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

Groaner's picture

consumer spending up .03 %

whoopee.. the depression must be over.. 

And if you believe those stats, there are plenty more where they came from..

ink's picture

How can anyone in their right

How can anyone in their right mind claim these raids are not manipulated? surprise

There is not a single market movement, economic indicator, statement or anything to justify this 12 dollar drop in 20 seconds. If anything alike would happen in ANY other market, all hell would break loose.

RaRaRasputin's picture

A year ago ...

Good post Turd and I agree with the sentiment behind what is the point in rehashing what you cannot change?

What's the saying - 'change the things you can, accept the things you can't and have the wisdom to know the difference between the two'.

That night I changed the things I could by by stepping up a gear in my prepping & learned to accept that TPTB will go to extraordinary lengths to achieve their aims to maintain the 'perceived' status quo.  That said here in the UK I was surprised by the reactions of regular folk to the Osama death news, as far more were skeptical of the presentation of the facts surrounding it than I had expected.  I think we had all had our eyes opened before by the Govt's exposure of 'sexing up' the WMD dossier and the suspicious death of John Kelly.  A case of once bitten twice shy maybe?

Unfortunately it also left me with a Pavlovian fear reaction to success in the metals which still lingers .....

RaRa

Xty's picture

European Government Bonds

European Government Bonds Tread Water Ahead Of Supply, Elections

LONDON (Dow Jones)--Euro-zone government bond markets trod water Monday, as a lack of any policy speeches, supply or market-moving data kept trading volumes wafer-thin, with investors playing a waiting game ahead of Spanish bond auctions Thursday and the second round of the French presidential elections at the weekend. In the 10-year sector, benchmark government bonds from Spain, Italy, France and the Netherlands were all quoted within two basis points of Friday night's closing levels. The Spanish 10-year benchmark was quoted at 5.85%, Italy at 5.62%, while France and the Netherlands yielded 2.995% and 2.25% respectively. Data released Monday which showed Spain's gross domestic product contracting by 0.3% in the first quarter and pushing the country into technical recession, left the market unmoved as did news earlier that ratings agency Standard & Poor's had downgraded a raft of Spanish banks. S&P noted that the Spanish government would have to provide more aid for the ailing banking sector which is struggling under the weight of losses in the real-estate sector Trading volumes are also unlikely to pick up in the near future with a public holiday in continental Europe Tuesday, while financial markets in Japan and China are also affected by holiday-shortened weeks.

"There are no customer flows at all, no fast-money short-covering, nothing," noted one trader, adding "with European bank holidays Tuesday we do not expect anything to happen until Wednesday at the earliest....

http://online.wsj.com/article/BT-CO-20120430-705079.html

Be Prepared's picture

Resistance is Futile... that's what they want you to believe..

Xty's picture

Fulgerite

1620 seems to be holding!  You must have different charts than me - I am not seeing much massacre, just a typical morning melt-down - sets the negative tone for the day.  By days end the news may well be of silver's unprecedented rise.  

30.75 and 1650

Be Prepared's picture

When will they wake up?

Xty's picture

Sometimes I feel like Arthur Dent

"You can't throw us into space," yelled Ford, "we're trying to write a book."

...

"Resistance is useless!" bellowed the guard.

"Just don't say things like that," stammered Ford. "How can anyone maintain a positive mental attitude if you're saying things like that?"

"My God," complained Arthur, "you're talking about a positive mental attitude and you haven't even had your planet demolished today. I woke up this morning and thought I'd have a nice relaxed day, do a bit of reading, brush the dog ... It's now just after four in the afternoon and I'm already thrown out of an alien spaceship six light years from the smoking remains of the Earth!" He spluttered and gurgled as the Vogon tightened his grip. "Alright," said Ford, "just stop panicking."

"Who said anything about panicking?" snapped Arthur. "This is still just the culture shock. You wait till I've settled down into the situation and found my bearings. Then I'll start panicking."

 
recaptureamerica's picture

HSBC cuts its 2012 average

HSBC cuts its 2012 average gold price forecast by 5%, to USD 1,760/OZ

http://ransquawk.com/!#/headlines/219338

Maximillion's picture

Turds Lease rates dropping again?

Great post Mr T, don't know what the 1 month lease rate is today, however it seems to have been gradually dropping over the last couple of weeks ending at -.31% on Friday. 

For me personally, I watched last years smack down of both the price and my bank account live. Not nice but one helluva lesson in the need to paper play within my meager means. Still here, still stacking, still playing the mugs game in paper in the hope of getting a bit more fiat to transfer to real stuff.

And I've just sent you a small donation, so keep up the great work! 

Groaner's picture

The spending number was a bad one I guess

So to me this is more gold positive news that the Crooks will have to unleash more funny money..No?

