Wrapping An Extraordinary Week

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.

TF

374 Comments

Groaner's picture

FB slipping under offer price.. Oh no!

You mean FB at 107 times earnings is no deal??? oh no...

Harald's picture

I hear you regarding Merit Financial

They were offering a deal on silver Maples, $1500.00 minimum order, free shipping to first time customers.  When it came time to finalize the sale, he was trying to get me to buy Morgans and Peace Dollars for $33.00 instead?  Anyway, ended up with sixty Maples for two bucks over spot so it turned out to be a good deal.  Course, the Maples haven't been delivered yet.cool  

Dr Jerome's picture

Is this the pullback we have expected?

Ag at 25.50 at 7:40 this AM and then pushed down .30 before the comex open. It sure seems that the algos don't want AG to challenge 29 again. Is this a preemptive strike to scare away some longs? Could turn into a down day.

Groaner's picture

I am so sick of deception.

This entire system is rampant with it.

proton777's picture

DrJ

Everything effecting metals turned around quickly. Stock futures are barely positive now, the USD had been flat but is now on a rocket ship at 81.51.  Gold, however, is down but just a holding on.

Groaner's picture

There seems to be no consistent explanation to

figure out how the metals trade.. Its always changing against other market forces..

That's why I believe the Cartel is insidiously every minute of the day manipulation the price.. 

Its like when the Swiss announced they were gong to devalue their Frank with  the Eruo,, that was wildly bullish for gold,, gold got killed that day... pisses me off that so many say there is no interventions!

Vermilion's picture

Tabberto

I don't think those who believe PMs are manipulated are paranoid or delusional - quite the opposite. They may well be correct, but I have seen no concrete evidence to prove manipulation. Any evidence you would like to present that would hold up in court?

However, when proponents of 'no manipulation' voice their opinion here, often their treatment is quite rough. It is never easy proving a negative, so the ball really is in your court to come up with conclusive evidence to prove your theory.

Of course, if you could, then the whole conspiracy would collapse!

Can you really suppress the silver market for 10+ years without creating a disconnect between paper and physical silver prices? The 'investment' demand for silver represents only about 15% of total demand for silver. The vast majority of silver 'bought' every month is for industrial/jewelry/mint use. Have you got any proof that a demand for physical silver from Comex or LBMA has ever not been met?

It may well be that JPM traders phaff around with paper contracts in a small way, but don't you think that it is a huge coincidence that the price of paper silver EVERY month is identical to the much larger physical market price?

The price of silver fell recently because supply increased or demand decreased - simples.

If you have any proof to the contrary I for one would be fascinated to see it, and would consider it with courtesy and an open mind. And if it was conclusive proof I would not hesitate to admit my mistake and applaud your better judgment. I repeat I certainly do not disrespect anyone here who believes there is manipulation going on - I just think you have got to do more to substantiate your claim.

Dr Jerome's picture

600 contracts in one minute

That is 3 million ounces of AG traded in one minute!

When I see this kind of volume, it screams "manipulation!" ...even if it is only a few cents on the price. but as one of our colleagues showed in a previous post, all these small manipulative events add up.

Edit:

Hold up in court? Not in today's courts. A good lawyer would rip up the manipulators arguments and create enough doubt to persuade a jury that the markets are fair.

Ah! but the scientist could find a strong correlation, provide a solid rationale, and show enough evidence to get a theory published in an academic journal. Of that I have no doubt. We have many so-called scientific theories that are taught to our children as fact that stand on flimsier evidence. so much depends on the credibility of the persuader--in fact, Aristotle, my beloved avatar, called credibility the "controlling factor" in persuasion. 

Urban Roman's picture

Intervention, no. Manipulation, maybe.

I'm convinced there are interventions, but not every little jiggle in the price is manipulation.

Obvious examples are early last May and late September. Today's movements (to me) seem to be synchronous with little jiggles going the opposite way in POSX. Intervention? I don't think this is intervention on a large scale. Of course, the silver market is small enough that a smallish hedge fund can probably push it around a few percent.

Groaner's picture

MANIPULATION. just read a couple of these articles.

By Andy Hoffman..

http://blog.milesfranklin.com/category/market-manipulation-2

Any reasonable person will see it.

Groaner's picture

FB down over 7%.. haha..

Saving Face.. Oh my.. 

pforth's picture

Not liking the action today...

One long solid downdraft since midnight without a hint of strength or support.  It feels like a continuation of the pre-Thursday slide.  Hope I'm wrong.

Vermilion's picture

Groaner

Sorry - I don't want to wade through someone else's reasoning on this - I was hoping to hear yours. However, I did glance at Andy Hoffman's 'Supply Shortages Looming' piece, and I note he too differentiates between PHYSICAL and PAPER prices (his capitals!) when they are identical. It matters not if you invest by buying an ETF or a Silver Maple - your profit over the last 2/5/10 years would be the same!

He talks a lot about the 'Cartel' 'attacks', 'naked shorting', 'suppression' etc. etc., but provides not one scrap of evidence (although, as I said, I flicked though it v. quickly).

Groaner - do YOU think there is manipulation, and why?

