly ahead of a weekend. Let's wait and see what happens Monday. To that end, here are your charts. Note the steady climb higher on both of the hourly charts. Also note the next levels of resistance. In gold, once 1600 gives way, the serious battle will be near the intersection of horizontal resistance around 1625 and the 2008 trendline in the same area. Expect quite a fight. In silver, though 29 may offer resistance again early next week, I think the main battle will be between 29.50 and 30.

It's now 3:35 EDT on Friday and the CoT was just released. As expected, it's fantastically bullish once again. For the week 5/9-5/15, the Gold Cartel reduced their net short position by 12,538 contracts. This gives them a net short ratio of just 1.81:1. That's as low as I've ever seen it. On the flip side, the easily-manipulated large specs reduced their net long situation by 9,161 and the small specs reduced by 3,377. The lambs were led to slaughter. This report undoubtedly marks the bottom in paper price.

The silver CoT saw similar action. The Forces of Darkness reduced their net short position by nearly 2,000 contracts and their net short ratio now stands at 1.35:1, which is almost exactly how low it was at the price bottom of late December. Like gold, both large and small specs were selling longs and adding shorts. Though, I had hoped for a bigger drop in the EE net short ratio, given the tiny change in total OI for the reporting week, the 2,000 contract drop is pretty good news and confirms that, like gold, the silver price likely saw its lows this week.

OK, here's some reading material for your weekend. First, Eric Sprott was on KWN today. You should, of course, give this your consideration. http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2012/5/18_Eric_Sprott_-_Governments_Frightened_of_Panic_Liquidation_Event.html

And then there's this. Turdite "tabberto" turned me on to this author, Detlev Schlichter. His book and this column discuss what we shall loosely call "the gold standard". I plan to be discussing several "gold standard" ideas in the coming weeks, so this seemed like a logical homework assignment for you. http://papermoneycollapse.com/2012/05/by-abandoning-the-gold-standard-we-embraced-monetary-central-planning-chaos/

We're also going to be spending time discussing backwardation as this has become a near-constant condition on the metals markets, particularly silver in the spot vs futures area. I found this study from 1999 linked on Harvey's site a few nights ago. If you've got the time and the mental energy, give it a look. http://www.fame.org/PDF/Howe_War_Against_Gold.pdf. Of course, the seminal piece on backwardation can be found here: http://fofoa.blogspot.com/2010/07/red-alert-gold-backwardation.html

That's all for now. I hope everyone has a safe and relaxing weekend.

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Comments

Why not June 14th??? Kind of

Submitted by Eric Original on May 18, 2012 - 4:36pm.

Why not June 14th???

Kind of a magic date here in TurdTown. I can't believe it's still available.

I can feel the karma washing over me right now....

Open Interest

Submitted by CBDooper on May 18, 2012 - 4:37pm.

I have a bit different take on yesterdays gold open interest. It seems to me for open interest to increase a higher percentage than the actual price gain(4% vs 2.5%), a good amount of shorts had to have been added to slow the advance. Who added them is unknown, but either way it still leaves a huge short squeeze potential still on the table. Maybe I'm totally wrong, but it makes sense to me

June 28th

Submitted by Havenstein on May 18, 2012 - 4:39pm.

June 28th. Go Sinclair.

EO beat me to it

Submitted by SilverFocker on May 18, 2012 - 4:39pm.

So now it's 7/25/2012

Sooner than anyone expects

Submitted by Zoltan on May 18, 2012 - 4:41pm.

How about a week from today (5/25/2012 at a price of $32 for a bonus point)

Just SWAG

PS watch the JPM/silver price cross over as well, hopefully coming soon to a screen near you.

EDIT: I see Loner and I are on the same wave length. So therefore I'll up the ante to May 24th unless we can share dates and if so I'll stick to my original call.

AG over FB

Submitted by boatman on May 18, 2012 - 4:43pm.

dec. 1,2012

PMs......bitchez

Simplicity

Submitted by Doc1800 on May 18, 2012 - 4:46pm.

