Getting It Wrong

Wow, there's certainly a lot of bad metals analysis out there this weekend. I might as well throw my big ol' hat in the ring, too.

Before we get started, a disclaimer for me and everyone else who thinks they can accurately predict the future: It's not possible. What am I, a weatherman? You're asking me to tell you, days in advance, how the precious metals are going to respond to completely unpredictable variables like geopolitics, currency wars and monkey sell programs. That said, I still believe that I have a far better handle on this than most and I'll be happy to point out to you some of the errors that others are making as well as put my neck on the line going forward.

Here are just a few of the things that are bothering me:

  • Lots of folks are worked up because Soros has allegedly sold almost half of his holdings in the GLD, nearly 18 mts. However, year-to-date the GLD has seen a net withdrawal of 27 mts. Any chance old George simply redeemed took delivery? That guy didn't get where he is by being stupid and you can bet your batooty that, if there is an unallocated/rehypothecated/leveraged gold scandal brewing, he'd be first in line to get his hands on his metal.
  • The $100/month subscription guys are telling their suckers clients to dump everything and move into...what, exactly, I have no idea. But apparently a couple of downticks is enough to push these guys over the edge, regardless of the underlying fundos.
  • And I don't understand much of the silver CoT analysis that I've read. Everyone is running off in all sorts of different directions but seeming to miss what is directly in front of their faces.

In gold, the CoT is easy to interpret. All the way down from $1800, the specs have been liquidating and The Gold Cartel has bought into this selling and covered shorts. This is how it has always worked and, not surprisingly, it has worked again. The gold CoT is now, at worst, neutral with several internal components back to the bullish category.

Again, though, it's the silver CoT that is so interesting. If you haven't yet, please read through these posts. Read them very carefully, taking the time to compare the CoT structures from various points in the past two years.

http://www.tfmetalsreport.com/blog/4492/strange-days-indeed

http://www.tfmetalsreport.com/blog/4505/still-struggling-silver-open-interest

Everything I've read focuses on the spec long position, as if it's still somehow out of whack. Look at the number yourself, though. As a percentage of open interest and as a ratio of net longedness, there's nothing to strongly suggest that a major spec washout is coming or required. On 9/11/12, with price near $34 the Large Specs were long 41,371 of a total OI of 121,050 (34.18%). As of last Tuesday with price near $31, they are long 40,205 of 152,817 (26.31%).

The only thing that stands out and the one thing that nobody is discussing is the Commercial Long position. It is extraordinarily high. Easily 60-70% higher than you would expect it to be, based upon history. And because it is so high, the Two Big Bad Guys have been unable to cover shorts in silver as they have in gold. I cannot stress enough how odd this is but don't take my word for it, go back and look for yourself. By this time in the price cycle, the Comm Long position would/should have "normally" contracted to 30,000-35,000. Instead, it's 52,182, UP nearly 6,000 contracts just last week! All of this commercial buying prohibited JPM from covering and, instead of a gross short position in the 70,000 range, The Silver Cartel is buried under 98,979 shorts, also UP last week.

On the surface this is extremely bullish and is most likely indicative of a "civil war" in the silver pit. One thing we must be wary of, though...What if JPM is clandestinely building a massive spread position, like they often do in gold and, just as they manipulate gold, they plan to begin creating air pockets in silver by legging out? Since we have no way of knowing, we must be aware of this possibility. Again, though, much more likely is the idea of "civil war", where JPM is trapped as the only remaining firm providing naked paper. The other commercials are buying it all up and forcing the noose ever tighter. This is akin to what happened to Bruno Iksil, their "London Whale". Once word got out that he had built an untenable position, the smaller "sharks" circled in for the kill. We'll see where we go from here but it certainly looks like this coming Friday's CoT will show a continuation or even exacerbation of this trend. Strange days. indeed....

So here are your charts as we enter a new week. I have done my level best to show you exactly where I think we are and where I think we're going. In gold, note first that the daily RSI has now fallen all of the way to 30. Though some spillover selling is possible early week, far more likely is a snapback rally to alleviate this highly oversold position. I'm still looking/hoping for one quick spike to $1580 or so but, regardless, I think we are just about done with the carnage.

And here is the key chart formation that we are going to be watching going forward, again something that I haven't seen anyone else mention. I've drawn the bottom of the pennant from the 7/1/11 price levels that preceded the huge rally in gold that followed and I've drawn the top of the pennant off of those early September 2011 highs. These are very important charts so print them off and keep them closeby in the days ahead.

