ChartDaddy

75
186
Wed, Jun 29, 2011 - 4:46pm

A lot of green on our screens this afternoon. Be careful, however. Just as soon as you get greedy, you'll get crushed by fear. Such are the dreaded doldrums. Now, onto the charts...

First of all, if you're trying to trade, you must be a masochist. If you are a trading masochist, you should watch the POSX first and foremost. Until and unless the September POSX breaks down through 74.86, you're susceptible to a very quick, snapback rally toward 76.40. You've been warned.

On a lighter note, I'm very encouraged by the action in crude today as it is trading exactly as forecast here last week. It may simply charge on through 96 tomorrow, we'll see. I'd prefer, however, to see my reverse H&S develop over the next week or so. A July move through 96 off of a reverse H&S base would be one we could all get excited about and the enthusiasm would definitely spill over into the PM pits.

Here are your PM charts. Yes, we had a nice day, particularly in silver. Yes, it's tempting to get greedy and jump back on the bus. No, please don't do it, at least not yet. The summer doldrums (frankly, any commodity in a consolidation phase) will crush and bankrupt you in less time than it takes Bart Chilton to fix his hair. As soon as you get excited and greedy, they'll reverse and kill you time and again until the phase is over. Trust me, you won't miss out on much and you'll save yourself a lot of money if you patiently wait and avoid the temptation brought upon by greed.

Finally, here is the most interesting item of the day ---copper. Notice that I wrote the approximate change in price since 5/1 on both of the PM charts. Now, take a look at an 8-hour copper:

Well now that's interesting, isn't it? Ole DrC is supposed to be a bellwether. The price of copper is purported to be an indicator of global economic activity. Yet, since 5/1, the price of copper is basically unchanged. Gold, silver, crude, the grains? All down. Copper? Flat yet trending higher. Why?? Maybe the answer is in this daily chart?

Perhaps copper is not an indicator, it is instead a predictor. While the PMs were declining/consolidating in December and January, copper was soaring. While the PMs were flying in the spring, copper was swooning. I would suggest to you that the current stability and rise of price in copper is just another indicator of the coming continuance of QE and subsequent resumption of the Great PM Bull Market by late summer. Something to think about, at least.

That's all for now. Thank you for being a part of the site and thank you for spreading the word! TF

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Kumanari
Jun 30, 2011 - 6:56am

LINKS not just 4 golf or terrorism

Can spell you COPYRIGHT INFRINGEMENT ?

JoeKa
Jun 30, 2011 - 2:54am

Goldman Sucks (sic)

By Adam Brochert, Gold versus Paper

The "risk on" trade seems to have returned. It may last 2 weeks or it may last 8, potentially even a few more. It may even be good for a new high in "advanced" Western markets like the United States. Everyone knows Greece is going to blow up, along with lots of other countries. That doesn't mean the market is going to crash tomorrow, since this information is already well known and was likely partly behind the massive spike in the equity put-to-call ratios seen a few weeks back (chart below shows only the exponential 10 day moving average in this ratio over the past 4 years to get rid of the "noisiness" of the daily data):




Now, having shown this chart for the second time and having previously warned against being bearish based on this data, I understand people who are feeling bearish. The whole global economy is being held together only by unprecedented government guarantees/interference and massive currency debasement. It is sad, really. And it isn't right when viewed from the perspective of conservative savers and the future generations that will have to deal with the chaos that is sure to result from the ridiculous decisions being made on "our" behalf by those who clearly either don't have a clue and/or are selling out their countries for their own personal interest.

Speaking of such biased parties, Goldman Sucks (i.e. Goldman Sachs) has certainly become a magnet for the current populist rage, particularly in the United States. I can't say I have any sympathy for this firm. The fact of the matter is that this corporation has been pulling the same scams for decades, but few notice or care when times are good. As the social mood continues to deteriorate with the economy, let's just say the partners at Goldman Sucks would be wise to keep a much lower profile.

But the chart of this firm, which of course only exists due to the generosity of the government, doesn't look healthy. The "smartest guys in the room" apparently didn't see the Great Fall Panic coming at all, since they were thoroughly bankrupted and needed a helping of government teat milk to stay solvent. Those of us out here trading in the real world that made a fortune shorting firms like Goldman Sucks and JP Whore-gan in the teeth of the late 2008 storm despite government bans on shorting these "important" corporations know that the piper still hasn't been paid.

Financials remains the weak link and they have been lagging for a while. The current chart of the poster child of government largesse (i.e. Goldman, ticker: GS) makes me think they are going to need another bailout sooner or later. Apparently, they haven't had enough time to detoxify their balance sheet despite all the money they were given and the time they have had to sell their toxic crap to Uncle Sam and the so-called federal reserve (not federal and they have no reserves, so Orwell would be proud, much like with the so called patriot act - but I digress).