Urban Roman's picture

Hello, what's this? ... part 2

Earlier this morning, we had:

, and now it's:

... so the colors have rotated, the previously red line is blue, the previously green line is red, and a new green line makes its way across.

Oh, and that spike up to 32.40 is missing now. Shouldn't it still be there on the red line?

Turd Ferguson's picture

Brutal

MODERATOR

Somebody just got their nuts ripped off. Andrew Maguire calls it "malware", the trolling HFT programs of The Cartel that sniff for stops and then gun them for profit.

Is that what happened here or did The Wicked Witch read this post and attempt to send a not-so-subtle message that she remains in control and will not be going quietly into the night?

large_4-30amgold1.jpg

RaRaRasputin's picture

Xty

When is 'The Hitchhiker's Guide to the Galaxy' ever not appropriate?

zilverreiger's picture

theres talk that  europe will

theres talk that  europe will be more lenient about their 3% norm

http://www.volkskrant.nl/vk/nl/10637/VK-Dossier-Verkiezingen-van-2012/article/detail/3248555/2012/04/30/Brussel-versoepelt-mogelijk-3-procentseis.dhtml

the spike up of last night US time doesnt show on netdania

Groaner's picture

They were trying to maximize a good profit by

dumping 6000 contracts at once, very obvious.

ink's picture

Some of that money going into

Some of that money going into the currently developing FUBM could (should) have gone into driving the price towards 1680 angry .

Groaner's picture

PMI at 29 month low!

so things are little slow, but what, me worry says,, Oliar.

Frankenstein Government's picture

Great Minds Think Alike

No sooner had I put the finishing touches on my 1 year anniversary silver manipulation piece than I wandered over here and saw this. http://thecivillibertarian.blogspot.com/#!/2012/04/one-year-anniversary-of-great-silver.html

Well done Turd. You are a daily read for me. Thanks for all you do.

Eric Original's picture

Keepin' It Simple, Stupid

The one big thing that will bail out the banks is to inflate nominal housing prices back to 2007 levels.  Are we there yet?  No?  Then QE is still on.

Latest S&P/Case-Shiller Home Price Indices news release

They'll have a helluva time trying to only inflate housing without also inflating everything else, including gold, silver, oil, steel, beef, grains, etc.

Take this perspective, add in a bit about the exponential character of the Debt vs GDP situation, and I've got all the fundamentals that I need.  No need to get bogged down in the minutia.

Turd Ferguson's picture

EXACTLY!

MODERATOR

Which is why it's done in the first place.

I just spoke to Andrew. He informed me that it was 7500 contracts, dumped all at once, by "our usual suspect". The goal, he thought, was to knock back price to keep it below 1670 today and away from turning the month of April green on the chart. The amazing thing is that there are substantial orders for physical to be filled/tripped if price reaches 1645. The low in the June12 was 1645.10. Pretty sweet, huh? Move along now. Nothing to see here.

At any rate, JPM is now trying to claim that it was a simple, "fat finger" error, which is complete BS. Let's get the PM fix behind us and then see if we can complete the FUBM.

Groaner's picture

I have seen many times when they hit gold like this

it marks a bottom!

ClinkinKY's picture

Wow, if you think You Tube isn't in the tank for B.O....

...check out the responses on this video. I tried to post a comment simply saying "Don't drink the purple Kool-Aid or take the brown acid" and it's being "moderated" by You Tube. We've gone "through the looking glass" folks.

indosil's picture

JOKE

Chicago PMI Plunges To Lowest Since November 2009, Biggest Miss To Expectations Since September 2009........still the precious metals get clobbered.....what a fuckin joke!!!!!!!!!

http://www.zerohedge.com/news/chicago-pmi-plunges-lowest-november-2009-biggest-miss-expectations-september-2009

¤'s picture

That was crazy

I just got back from somewhere early this a.m.  and I saw that plunge in the PM's at the open on my cell phone. Wow!

Just had to shake my head at it and realize that it's starting to get really nuts and we might be on the verge of something really brazen or desperate in the next 2-3 months. 

Groaner's picture

Since September of last year, according to R Andy

there is an all out war on gold and silver The Cartel Crooks are doing everything they can to limit the price moves up.. They are pulling out the all the stops and hitting the stops..

Sandiaman's picture

Another Anamoly

How could the Nikkei peak at 10638 last night when it was not open then settle at 9450 as I type this. That a move of 1200  points. Fat finger?

ink's picture

London PM fix is in. Will

London PM fix is in. Will gold be allowed to rise now?

Groaner's picture

It depends if the crooks who run the computers

are paying attention since they probably are watching a lot Porn

koan's picture

Will someone tell Ag to join in...

Currently distinctly bashful.

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