In silver, the daily RSI is still above 30 but an early week drop toward major support near $29.20 would certainly take care of that. Not that a drop to $29.20 will happen, but it might. Soon, though, I expect a very sharp, short-covering rebound, UP toward $31 and change. The key pennant here suggests some further consolidation but not much longer. As an aside, it seems that many folks (Your Turd included) are expecting big things from both metals, and particularly silver, in March. These charts certainly seem to confirm that timing. By my count, the week that concludes on Friday, March 22 looks to close the pennant. Maybe you should mark that date on your calendar. (Ides+7)

Lastly, in case you didn't know it, tomorrow is a U.S. holiday so all U.S. markets will be closed. The metals will trade on the Globex, though, so you'll still see prices changing during the day. The real action won't begin again until Monday at 6:00 pm EST, though. Additionally, I'm not going to be around much the next few days so look for some guest posts and open threads. If things get really crazy, I will, of course chime in but, for the most part, I'm going to be out of action. Hang in there, keep the faith and expect more volatility. Savor the discount and btfd. You won't be sorry that you did.

TF

336 Comments

The Green Manalishi's picture

Ok, they say Hollywood movies have a hidden meaning...

What do you make of this...

Lots of Gold titles and bits and we know what the original story was about - just for fun!

Jan Roos's picture

First!

Yes

Edit: I'll settle for silver

Nana's picture

Seems We Live In A World Where Wrong Is Right and Right Is Wrong

What else is new at this point...TPTB have control...

------

3rd Amendment: No Soldier shall, in time of peace be quartered in any house, without the consent of the Owner, nor in time of war, but in a manner to be prescribed by law.

¤'s picture

Trez hombre'

Dang...Nana beat me to it yes

ferretflat's picture

Holiday

Day off hell, hell I'm doing the coin shops tomorrow!

criscrossing's picture

Top 10

Ha!

That_1_Guy's picture

top 10?

Howd it happen?

foggyroad's picture

Excellent Dot connecting TF.

Two points, the spreading aspect requires a good long look.

Second is a personal opinion, but what if the Big Bad ole Fed has lost some of its clout over these primary dealers.

I know they do what their told by the fed, but what would happed if the Fed needed them more than they needed the Fed.

Would they then be able to position their trading desks more in their own favor, demurring at the feds bidding.

Hmm, Greed abounds, sharks the lot of them.

Edit I am assuming the' commercial category' contains some Primary dealer Banks. 

'The most recent report was for bank positioning as of August 3.  We at Got Gold Report are focused on the positioning in gold and silver futures by the largest U.S. banks – some of the same bullion banks that make up the lion’s share of the COMEX commercial traders in the regular commitments of traders reports (COT) – which are reported weekly on Fridays. "

credit to gotgoldreort
Bollocks's picture

Santa agrees - gold not in backwardation

Trader Dan On Backwardation

Dear CIGAs,

Many people writing in the gold sector now are drawn into articles written for the effect of sensationalism without the background knowledge or experience in the field to know the subject of their discussion. They usually deliver their writings as fact or from a perfect source.

Backwardation in the gold market and its supposed implications is one such situation.

In the flowing Trader Dan makes this point clear.

Respectfully,
Jim

------------

Dear CIGAs,

The futures market is not in backwardation. The structure for gold futures contract is normal.

Plus – when calculating the basis, one has to take a “freeze frame” shot in time because as the front month goes into delivery and open interest falls off, so too does liquidity. This means that oftentimes very few trades are occurring at the Comex. One can see the bids and offers but no trades are occurring.

So when guys talk about the price that the February gold contract is trading, they are taking a price that is already dated because so few trades are actually occurring in that delivery month as the contract winds down.

What you can sometimes try to do, is to take the difference between the bid and the ask and average it and then get an instant quote on the spot price to gold and compare the two.

Most of these guys pushing the gold backwardation story fail to take into account the actual structure of the futures market contracts. Gold is not in backwardation.

Trader Dan

--------------

http://www.jsmineset.com/2013/02/17/trader-dan-on-backwardation/

http://traderdannorcini.blogspot.co.uk/

ag1969's picture

10th Ammendment

The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.

Turd Ferguson's picture

You know I love Trader Dan

MODERATOR

You know I love Trader Dan but Sandeep Jaitly would vehemently disagree and he is the expert.