ClinkinKY's picture

Why More And More People Home School

N.C. Teacher Tells Student He Could Be Arrested for Talking Badly About Obama

SCROLL DOWN FOR VIDEO

Last Monday, a high school student in North Carolina engaged his social studies teacher in a heated debate about politics and the two leading presidential candidates. During the exchange, the teacher (an obvious Obama supporter) got very angry with the student and accused him of disrespecting the president. She even went so far as to tell the boy that he could be jailed for speaking ill of Obama.

Sarah Campbell of the Salisbury Post first reported on the story. She claims that the school district is not releasing the name of the teacher and that she is not responding to requests for public comment (although the two students identified her to the newspaper). According to Campbell’s story, the teacher will not be suspended or even face disciplinary action for what was heard on the recording. A statement from the school was released at the end of the week:

Read more:http://www.theblaze.com/stories/n-c-teacher-tells-student-he-could-be-arrested-for-talking-badly-about-obama/

Zoltan's picture

Facebook Fail

And I thought I was being a pessimist by giving them a week.  This could set a record for Turd's shortest contest ever.  I wonder who took today in the pool?  Could be sporting a lovely yellow hat by the end of the day.

Z

pforth's picture

What I am liking is...

Although silver itself is weak, the miners are strong so far today.  If that keeps up it is a really good sign.

Groaner's picture

Are you related to the Bernank?

I will not waste anymore of the Turd's bandwith with you on this..

Groaner's picture

FB down 11% now..

All the hype and pump and dump. dont you love these honest injuns on wall street?? 

You can bet the insiders are selling all they can!

Tube's picture

FB

Down 12.2% now, 13%...and going

Vermilion's picture

Groaner

Just looking for a reasoned debate - although your attitude is illuminating - I'm sorry my stance leaves you floundering.

humbleprofits's picture

Global coordinated easing near? Let's ask China.

FT article.

China Buyers Defer Raw Material Cargos

"Chinese consumers of thermal coal and iron ore are asking traders to defer cargos and — in some cases — defaulting on their contracts, in the clearest sign yet of the impact of the country’s economic slowdown on the global raw materials markets."

http://www.cnbc.com/id/47498211

AP: 

China's premier calls for efforts to spur growth

China's premier calls for higher priority on economic growth amid slowdown

"We should continue to implement a proactive fiscal policy and a prudent monetary policy, while giving more priority to maintaining growth," Wen said, according to Xinhua.

http://finance.yahoo.com/news/chinas-premier-calls-efforts-spur-104923771.html;_ylt=AgyMepmwGYtzJkFV.BZf5D32uYdG;_ylu=X3oDMTNqbG9uYWkzBG1pdAMEcGtnAzhjZmU0OTRmLTAzNzktM2MwOS1iNjQ0LWU2YWY0NDE3YmViZgRwb3MDODEEc2VjA01lZGlhVG9wU3RvcnlUZW1wBHZlcgM1NGNjNWRjMC1hMjZkLTExZTEtYmVjYi1lNTc3MDA1ZGFiYjI-;_ylv=3

aurum argentum's picture

Off topic

Hello.

Does a 2007 U.S. 1 oz. gold eagle have any more intrinsic value than a 2012 U.S. gold eagle?

Thank you....

Groaner's picture

Lets see J PIG M and FB below Silver very soon.

What a jump in bullion all of a sudden.. i guess someone is doing a reboot on the HFT computers algos for a couple of minutes.

Groaner's picture

does the 2007 weigh more than the 2012?

unless you can convince someone there is a difference.

Big Buffalo's picture

FB

watching the action. . .at $33.00, it looked very much like $38.00 on Friday. Seems the underwriters are still at play and will not let it drop below $33.oo today. Tomorrow's a different story. I'm a buyer at $17.00 hahahaha

IMHO: underwriters let FB get down to $33.00, defended...then as a bounce above $34.00 they are defending here so "investor's" can think $33.00 was the bottom and there's a great risk/reward....

Bottom $33.00 today, then another 15% tomorrow.

Bongo Jim's picture

They will cross

Facebook & Silver will cross on friday May 25.

I have spoken.

Tabberto's picture

Vermilion - re JPM manipulation

I did refer to this in some detail earlier but you evidently need it delivered with a ribbon on. Quite funny that what you ask for is absolutely available to you!!

http://silverdoctors.blogspot.co.uk/2011/09/new-lawsuit-filed-against-jp-morgan-for.html

The scribd document is in there, weirldy I cant open it myself.  Enjoy and come back to us explaining that you still feel the same way or have had a eureka moment pls......

aurum argentum's picture

2007 gold eagle

no. it's the standard government issue. so, the year is irrelevant if the weight is the same?

achmachat's picture

2007 gold eagle

at coin dealers, an older year of a specific coin is usually more expensive than the current year.

That is not because it's worth more per se, but a lot of buyers are collectors and are specifically looking for a year that they don't already own, etc.

If you're not a coin collector, stick to the current year, or the one you can get for the best price.

Groaner's picture

Vermilion.. True identity is???

You are either Bob Moriarty, Nadler, or Gartman.. or B Masters., which is it?

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