This Ain't Horseshoes

272
Thu, Aug 25, 2011 - 9:04am

They say close only counts in horseshoes and hand grenades. That certainly applies here. Monday evening, I projected that a margin hike was coming this week in gold. I thought (hoped?) that gold would be allowed to run a little bit farther before the smashdown began. I was looking for the margin hike to be tonight, not last night. If it had been, we'd have had Tuesday as a peak, not Monday, and many of us would have been able to lock in gains before the fireworks began. Alas, I was off by a day. Nuts. Close. But close doesn't count.

The pain for The Cartel had become too great by Monday evening. Their paper shorts were getting slaughtered and, with the technical picture so rosy in both metals, they were looking to really take it up the bahooty on Tuesday. When the Forces of Darkness saw the OI in gold rise by an incredible 10,000+ contracts on Monday, they knew it was time to strike. First, coincidence or no, the C/C/C sees their friends(?) in Shanghai raise their gold margins by 9%. This is enough to stop the runaway train at 1918 and bring it back below 1900. Then, before the Comex opens and momentum starts anew, the criminal C/C/C gets the ball rolling on their diabolical plan. They let word out to a few of their friends (traders, hedgies and algos) that "there might be some headlines that will interest you after the close on Wednesday". Down goes gold. Gold begins to recover mid-morning and it looks like there might be hope. At about noon, you drop the hammer by telling a few more "friends". Gold seriously drops and, when it's all said and done, it finishes the day down about 5% from the overnight highs of the previous day.

I wrote Tuesday afternoon that I would be "flabbergasted" if a margin hike wasn't announced that evening. I felt this way because the C/C/C had already created the necessary volatility to justify one. Ahh...but they weren't done. Why hike margins Tuesday when you can use the fear of the hike to scalp another $100 from gold on Wednesday? And that's exactly what they did.

So, where do we go from here? I may end up looking foolish but I think they're done. I don't expect 3 more hikes over the next 5 days like we saw in silver in May. Why, you ask? Purpose and mission.

In late April, speculators were the primary drivers of price and had squeezed The Evil Empire into a corner. The specs had to be driven out and taught a lesson. The EE also needed time to regroup. This led to the 5 hikes in 9 days and a 35% drop in silver from which it is still recovering. This last run in gold was entirely different. As pointed out here and by others much smarter than I, the OI and CoT numbers for gold over the past three weeks have shown that the primary driver of the last $250+ in gold has been short-covering by The Cartel, not specs. As stated last week, this is why all of the "bubble" talk in gold is nonsense and those spouting it should be permanently ignored. Bubbles form in excess speculation, not short covering, and the data clearly showed that this was a short-covering rally. Given that gold rallied $250+ on the backs of Cartel short-covering and given that The Cartel is a primary member of the C/C/C and given that this entire episode was designed and implemented to relieve the short-covering pressure on The Cartel, it is logical to assume that the target of this attack is to get gold back down to where all the pain began.

Where is that? Well, you can clearly see it on the charts. Three weeks ago tomorrow, S&P announced they were downgrading U.S. debt to AA+. Recall that this even caught The Turd by surprise. On Sunday night, the 7th, gold gapped open higher and never looked back. (Except for the period around the first, damage-control margin hike on the 11th.) The banks know the true significance of the ratings downgrade and they began to furiously cover their long-held short positions in gold. However, it got away from them and, by late last week, the technical picture in both gold and silver had begun to look so swell that hedgie and WOPR money was beginning to rapidly stream into the pits. It had all the markings of a serious short squeeze and the C/C/C was forced to act. Unfortunately, they acted one day too soon.

So, where do we go from here? After reaching down to 1705 a few hours ago, gold has since recovered to about 1730. That could be it. This could easily be a "sell the rumor, buy the news" type of event. Seriously, which fundamentals have changed? The debt? The deficit? Europe? The key number to watch looks to be 1750. A move above there would give me some measure of confidence that the storm has passed. Do not be surprised, however, if gold makes a run down to fill that gap on the chart from Sunday, the 7th.