For the record, Sandeep measures spot vs front month, not front month versus next month. By doing so, there is significant backwardation. Consult his Gold Basis Service for more details.

Groaner's picture

Good post Turd.

No more doom and gloom.. WE are close, very close..

foggyroad's picture

OZ movie trailer

@The Green Manalishi;

"I don't want to be a good man, I want to be a great one."  hmm.

"Aren't you the man we have been waiting for"? hmm.

Well I guess I will have to watch the movie to find out what color hat this guy rides under.

JazzTalker's picture

RT still down

Things are speeding up. More hacking going on. Remember folks-go to facebook pages or twitter if TURD or anyof your other sites go down.   YOUTUBE too. just in case.  Now that there is a currency war going on, a cyber war going on, and pretty soon......

Contingency plans everyone. Be prepared

ag1969's picture

As great as it is.......

....to imagine you are correct, and the sharks smell blood in the water, if you are right, there is probably going to be a war by the end of March.  I mean a real war.  And I should have said "another war by the end of March." 

Living history ladies and gentlemen.  The next 6 weeks won't be uneventful.

Here is to hoping your time away is for fun.  If not, good luck!

Bollocks's picture

Righto Turd re: gold backwardation

I'm not the expert, for sure. No doubt we'll see how this pans out over the coming days / weeks.

Whatever is the truth here, things certainly do seem to be hotting up wink.

Bollocks's picture

Mike Maloney

Relentlessly educating the masses. And he's doing a great job yes.

Northern Border's picture

BTFD on everything thats not nailed down

Buy the dip on the metals of course but with what is going on right now, don't forget to buy anything that is not nailed down that you can still exchange your FRN's for.  Tangible assets is the name of the game. 

Very historical times we live in. 

Thanks to sites like this is, more and more people are waking up everyday. 

NB

Ilya Repin's picture

Gold on wave 5 of 5 wave

Gold on wave 5 of 5 wave correction. Completion is now this week

If we get new lows, 1589 looks solid

If not, then not yes

USD is also on final move though it could extend as high as 81/82

The GBP looks dead across the board (monthly chart) and where the pound goes the dollar will follow

NZDGBP NZDUSD too watch for future direction of USD
 

SteveB's picture

Soros

Oh how this makes me reflect back to 2005-2006 when Buffet and Gates sold their silver. Let me think....Oh ya they sold around $7.00....LOL

Kcap's picture

I just have to chime in here...

SORRY TRADER DAN, but for criminy craps sake, you are WRONG on Gold not being in backwardation.

Good Lord.  People who are on the same side better get on the same page.  Backwardation as we all measure it for the purposes of Gold being scarce at the moment (at these prices) is Spot vs. Front Month.....but even when you look at front month vs. future month (April) it is also barely backwardation as well.

C'mon bigtime TD, get with the program!!

Kcap

thesandbox's picture

more fear, panic, and wrong....

http://www.foxnews.com/politics/2013/02/17/obama-pre-k-plan-draw-support-for-poor-children-but-questions-on-cost/

better get those kids away from their parents even sooner so we can train them up in the way they should go....wow...slowly ever so slowly

"The president announced the plan during his State of the Union address last week, arguing that America must begin preparing its citizens for the new, high-tech economy at the “earliest possible age.”....uh huh...

“Study after study shows that the sooner a child begins learning, the better he or she does down the road.” However, less than 30 percent of 4-year-olds are enrolled in a “high-quality” preschool program, he said. ...yeah right..

Obama argued most middle-class parents cannot afford a few hundred dollars a week for private preschool and that poor children, who need help the most, could be at a disadvantage “for the rest of their lives” as a result of not having access to such education. ...wonder why that is...

¤'s picture

Makers Mark Stays On The Mark

Maker’s Mark Reverses Decision to Water Down Whiskey

A bottle of Maker's Mark whiskey is pictured in New York

Reuters / Keith Bedford

No need to rush out and stock up on your favorite trademark red-wax sealed bourbon.

One week after announcing plans to dilute its whiskey, Maker’s Mark has changed course. The Kentucky bourbon company released a statement Sunday reversing its decision and apologizing for disappointing its loyal fans with the decision to reduce alcohol content to keep up with rising global demands.

“We’re humbled by your overwhelming response and passion for Maker’s Mark. While we thought we’re doing what’s right, this is your brand you told us in large numbers to change our decision,” the statement from president Bill Samuels Jr. and his son and chief operating officer, Rob Samuels, said.