Lots to be said for living a simple life. I am interested in the PM action mostly from a standpoint of how things are playing out. By farming, raising livestock, and keeping interests close to home; one is able to tune out or at least tune down the noise that accompanies the world today. We know the system is on a downward path. I don't think that can be debated, how we handle ourselves as the world moves in this downtrend is what really matters. There is not one of us that alone can instigate a trend change, and yet as we live our lives to see the trend change we hopefully will gain numbers to a point of threshold when the change actually comes. PM's are a piece of the pie, not he whole pie but a vital piece.

Trader Dan's Warning Confirmed - 10 Year Note Closes Under 1.80

Submitted by silverstax on May 18, 2012 - 4:47pm.

Well the deflationary signal that Trader Dan Norcini warned about has been confirmed (a weekly close below 1.80% in the 10 Year Note):

http://www.forexpros.com/analysis/treasuries-update:-10-year-yield-at-hi...

Not only did it close under 1.80%, it closed at a historic low of 1.70%.

He seems pretty cautious as well:

Silver has managed to hold the $26 level once again, although this time around it did not get down as close to 26 even as it has done on two previous occasions, once in September of last year and then again in December of last year as well. I am still skeptical of this market however as it is too closely associated with the risk trades. If Copper could ever stop falling out of bed, I will feel more comfortable about silver. The best thing that can be said about it right now is that at least it stop going down for a change. If we get any sort of news over the weekend detailing a worsening of conditions in Europe, silver is going to turn right back around and go lower. You just have too many funds selling the metal who need something to shift the sentiment towards inflation to bring them back into this market in a very big way. That means we will need more statements from Federal Reserve officials leaning towards QE sooner rather than later.

Full post here:

http://www.traderdannorcini.blogspot.com

The Date

Submitted by Blackshook on May 18, 2012 - 4:50pm.

Ag over takes FB will be .... JULY 9 th 2012.

(No subject)

Submitted by Dr G on May 18, 2012 - 4:53pm.

What a fool. He should be buying silver. From the WSJ:

Meanwhile Theophilus Hodges, a 36-year-old property manager, stopped into an E*Trade branch in downtown Chicago on Friday morning specifically to open an account to buy Facebook shares, he said.

"If it wasn't for Facebook I wouldn't be here," he said as he left the branch to go to his bank and transfer money into his new account. "I missed out on Groupon when it went public, so I'm not going to miss the boat this time."

Mr. Hodges said he plans to invest $10,000 in Facebook shares--including $4,500 of his own money and $5,500 from his mother.

FB Price Support

Submitted by CBDooper on May 18, 2012 - 4:54pm.

Did anyone watch the price action the last half hour of trading in Facebook. I thought it was hilarious as I've never seen a more obvious display of price support manipulation. The underwriters appeared to have an unlimited bid set for $38 as it traded for almost a half hour straight between $38.00 and 38.01. Facebook looked like it had its own personal PPT. I'm sure there will be no shortage of shares for sale at MS next week.

Not if, but when?

Submitted by Magpie on May 18, 2012 - 4:55pm.

http://hat4uk.wordpress.com/2012/05/18/exlusive-euro-banknotes-update-berlin-printing-new-euronotes-x-en-masse-ecb-withdrawing-greek-notes-y-20-2/

The Commission mole has ‘confirmed’ that the process is designed to ensure minimal numbers of ‘Y’ designated Greek notes are in circulation, in order to reduce refusal to accept them outside Greece to a bare minimum “as and when the Greeks exit the eurozone”.

I suggested that surely he meant “if and when”. After a brief silence, he added, “I doubt if the ECB and Berlin would’ve gone to these lengths if they didn’t feel that an exit is inevitable”.

June 20th, 2012 is my guess.

Submitted by Dr G on May 18, 2012 - 4:55pm.

June 20th, 2012 is my guess (FOMC meeting).

September 11th

Submitted by Tyler on May 18, 2012 - 4:57pm.

9-11-12

June 15, 2012

Submitted by Nuclear Rocketman on May 18, 2012 - 4:57pm.

June 15, 2012

FB/AG crossover date

Submitted by theskier on May 18, 2012 - 4:58pm.

I see a FB fade sooner than later. FB closes below AG on June 21, 2012.

tmosley's first thesis in

Submitted by tmosley on May 18, 2012 - 5:00pm.

tmosley's first thesis in full effect--increasing volatility as the paper price is torn between increasingly bullish fundamentals for physical silver, and ever less physical backing tearing it toward zero. The bias will be in the downward direction. Please note that I started calling for this last February.