In silver, I do think the worst is over. It reached down last night and touched the bottom end of the channel we drew for you yesterday. That overnight drop to 38.76 ought to do it. IF gold drops again and tries to fill that gap, I do not expect silver to make new lows. Again, I am very excited about silver here. The C/C/C have evened to great degree the "leverage balance" between silver and gold. This will serve to drive some interest back into silver in the coming days and weeks. I expect we'll see silver eclipse again sometime soon. Not ready to go into full prediction mode yet, though. Let's be 100% certain that this "event" is over before we go there.

That's all for now. More later this afternoon. TF

About the Author

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turd [at] tfmetalsreport [dot] com ()

  272 Comments

SilverSurfer21
Aug 25, 2011 - 9:06am

First

Keep it up turd, you had that margin hike called perfectly

Mudsharkbytes
Aug 25, 2011 - 9:08am

Second

I'd say 'second' if I had anything important to say.

Eric Original
Aug 25, 2011 - 9:09am

Wow, Turd's up early this

Wow, Turd's up early this morning!

I'll have to get another cuppa and settle in.

pbreed
Aug 25, 2011 - 9:11am

Differnt from may

In May they drove silver from 50 to under 36.

They have not achieved the same level of drop, add to that the fact that London is closed on Monday so the CRIMEX has the market to itself and I would be very cautious until Tuesday morning.

Watcher
Aug 25, 2011 - 9:16am

Will the Gap be filled

I'm wondering if the gap will be filled or not. That is the question of the day. Nervous shorts may decide to take the hit and not wait to see if the gap is filled. We will soon find out. Looks like 1700 held. Looks like a double bottom.

mrgneiss
Aug 25, 2011 - 9:18am

The seasonal charts have

The seasonal charts have worked fairly well for silver since the beginning of June, if people had been using them combined with the knowledge that the metals get hit going into options expiration - everyone could have made some money! Please look at the seasonal charts if you haven't yet! They call for a quick snap back from here - great entry point! But also hedge yourself and buy some cheap OTM SLV puts for Oct or Nov.

https://seasonalcharts.com/classics_silber.html

https://www.spectrumcommodities.com/education/commodity/charts/si.html

BlackHawk
Aug 25, 2011 - 9:20am

Buffet Pumping BAC

Injecting $5 billion in BAC - Thank the Oracle for maintaining our free markets!

Didn't he just meet with Obama a week ago? So special.

sevin
Aug 25, 2011 - 9:27am

The Oracle

The oracle just destroyed my FAZ. Oh well, I guess I will have to load up some more thanks to this drop!

margaritatime
Aug 25, 2011 - 9:27am

Bump and Run?

Is anyone else seeing a possible fall through line at $1700?

I can’t help but to point out an obvious Bump and Run [Reversal]. The lead-in occurring around the beginning of August. A bump around the 17th of August. A run to last Friday. Assuming that, the retracement looks to go to $1650.. Looking at the lead-in of $1625ish, that is typically where a BARR would return to.

However, in a typical BARR pattern you do not have margin hikes to contend with. Any of you chart peeps want to take a stab at that? Or am I completely off-base here?

edit: morning Turd! Ya know what, sometimes you throw a ringer, sometimes you don't. Who cares, your calls are well informed and concise. I don't think any of us could ask for more. You don't have to explain anything to anyone. Thanks for all you do. Now grab your horseshoe and don't worry about it.

Cleburne61
Aug 25, 2011 - 9:29am

Ben Davies

In the last two weeks, Ben Davies called for a correction to $1675 in gold, followed by a blast to $2,100 by Christmas. So, we're within 1.5% of that low thus far. We could hit it, but the two previous days were so fast and complete, that another 1.5% may not benefit them enough to consider taking that chance. If the commercials have covered and gone long...it could be snatching defeat from victory's jaws to do this...

But as TF and Margarita have said....it's possible. Stay on your toes, but this is definitely nibble-worthy territory. Good luck friends!

