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

Dr G's picture

Will gold be allowed to rise

Will gold be allowed to rise now?

Absolutely not. But despite that, it will probably do so anyway.

Silver on the other hand just can't get any momentum.

Driven81's picture

Not to change the subject, but

Do you all think gold and silver are money? Lmao just kidding...great article and great comments section today. I do appreciate rollin with a crowd who can actually see through the madness. Everybody else thinks I'm either looney or running for office. If there's any difference. 

Xty's picture

Gold's floor - lack of trust in dollar and Euro:

Takes a while for the article to get going, but worth the read I think:

Gold crash on Fed tightening and euro salvation looks premature

...

Until the rising reserve powers of Asia, Russia and the Gulf regain trust in the shattered credibility of the world’s two great fiat currencies – if they ever do – gold is unlikely to crash far or remain in the doldrums for long. 'Peak gold’ cements the price floor in any case.

Whether or not the global economy has really put the nightmare or 2008-2009 behind it and embarked on a durable cycle of growth is of course the elemental question. The answer depends on what you think caused the crisis in the first place. If you think, as I do, that the root cause was the deformed structure of globalisation over the last twenty years – a $10 trillion reserve accumulation by China and the emerging powers, with an investment bubble in manufacturing to flood saturated markets in the West, disguised for a while by debt bubbles in the Anglo-sphere and Club Med – then little has changed.

>In some respects it is now worse. China’s personal consumption has fallen to 37pc of GDP from 48pc a decade ago. The mercantilist powers (chiefly China and Germany) are still holding on to their trade surpluses through rigged currencies, the dirty dollar-peg and the dirty D-mark peg (euro), exerting a contractionary bias on output in the deficit states – though China at least recognises that this must change.

">There is still too much world supply, and too little demand, the curse of the inter-War years. That at least is the Weltanschauung of the pessimists. If correct, we face a globalised “Lost Decade”, a string of false dawns as each recovery runs into the headwinds of scarce demand, and debt leveraging grinds on.

>There are two implications to this: central banks will have to keep printing money for a long time, and the Asian surplus powers – as well as Russia and the Gulf states – will have to find somewhere to park their growing foreign reserves.

These countries don’t want other peoples’ paper promises any longer,” said Peter Hambro, chair of the Anglo-Russian miner Petrovalovsk. “There is no sign yet that we are returning to a well-balanced and normal financial system. The ECB is accepting bus tickets as collateral and the only way out of this debt and banking crisis will be inflation in the end.”

....

http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/9193361/Gold-crash-on-Fed-tightening-and-euro-salvation-looks-premature.html

Groaner's picture

Oh man!

just bring it in to be detailed, no problem.

Groaner's picture

Gold is fighting back.. ever so slow and steady

this very well could have been the bottom..

realitybiter's picture

BM

I saw that steaming, filthy BM on Frontline.  (Blythe, for clarification)

1)  Why is she on this media tour?

2)  I can't believe the similarity of her logic and John Law's

3)  I am so happy that she is so vain, filled with hubris, assuming the media tour will absolve her.....no....BM, the media tour is only making your mug well known.  This is awesome.  I tell people about the stinky BM and they say, "who?"  Not now.  Now, even folks out in the sticks will know your face.  And like John Law, when the gig is up, the financial architects will be known for their destructive acts, and you will have to flee London or NY, or where ever your stinky BM butt resides, and you will have to escape disguised.  John Law did it as a woman.  I guess that's good news for you....

Turd Ferguson's picture

Gold FUBM nearly complete

MODERATOR

Very nice action. May see a pop if/when it turns green. Stay tuned.

Rico's picture

Picking bottoms is a sucker's

@Groaner,

Picking bottoms is a sucker's game

Vypuero's picture

it was good for me

One of my buy orders got triggered at $1643 - never would have happened otherwise.  That is also why I stopped using stops and hedge with options instead.

ReachWest's picture

Ag

Come on Silver .. you can do it too!!

paulindoon's picture

Re: Gold FUBM nearly complete

TF: Seems true for Au BUT Ag is having a real struggle to FUBM.

Of course, as things go, I have to have chosen to focus on Ag!!!!!!

Ferd Torgerson's picture

@ Driven 81

Showed your picture regarding Angry Birds to Ms. Torgerson and asked if it reminded her of anything.

She recalled with me the day in 1996 we were in the Rio Grande Valley with some visiting friends and decided to go to Progresso, Texas to walk across the border into Nuevo Progresso on the Mexican side.  There was a parking lot on the US side where tourists could park and walk across.  It was a very hot July day and I thought I was lucky to find a parking place under the ONLY TREE IN THE PARKING  LOT.  As we left the car and walked toward the bridge, we noticed we were getting a lot of bemused looks from locals who were also there.

Later, once we returned to the car, I found out the reason for the looks.  Our new Hunter Green Ford Taurus looked much like the car in your picture.  It became obvious why we had gotten the parking place and why none of the locals wanted it.  Had to put the Taurus thru the car wash twice and then pay two guys extra to go over it again with rags and towels.