Here's a chart of Goldman Sucks over the past 27 months to show you what I mean:



Living proof that fascism (i.e. corporatism for those that don't like harsh terms to describe our "modern" world) doesn't work. But all needling of Goldman aside, it is not a good sign for common stocks in the U.S. when Goldman can't do well. Our so-called "FIRE" (i.e. finance, insurance, real estate) economy needs the financial sector to do well until we figure out a way to re-tool our economy. And trust me, though the situation may get darkest before the dawn, the U.S. could potentially have a massive economic renaissance after all the bad debt gets liquidated, but only if we can figure out a way to massively slash the size and scope of our government and their corporate parasites/ticks.

In any case, such weakness in the financials is why I am currently bullish on the short to intermediate term in risk assets but am still bearish on the longer term. I think Gold and silver bottomed yesterday for this shorter-term time frame but I don't see a massive rally taking place right now. I still like the idea of a triangle correction in Gold over the summer before a fall rally once governments realize it's fraudulent money printing or Armageddon part 2 in the financial markets. Austerity in Greece will work as well as fur coats in the desert during a heat wave.

Please keep in mind that Goldman is due for a bounce higher from current levels, so I wouldn't be shorting them right now. The character of the bounce in GS may or may not suggest a good opportunity in the future, but I would be careful shorting "important" (i.e. those with lots of government bribe money) financial firms in the U.S. given the previous bans on shorting connected financial corporations in 2008. I think there will be better and safer opportunities out there.

Watch the apparatchiks cave later this summer and watch the currency of kings respond when this happens the way you would expect - with a massive rally in the Gold price in all major currencies despite any and all attempts to stop it. In truth, things are someday soon going to get desperate enough that central bankstaz are going to start praying for and encouraging a higher Gold price. Hold your Gold outside the banking system until the Dow to Gold ratio hits 2 (and we may get below 1 this cycle) and if you're crazy enough to attempt trading in this environment,consider subscribing to my low-cost trading service.

JoeKa
Jun 30, 2011 - 2:50am

Silver Producers Enter Profitable Phase, Reaping the Dividends

By Sean Rakhimov, www.silverstrategies.com

Over the past nine months or so silver has finally garnered the attention it deserves in the financial headlines after virtually tripling in price in that period and challenging its all-time high of US$50/ounce as was called here and again here , well in time for it to be helpful to those paying attention. No sooner it did that as commentators of all walks called it another "bubble" as they never fail to do in things they don't like to see going up. We're yet to see those same talking heads call a bubble in paper money, bonds or their own bloated salaries, but don't hold your breath for that.

As is often the case, the most significant aspect was again left out of the conversation, namely, what are the investment implications and how can one take advantage of them. We're here to correct that by adding some substance to the discussion. It's all great of course, that silver has finally broken out of the decades long resistance level in the $22-25 area and the race is on towards bigger and better numbers. As of this writing silver is still trading around $36/oz, which is about $20 over the price it was at when we penned the prequel to this piece. That's a lot of dough that should be landing on the bottom line of silver producers' balance sheets. So we thought an update was in order to provide a context to all the moaning out there that silver has "crashed" from $50 to mid $30ies presently.

Company

2010 EPS Projection USD

Actual 2010 EPS****

2010 Silver Produced Moz

Q1, 2011 Silver Produced Moz

Q1, 2011 EPS

2011 EPS Projection USD

Alexco Resource*****

-

-

-

0.45

0.06

$0.30

Coeur d'Alene Mines

-

$0.39

16.76

4.20

0.42

$1.60

Endeavour Silver

$0.05

$0.11

3.30

0.91

0.18 (Non-IFRS)*

$0.80

First Majestic

$0.30

$0.39

6.53

1.77

$0.24

$1.20

Fortuna Silver

$0.25

$0.12

1.90

0.44

$0.04

$0.25

Great Panther

$0.05

$0.04

1.54

0.41

$0.06

$0.25

Hecla Mining

$0.25

$0.14

10.60

2.50

$0.16

$0.70

IMPACT Silver

-

$0.07

0.75

0.26

$0.04

$0.20

Pan American Silver

$0.80

$1.05

24.30

5.30

0.86(Non-IFRS)*

$3.00

Silvercorp**

$0.32

0.41**

5.3**

1.05

$0.07

$0.60

Silver Standard

-

-

6.30

1.70

$0.12

$1.00

Silver Wheaton

$0.60

$0.84

22.10

6.10

$0.35

$1.50


* Under IFRS rules outstanding warrants have to expensed

** Silvercorp's Financial Year End for the period in question is March 31, 2011

*** Silvercorp's latest quarter of record ended March 31, 2011 which is part of the annual results which is not the case for the rest of the companies

