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

Mudsharkbytes's picture

Where I was

Not that anybody will particularly care, but last year's beat-down was especially memorable to me  for several reasons.

The day before the massacre, I'd finally managed to convinced my eldest son to invest in silver after showing him how well it'd been performing so far that year.  What helped was me informing him how many people were predicting triple digit prices by years end.  As a result, he took a great deal of his savings, which he'd worked hard for in construction, down to the LCS and bought as much silver as he could.  As a result of that, my credibility with him is still in the pits to this very day.

The next day, the day of the massacre, I participated in a disasterous concert of original music where I performed several difficult pieces of original piano music to a largely empty room.  My friend who'd masterminded the whole fiasco was convinced all the publicity and promotion he'd done would result in a nearly sold out concert, but the reality was that by the time the 2nd half of the program started, the portion where I was performing my music, the scant few people who'd showed up for the first half had left and the only people I was performing for was the couple of musicians waiting to play the last piece on the program, and my family who'd already heard it all.  The reason most of the audience left was because my friends music, which filled the first half, was, no kind way to put it, excruciatingly boring.  So after packing up my equipment and going to my car with my ass chapped because I'd spent a couple of months practicing music that virtually nobody heard, and vowing I'd never get suckered into a jackpot like that again, I whipped out my iphone to see what kind of gains silver was making at the opening of the market, expecting to see some positive action that was bound to make my son happy, and instead watched the waterfall in jaw-dropping real time.  I hadn't found this place yet, but I was accessing SilverSeek on my iPhone and comments like "is anybody else seeing this???!!!" were rampant.

How convenient it was that Osama been forgotten was suddenly, conveniently, taken out with no photos (still to this day, for the sake of security) and thrown in the drink on the same day.  What a coincidence!  Except I don't believe in coincidences generally.

All in all, it was a really shitty weekend I want to forget but can't. 

ClinkinKY's picture

Morning Toons

ClinkinKY's picture

Smug

ClinkinKY's picture

Smug Squared

ClinkinKY's picture

And finally...

Airgead's picture

Ann Barnhardt & Bacon

Definite proof she is nuts!

Green Lantern's picture

Well to riff off of the post

Well to riff off of the post Katie Rose put out some months back, it seems like this is a very holy time.

April 30 - May 1 - Beltaine Festival, also called Walpurgis Night. This is the highest day on the Druidic Witch's Calendar. May 1 is the Illuminati's second most sacred holiday. Human sacrifice is required

Number 47's picture

Thanks for the reminder.

This time last year was a big earner for me. I was selling into what I can only call mania. I sold kilos of junk silver on the bay, listing 7 day auctions starting at 99c with zero insertion fees most weekends. I was listing the coins individually, lots of work but more bids from those with not much cash to buy larger lots. The Saturday before the smackdown was epic, I remember dancing a jig in my living room as me and the family watched the bidding wars in the auction close. I sold 4 Kennedy halves that night for 14.50 euros each. That was $20+ at the time. 

1oz bars and phillies were bringing 40-45 euros, after the Sunday massacre I listed 10 1oz bars on B.I.N for 380 euro, they sold in seconds so I listed 10 more at 420, they took half an hour.

I took a lot of profit over the few months I was selling, I turned it into Chinese coins with low mintages which have steadily risen in value since. (Check out the prices of older Pandas etc)

I'm back buying the last year, lots of scrap lots of British sterling coins, American halves, quarters etc. Any silver really. Will be repeating the same selling in the next mania phase. I do very well buying bulk lots and selling back individually although i have noticed much less silver selling on the bay, much, much less.

ClinkinKY's picture

Patience is a virtue...

...but ignorance is a disease, fed by the MSM.

Don't get me wrong, I'm in this for the "long haul" but the "flat lining" of metals abetted by the dis-information of the MSM (economy getting better, unemployment stated  about 7-8 points lower than actual, etc. etc) is enough to test the "patience of Job".

I'm willing to "wait them out" but damn it, I'm no "spring chicken" and I'd like to be around to hear my family say "Well, you weren't crazy after all":)

If B.O. is re-elected, then I'm sure I'll have to live at least another 4 years before the MSM even begins to "do their job" reporting on the sorry state of things.