Sadly, there is no insurance for dumb tourists.no  There wasn't a bird in sight when I parked the car.  I suppose Pining and some of his friends came along afterwards.  smiley

Dr G's picture

Silver really struggling to

Silver really struggling to move off those lows.  % wise it is really lagging gold. Gold down .16% and silver down 1.34%. Miserable.

Xty's picture

Dr G and Groaner

Are you two related?

Xty's picture

Rico

That was a horrible metaphor - suckers picking bottoms - I didn't even dare look for a funny picture.

Turds are for picking bottoms.

¤'s picture

Mozart - Piano Concerto No. 21 - Andante

¤'s picture

Four Seasons ~ Vivaldi

Mistakenly posted some news here...sorry.
Vivaldi works in it's place maybe.
 
Punk-Assets's picture

Interesting article on

Groaner's picture

No.. not that I know of.

However as far as the stocks go, it very well could be a sell in May and walk away type market.. 

I cant see how much will change unless the Crooks buy some more Milton Bradly games and use that monopoly money..

Mickey's picture

Business in general

while I hear much about recovery (and its hard to see without employment  getting much better) it seems to be many small businesses are really suffering.

Anybody hearing the same?

s1lverbullet's picture

As usual...

And as usual silver gets the special treatment...

Xty's picture

S & P in gold

From 2010, but still relevant.  We need to keep our eyes on the ball, and not get  too fixated on minute by minute  movements, unless you are actively trading.

I found this interesting:

The Invisible Stock Market Crash Only Gold Hoarders Can See

Dollars, euros, and yen are all just currencies you can price any asset in. Everything is cheap or expensive relative to the currency you hold.

Thus if gold is truly a world currency, then the S&P 500 index of U.S. stocks is dirt cheap when priced in it. For every ounce of gold, you can now buy more than five times the amount of stocks you could have ten years ago, as shown below.

The tricky question is where this stocks-to-gold ratio will go over the next ten years:...




Read more: http://articles.businessinsider.com/2010-09-29/wall_street/30089843_1_hoarders-currency-dirt#ixzz1tXUJbYXZ

cpnscarlet's picture

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Same Poop Different Day

Irksome's picture

Amusing how right after the

Amusing how right after the attack on gold, this came out:

http://www.marketwatch.com/story/gold-steady-in-asia-on-track-for-monthly-loss-2012-04-30

And if the current trend holds, they will have failed anyway.  We're $3 away from green for the month.  I wonder when that story was written?  I'm guessing Friday, with advance knowledge of the upcoming pre-market pounding.  

Too bad there are so many people that BTFD!  ;)

Maximillion's picture

Re; Business as usual

No recovery here in UK with small businesses as far as I can see. Just done my year end accounts, result equals small profit but overheads up 10% plus in last year. No chance of increasing my prices as the customers can't afford/go elsewhere to busy fools. 

Broken window fallacy explains all;

http://www.youtube.com/watch?feature=player_detailpage&v=gG3AKoL0vEs

¤'s picture

cpn

Lol!

Geez, for a minute there I thought you were face down in your keyboard. laugh  You sure you don't have an S or D imprinted into your forehead right now?

SE's picture

"What we you doing one year

"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:"

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

What the hell you mean you didn't know it was coming?  I KNEW it was coming.  "As fast as you go up must you come down."  I had ADVANCE warning from my contacts that it was going to happen eventually in mid-April.  I really had to bite my tongue not to sell just 10 ounces to make a bit of money and then buy it back in case they were wrong and it kept going up instead.  It took about two or three weekends before it happened.  But I KNEW it was coming.  People, compile the silver data from the last 12 years, and you'll see that we go from peak to peak about every 2-3 years.

I can't believe that you didn't know this...  When did you really get into Ted Butler's, GATA's, et al's world?  I got in nearly 8 years ago.

Anyway, I was at home, reading online when I went over to Kitco's web site an reloaded the silver page, and down it went.  Immediately, my mind went into buy mode.  How long do I wait to buy again?  How much can I afford to buy?  How low will it go?  I waited...  I waited...  I got back home from a tripa few months later, and I waited.  Finally it went near $30 and I went to buy more.

How come I knew this, and you didn't?  I'm not bragging.  I'd wish the whole damn world would know so we can stop these people.  Just watch...  I believe that James Turk is wrong about silver clearing $50-60 by June, and I believe that we won't clear $50-60 until about May ***2013*** at the earliest, unless James knows something that I don't.  Turd, print this out and hold my feet to the fire if I'm wrong.

SE

Monedas's picture

How To Succeed In Blogging Without Really Trying !

Get discovered by me !  Clinky and TexasStalker soaring to new highs in the Bloggosphere !  Monedas still stuck in the Mail Room !  I feel like Bernanke's Jewish mother....wiping my tears of pride and joy off stage, behind the curtains !    Monedas  1929   Comedy Jihad Talent Scout   devil

Turd Ferguson's picture

currently watching this

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