**** Alexco, Hecla, Coeur, PanAm, Silver Standard report net income per share rather than earnings

***** Alexco has only reported results for the quarter ended March 31, 2011 , which is Q3, of FY 2011

The projections are ours, while the rest of the numbers have been obtained from corresponding press releases by the companies announcing results for the full year 2010 and Q1, 2011. Again, to make the most the table summarizing 2010 EPS(earnings per share) as well as EPS for Q1, 2011, and finally an EPS projection for the full year 2011 we advise reviewing the earlier article on the subject. The numbers are for silver production only and do not take into account production of other metals, irrespective of the fact that some companies offset such by-product production towards the cost of silver production, while others do not. So don't take it as a gospel as it's a very tedious and time-consuming exercise to bring numbers to apples-to-apples basis, rather this is a rough and incomplete, yet representative guide to what you have to choose from and expect from in the silver producers sector.

We can't get past the fact that with few exceptions no discussion has been put forth or consideration given as to what will the recent run-up in silver price will mean to earnings of these companies. The conversation doesn't seem to get past the run-up (where present) in the share price of the companies themselves. Just think for a moment what it would take to double the price of Coke and if it were possible, how it would reflect in the share price of Coca Cola? Do you think the share price would double? Triple? The answer is – we won't know till we crunch the numbers, but one thing is clear: the bulk of that increase would end up on the bottom line. That is exactly the situation at hand with silver (and gold) producers and, the 'old' share price, perhaps, only retains meaning in terms of a technical chart pattern, but beyond that we'll have to construct a 'new normal' price for shares based on the new price of silver.

Of course, skeptics will be quick to point out that silver price can as easily go down as it went up and will be correct... in theory. Sure, anything is possible, but the reasons WHY silver went up in the first place are still intact and have been thoroughly examined by this and other writers over the years. Instead, let us just note that we expect a new high in silver some time in 2011. Aside from a bullish market sentiment that may or may not accompany a new high in silver, in the context of earnings it should mean that current silver price is sustainable and can serve as a basis for projections which would help us arrive at "new normal" prices for stocks. That is a long winded way of saying that based on the above table and the assumption that the average silver price will stay above $30/oz level this year, producers as a group look cheap, the recent rally notwithstanding .

When was the last time you saw a silver stock post a dollar/share in earnings? Brace yourself, it's about to hit you. And if you're not watching, Wall Street is . Not yet, but they will be when these earnings hit the tape. We know, we met many of them personally.

Another novel concepts we'd like to throw at you is dividends. Yes, silver companies paying dividends. Already three of them pay dividends (annual numbers): Silvercorp Metals (8c/share), Pan American Silver (10c/share), Silver Wheaton (12c/share) with SLW being the last one to join the list. This development is also taking place in the gold sector, but we'll stick to our knitting. We're here to tell you that: a) in many of the boardrooms of silver producers this has been a topic of discussion as they rack up the cash in the bank, and b) it will take most investors by surprise.

As the street becomes more attuned to the realities of mining companies, it will favor dividend payers for obvious reasons which in turn will increase the pressure on the companies that can afford to but have not yet made the leap to paying dividends. So the dividends are here to stay. Moreover, as the price of silver rises and corporate bank accounts swell, there will be a sort of a race among companies to post the greater annual rate of growth in dividends paid. This may not happen as soon as next year, but it is coming.

In conclusion we'd like to remind you of the old notion of a "gold mine". Their product is ubiquitous, universally desired and is better than cash. Unlike their central banker counterparts that are printing money, these companies - let's call them "peripheral bankers" - are minting money.

Commodity producers are about the only ones in the marketplace that can sit and watch the price of their end product go up in price through no doing of their own. For most other sectors it works the opposite way, they usually have to lower the price over time or improve the product to maintain margins. Of course, over time commodity producers will try to produce as much as possible and thus bring the price down (supply & demand) and that's how the cycles come about, but for the time being we're long ways away from over-supply and we'll share our ideas on why this time it could be different at least for gold and silver in the future.

Lastly in the next few years we won't be surprised with the return of physical metal positions. Longer time precious metal bugs will remember that several years ago when the champions among gold (Goldcorp) and silver (Silver Standard) companies held back a portion of their production or held bullion instead of cash. As inflation accelerates, which it undoubtedly will in the coming years, we may see it happen again.

JoeKa
Jun 30, 2011 - 2:48am

Could silver drop to $25 an ounce and then rebound to $60?

By Peter Cooper, ArabianMoney

The problem with trying to make market calls about a highly volatile commodity like silver is that you get it right about as many times as you get it wrong.

ArabianMoney can happily point to our prediction back in December that silver might spike to $50 early in the New Year (click here). Brilliant, we got that absolutely right. But what about our warnings last summer that silver prices might fall? Ah, well they did not and if you sold then you missed the best silver rally in 30 years.