Key Economic Events Week of 11/11

11/12 Three Fed Goon speeches
11/13 8:30 ET CPI
11/13 11:00 ET CGP on Capitol Hill
11/14 8:30 ET PPI
11/14 Four Fed Goon speeches
11/14 10:00 ET CGP on Capitol Hill
11/15 8:30 ET Retail Sales
11/15 8:30 ET Empire State Manu Index
11/15 9:15 ET Cap Ute and Ind Prod
11/15 10:00 ET Business Inventories

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Key Economic Events Week of 11/11

11/12 Three Fed Goon speeches
11/13 8:30 ET CPI
11/13 11:00 ET CGP on Capitol Hill
11/14 8:30 ET PPI
11/14 Four Fed Goon speeches
11/14 10:00 ET CGP on Capitol Hill
11/15 8:30 ET Retail Sales
11/15 8:30 ET Empire State Manu Index
11/15 9:15 ET Cap Ute and Ind Prod
11/15 10:00 ET Business Inventories

Key Economic Events Week of 11/4

11/4 10:00 ET Factory Orders
11/5 9:45 ET Markit Services PMI
11/5 10:00 ET ISM Services PMI
11/6 8:30 ET Productivity & Labor Costs
11/6 Speeches by Goons Williams, Harker and Evans
11/8 10:00 ET Consumer Sentiment
11/8 10:00 ET Wholesale Inventories

Key Economic Events Week of 10/28

10/30 8:30 ET Q3 GDP first guess
10/30 2:00 ET FOMC fedlines
10/30 2:30 ET CGP presser
10/31 8:30 ET Personal Income & Spending
10/31 8:30 ET Core Inflation
10/31 9:45 ET Chicago PMI
11/1 8:30 ET BLSBS
11/1 9:45 ET Markit Manu PMI
1/1 10:00 ET ISM Manu PMI

Key Economic Events Week of 10/21

10/22 10:00 ET Existing home sales
10/24 8:30 ET Durable Goods
10/24 9:45 ET Markit flash PMIs
10/24 10:00 ET New home sales
10/25 10:00 ET Consumer Sentiment

Key Economic Events Week of 10/14

10/15 8:30 ET Empire State Fed MI
10/16 8:30 ET Retail Sales
10/16 10:00 ET Business Inventories
10/17 8:30 ET Housing Starts and Bldg Perms
10/17 8:30 ET Philly Fed MI
10/17 9:15 ET Cap Ute and Ind Prod
10/18 10:00 ET LEIII
10/18 Speeches from Goons Kaplan, George and Chlamydia

Key Economic Events Week of 10/7

10/8 8:30 ET Producer Price Index
10/9 10:00 ET Job Openings
10/9 10:00 ET Wholesale Inventories
10/9 2:00 ET September FOMC minutes
10/10 8:30 ET Consumer Price Index
10/11 10:00 ET Consumer Sentiment

Key Economic Events Week of 9/30

9/30 9:45 ET Chicago PMI
10/1 9:45 ET Markit Manu PMI
10/1 10:00 ET ISM Manu PMI
10/1 10:00 ET Construction Spending
10/2 China Golden Week Begins
10/2 8:15 ET ADP jobs report
10/3 9:45 ET Markit Service PMI
10/3 10:00 ET ISM Service PMI
10/3 10:00 ET Factory Orders
10/4 8:30 ET BLSBS
10/4 8:30 ET US Trade Deficit

Key Economic Events Week of 9/23

9/23 9:45 ET Markit flash PMIs
9/24 10:00 ET Consumer Confidence
9/26 8:30 ET Q2 GDP third guess
9/27 8:30 ET Durable Goods
9/27 8:30 ET Pers Inc and Cons Spend
9/27 8:30 ET Core Inflation

Key Economic Events Week of 9/16

9/17 9:15 ET Cap Ute & Ind Prod
9/18 8:30 ET Housing Starts & Bldg Perm.
9/18 2:00 ET Fedlines
9/18 2:30 ET CGP presser
9/19 8:30 ET Philly Fed
9/19 10:00 ET Existing Home Sales

Key Economic Events Week of 9/9

9/10 10:00 ET Job openings
9/11 8:30 ET PPI
9/11 10:00 ET Wholesale Inv.
9/12 8:30 ET CPI
9/13 8:30 ET Retail Sales
9/13 10:00 ET Consumer Sentiment
9/13 10:00 ET Business Inv.

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