Thanks for allowing me to vent.

Boswell's picture

James Rickards

Just caught him giving  a talk on his book "Currency Wars"  to the Carnegie Council "Global Ethics Program" on MHz Network on KCET-LA...

Can't find a link to the video, but here's a transcript...

http://www.carnegiecouncil.org/resources/multimedia/20120126/0468.html?withOthers=1

(A "condensed version" of his book?)

Update: Found their video podcast page, it's not there yet, but should show up on a day or two...  http://www.carnegiecouncil.org/resources/video/rss  might be a few others of interest.

Xty's picture

re Martenson thread

yes, I too tried and failed to wade through that.   Right away you get the breathless praise for Jeff Christian - such a busy man, no time for you wing-nuts, but maybe he will favour us with his wisdom - and the trashing of the other side's experts, usually over very trivial errors.

It is no longer a proper debate because one side does not seek to discover truth, but is intent on re-creating a top-down economic system controlled by central banks who hold the gold, issuing non-redeemable, un-backed pieces of paper and worthless trinkets as coins to the public.

Free people need money they can trust and that includes gold (the money of kings AND commoners) and silver (gold's change and the poor man's gold).  And I personally am a fan of the old copper penny, it too seemed to be a good idea for about 1500 years.

recaptureamerica's picture

Funds Cut Positions In Gold

Funds Cut Positions In Gold By 4% And Silver By 20% - Gold Positions At 3 Year Low
http://www.zerohedge.com/news/funds-cut-positions-gold-4-and-silver-20-gold-positions-3-year-low

recaptureamerica's picture

Should go up now that the

Should go up now that the funds are underinvested...lol

Xty's picture

A copper Roman dupondius of

copper Roman dupondius of Marcus Aurelus as Augustus 161 - 168 AD .

And now Canada is getting rid of the penny - and not because people don't want it for the reasons you will hear in the main stream - it is because our currency has been debased so badly without official recognition of this, that they have rendered it valueless - first they had to take out the valuable metal, and now they take away the useless trinket and we all say, Yeah, they were so useless, without noticing that all of our currency is following a similar path.  Baaa.  

indosil's picture

wtf

wtf..........silver just dropped to 30.70

indosil's picture

gold..1643

ok..it seems like the cartel dumped a lot of contracts.

Turd Ferguson's picture

Maybe there's just something

MODERATOR

Maybe there's just something about April 30th that drives them crazy.

Big Buffalo's picture

Fukushima

indosil's picture

STOP LOSS HIT

maybe...a lot of SL Hits i guess....courtesy Spanish Recession

Turdle GG's picture

wow

gold drops $15 in about 15 seconds...

indosil's picture

Halloween Turd

Turd maybe we should celebrate April 30th as Ag/Au Halloween Special,,,,,though not celebrated in India..i'll certainly give it a try......so now is the time to BTFD

Groaner's picture

does it ever go up like that?

I am still waiting.. Maund has a buy on gold now.. no wonder it dropped

Salisbury House's picture

Ouch

Looks it will be an annual massacre. 

Be Prepared's picture

The Barack Doll.... now you can have one of very Own....

Fulgurite's picture

Fasten seatbelts...

...here we go!

Let's see if $30-ish and $1620-ish hold!

StevenBHorse's picture

Another CYA moment

Looks like the dump and cover game that happened during the Fed announcement.  6600 contracts traded in a 1 min time frame.  Move along......nothing to see here, SSDD.

Groaner's picture

usd up 11 ticks and gold gets sacked..

what a joke.. buying op?

ClinkinKY's picture

April 30, 2012-PM prices

Not sure how true it is but I heard they're going to "fish" OBL out of the sea and shoot him again.  (Hey, when you can't run on your record, you have to "spike the football" as many times as you can)

Be Prepared's picture

OBummer laughing as He lets our Dollar burn...

Turdle GG's picture

something gold bullish to be announced any minute now?

feels just like the time pre the Swiss announcing the pegging of CHF to EUR

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