Buy and hold

Buy and hold your poor man’s gold! That is our best advice for investment in a highly volatile commodity. Leave the trading to George Soros who also makes big mistakes from time to time. Trying to time an entry point for new silver investments is another matter.

The ArabianMoney newsletter this month (subscribe here) points to the end of July as looking like a low-point for silver, and has some interesting ideas for subscribers on how to best profit from the price hike to come. That low may be close to the current price of $34 an ounce or the $25 cited by some keen chartists and followers of the fibonacci series.

At a more fundamental level the silver price probably comes down to what happens in Greece and the eurozone over the debt crisis like everything else. If financial markets rally on another temporary solution then silver will stay up. If financial markets turn down sharply silver will probably fall harder than most, unless we have a crisis of confidence in money and that is why you should still hold silver.

$60 target

However, we still think the shiniest of metals has the brightest outlook for 2011 as we did in January (click here) and will finish the year back above the $50 spike of April and most likely north of $60 an ounce.

This confidence comes from an observation that the world’s central banks are flooding the financial markets with cash while at the same time more and more investors are noting that they cannot print silver and deciding to buy it as a hedge against monetary inflation.

At some point the purchasing of physical silver is going to overpower the obvious and blatant price fixing in the pits of the Comex in Chicago, and silver prices will soar to unimaginable heights.

Then we will be writing articles about the silver bubble and how long will it last and how high will it go. It could be that this summer is the type of 50 per cent correction sometimes seen in precious metals – gold prices halved in 1976 before going up eight-fold by 1980. But if so that really will be the buying opportunity of the decade.

SilverWealth
Jun 30, 2011 - 2:25am

pessimism

I am hearing a whole lot of pessimism in the Gold community and everyone is absolutely convinced that the 'doledrums' are set in stone for the next month. This might just be bullish. Commericals are wildly bullish in Silver COT report all of a sudden. They haven't been this bullish since the bottom in 08' when Silver was trading at 10. When you combine that with this level of retail pessimism I think a surprise may be right around the corner. Either way, buying in increments on weakness and then selling on strength into bounces is not a bad way to go if one believes that they are in a bull market, if one believes that come August big strength and QE will return, if one is cautious to never buy too much in any one increment but spread it out.

But I do have a question. Since everyone is absolutely convinced that come sometime in August there will be a big rally in metals, how is it then possible that this big rally will unfold? It doesn't work that way on Wall Street. Nothing is ever that easy or sure. Either one of two things I think will happen instead. 1. The rally begins a month early leaving many watching as the train pulls out around the bend or 2. Sometime in August there will be a sincere questioning by all in the Gold community of the entire integrity of the bull market itself and retail will begin to panic and sell their bullion and their long held gold stocks. An important trend or support line could be violated or a typically deceptive and violent propaganda campaign against gold and silver by the media this time adding wrinkle upon wrinkle of why people should get out while they are ahead. One thing is for sure. There is no starter pistol that fires off telling all those at some pt. that the Fall rally has begun. There will need to be high levels of anxiety,uncertainty,fear or greed and it will not be a comfortable decision for anyone on the outside to make one way or another. Why? Because it simply never is.

silver_hunter
Jun 30, 2011 - 2:18am

silver MA200,

don't forget, POS may consolidate in the narrow range and wait for MA200 to catch up, it is not necessary for POS to fall below MA200.,

Bears only talk one possibility, breakdown. Gold and silver bugs have the Beijing Put nowadays. Beijing don't wait at POG 1400, which every one is waiting for. Some idiots call for a drop to 1320 or 800 by simply drawing a line on the charts, yes, it is possible only if Ben Bernanke wants to crash the S&P as well.

Throw away the chart when investing in Gold.

agNau
Jun 30, 2011 - 1:45am

Great catch Turd!

Noticing that difference in movement where they should have moved in tandem was par excellence, and mighty interesting to boot! No way they could forget the copper market. ( No margin hikes I am aware of.) Interesting.

Strongsidejedi
Jun 30, 2011 - 12:39am

End of the FY... what lurks for FY 11-12?

Anyone want to venture a guess on price movement in the next 12 months?

To TF - I'm not convinced this summer will be one of doldrums.

I have the distinct impression that the cantilevered balance of the PM markets is tilting back towards a new norm.

AU - 1500+

AG - 35+

Turdle GG
Jun 30, 2011 - 12:24am

Of course EUR silver is not rallying

EUR/USD is rising, so EUR silver cannot be rising.

EUR silver = USD silver divided by EUR/USD

BillAuAg
Jun 30, 2011 - 12:11am

Ag in USD is rising because

Ag in USD is rising because USD if falling relative to USD/Euro

Silver goes up as the dollar goes down in value

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