This is super bullish for those holding physical silver. It just means you will have to wait for your payout until the price decouples from paper.

The new longs will either be bought out or MF'd. Guaranteed.

Also, FB will fall flat on its face in a week. I give it until next Friday, May 25th. To break any ties, I think it will happen 30 minutes after the opening bell.

FB vs Ag

Submitted by ReachWest on May 18, 2012 - 5:01pm.

FB and Ag prices cross on September 7, 2012.

Ag FB Crossover guess

Submitted by Chris P. Bacon on May 18, 2012 - 5:01pm.

Day before Flag Day 6/13/12.

[EDIT] And a nice charge into the close for the week! Can't wait for Sunday.....

You have no idea

Submitted by exiledbear on May 18, 2012 - 5:01pm.

Hold on, that's all I gotta say right now. Hold. On.

Hot Dang! A new hat contest

Submitted by waxybilldupp on May 18, 2012 - 5:02pm.

Just started catching up on the day and things are already coming up yellow roses.

I'm thinkin' FB will go down faster than a prom dress at midnight, soooo ... June 18th.

We should be due for a European SHTF event by then to justify an equity market enema. If I held FB, I'd be thru the exit long before then but most probably won't. Is this dot.com thud, the sequel?

Silver, OTOH, should continue to shine as the Old Country continues to rapidly run out of cans to kick.

AG over FB date....sold in May and going away.... June 1, 2012

Submitted by thesandbox on May 18, 2012 - 5:03pm.

June 1, 2012

FB vs. Ag

Submitted by Sandiaman on May 18, 2012 - 5:04pm.

6/6/2012

AG over FB...

Submitted by pourty on May 18, 2012 - 5:05pm.

August 30, 2012

Just mail me the Yellow Hat........

Submitted by kingboo on May 18, 2012 - 5:08pm.

and nobody gets hurt

Halloween '12

Submitted by esentrik on May 18, 2012 - 5:08pm.

Hmmmm...depends if on how much silver rallies vs. when the Facebubble inevitably pops. Who knows, maybe it won't? The sheeple love their ponzis.

Halloween '12

FB/Ag

Submitted by question on May 18, 2012 - 5:09pm.

5/21/12

Turning the Corner ~ Inflection Point

Submitted by OutLookingIn on May 18, 2012 - 5:10pm.

"I do not believe, any longer that the catastrophe can be avoided and I would begin to immediately plan for an event that will eclipse the American financial crisis of 2007-2008 because this one will be far worse."

-Mark Grant April 23, 2012

The diminishing marginal productivity of debt:

When interest rates fall, the liquidation value of debt, contracted at higher rates rises. The higher bond prices represents the higher liquidation value of the underlying debt, resulting in capital destruction. The stream of interest payments now has to be discounted at a lower rate, therefore at maturity at falls short of liquidating the debt. It now takes approximately $2.53 of new debt to achieve $1.00 of GDP.

"When it comes to the fiscal compact, the EU is pissing down our backs and telling us that it is raining. And the fact that the [Irish] government is also going with this line, implies that it is party to this falsehood.

-David Mcwilliams April 24, 2012

The dollar paradigm started out as a justified paper currency regime tethered to the productive an innovation capacity of the United States. But the regime wound up as a scheme to extract, not provide value - and the multi decade premium accorded to US purchasing power became the mechanism, in part, that hollowed out the US economy through financialization.

Greek bank runs continue and are now being reported in Spain. How much longer for this contagion to spread to Portugal and Ireland? Mean while the American people are being fed a constant diet of pablum from the POTUS and the MSM machine, concerning 'alternate life style' marriage.

"American's will remain willfully ignorant of the big red, white and blue dick thats being jammed up their assholes everyday. Because the owners of this country know the truth. It's called the American Dream, because you have to be asleep to believe it."

-George Carlin

The corner has been turned. The die has been cast. When an honest man discovers he is mistaken, he will either cease being mistaken, or cease being honest. To thine own self be true. Welcome to the new paradigm. Prepare.