(MORE: Maker’s Mark Waters Down Its Whiskey, and Anger Rises)

“You spoke. We listened. And we’re sincerely sorry we let you down.”

Last week’s announcement sparked public backlash over the decision to reduce the alcohol content of the 90-proof whiskey to 84 proof. As TIME’s Michael Lindenberger reports, taste-maker bartenders, who had been essential to the brand’s word of mouth marketing efforts in the 1980s, were questioning whether to abandon the trademark, red-wax sealed bottle in crafting cocktails.

Cocktail bar general manager Alba Huerta tells TIME, “When you are building a cocktail, you really reach for a higher element of proof as a backbone to stand up against the dilution and other ingredients in the cocktail. A lower proof makes a significant difference.”

The company’s decision left many wondering why simple economics couldn’t lead the brand to merely raise the price rather than committing, what Forbes referred to as, brand suicide.

Read more: http://newsfeed.time.com/2013/02/17/makers-mark-reverses-decision-to-water-down-whiskey/#ixzz2LCmC4fxk

grinners's picture

Gold Backwardation

I believe backwardation to be the normal and natural position of the gold market.

I, for one, would pay more for gold in my hand than a future contract of gold (irrespective of the storage fees I'd have to pay out).

And I believe many others would, and do, too, hence the 'backwardation'. Not due to shortage, but due to the fact that gold is a 'safe' buy, and you don't buy a contract of safety...

Bollocks's picture

Awwwwww

Yes, what a lovely photo.

The only thing the little lady doesn't realise is that mister pres is desperately hoping some sunlight will come in pretty-damn-soon from the window behind him so he can focus the light on little lady's eyes and blind her before she susses out who he really is and calls the cops.

Ok, maybe not the cops then (silly me).

Well, someone then. Anyone.

Obama Bin Lyin's picture

Coin Show Update - no palladium

I just got back from a local coin show.  I was amazed that 99% of the people there had no interest in bullion, they were more interested in rare pennies and nickels and other worthless crap.

There was very little low premium bullion there for sale, only a couple ounces of platinum and zero palladium.  The lowest premiums on Silver was $1.5 over spot.  I did not buy any.

Cheers,

OBL

Boswell's picture

RT - Try "https:"

This is working:

https://rt.com/on-air/

This doesn't

rt.com/on-air/

¤'s picture

Encouraging...

...so far.

Live 24 hours silver chart [ Kitco Inc. ]

Live 24 hours gold chart [Kitco Inc.]

J.P. Cubish's picture

The long view

I was at a wedding yesterday.  An acquaintance remarked that gold was down.  I told him to buy some.  He did not want it when it was down .  Next week it will be up though.  Then down, then up, then down, then up.

An ounce still weighs one ounce.

Gold is a special commodity because it is not consumable like sugar or hashish.  Once we get it, we hold it for years, even generations.  We can hand it to our children without government oversight (taxes).  Gold is monetary freedom.

If you are buying gold,  trying to get rich quick, best of luck.  If you are buying gold because it is a valuable commodity in short supply, and has been through recorded history, then you are with me.

Turdès chart are nice and everything, but I buy when I have the paper.  I am not looking to sell.  Fifty dollars is just dinner and a movie.    I am not going without. Just saving.

Cant save at the bank...cause they straight steal..just get some gold..buck em.

Buck em, Yee Haw

Mad5Hatter's picture

Major 3 of 5

now lets see  O.O 

Fundamentals in place?   Check

Apparent washout .... Check

Been Accumulating in the low 30s? ..... Check

Raging PM Bears galore?   .... Check

Star Aligning again .... Check

Long Consolidation Pattern? .... Check

Been nearly 2 years for silver in the making, with many many typical bull-chit head fakes, buckin many a young and old off the hunt, but we Terds kept stacking, RIGHT?

you bet you did, as we all have. sitting tight, accumulating in the low 30s,  

The really-big-shoe Starts Wednesday,

a run for over year, taking silver over 100$ and gold over 2500$,

buy some silver, buy some gold, they are the ONLY TICKETS IN TOWN.

just saying ....

As Silver launches toward 100$, finally, it will ONLY THEN confirm Gold's break out above the 1980 highs, and gold will move as well,  450$/oz 4500$/oz on wave 3 .....

I suspect Silver will be a huge, mega-huge out performer .....

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