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

watcher01
Aug 25, 2011 - 9:30am

Options Expiry tommorrow

With Options Expiry tomorrow, there is a good chance to slide down a bit further. Should be perfect timing to buy phyz.

New Highs >> Margin Hike >> Options Expiry >> Buy Phyz >> Ride >> Rinse, Repeat, and accumalate.

50Jim
Aug 25, 2011 - 9:31am

I sleep well

I sleep well

Submitted by 50Jim on August 25, 2011 - 9:28am. Hat Tip! 0

I saw your point on walking away some days. It is exactly what I have had to do.

It seems like on days that it is going up, you get excited beyond compare. But, on

days like we just saw, I find myself working in the yard, or on some project and

only on occasion peak at what is happening. I usually will throw out a guess that is

lower than I would like (say $37 for silver) and then when it is $39.50 I can be happy.

I stopped swearing at the computor years ago. Just remember at the end of the year

month it has been going up, the day to day crap just gets in the way.

Keep stacking.

tpbeta
Aug 25, 2011 - 9:31am

I don't agree you got it

I don't agree you got it wrong. You said to sell immediately IIRC

Tesla
Aug 25, 2011 - 9:31am

Thanks Turd

B Kickin' Some Bahooty Back Very Soon!

ndmaster
Aug 25, 2011 - 9:32am

I'm not a large trader, but I saw what was coming

So I shorted via ZSL and GLL. Am I part of the cartel now? Give me a break. Incessant bullishness, even in a long term bull market can hurt, sometimes badly.

¤
Aug 25, 2011 - 9:35am

Housing and property will never be more affordable

https://www.tfmetalsreport.com/comment/19976#comment-19976

Dragged this forward from end of last post.

A incredible opportunity will happen in housing and land , (albeit born of economic desperation) so get ready for when they do implement the above article in the post.

This plan is a drastic (albeit necessary) change in the nations housing direction and who controls it. Going forward it will be drastically different with a blend of quasi-private entities and the Fed. Govt. back stopping "everything" for "everyone".

Going forward after this is implemented, it will be the easiest time ever to buy a house or property. And I'm unashamedly going to let them give me as much cheap credit (or property) as I can honestly pay back. This will be a historic time to buy a property and if a person doesn't seize the opportunity they will have missed one of the biggest housing discount sales in history.

Just consider the possibilities of land/property ownership due to the still increasing amount of foreclosures and delinquencies and the Govt. backstopping the whole thing at super low rates and the properties are at a discount just to clear the shelves.

Land/housing for gold or silver to be discussed at some point as the banks want as much as possible from any source and trading it for a piece of paper (deed) would be a bargain for them as most of their real; estate loan portfolios have already been made whole by the Fed. or just written off in their creative accounting methods.

Get ready for the opportunity of a lifetime.

silvergoldsilver
Aug 25, 2011 - 9:35am

Banks

are.....running....away....what ...the....fuck

AMERIKA IS SAVED!

DefiniteMaybe
Aug 25, 2011 - 9:38am

@Margarita: Support Levels

Hey Margarita,

Overnight the gold market tested $1700 and had a little bounce up. I think it's going through $1700 and will eventually go to $1650 if not further down to $1625 and then some where there is support around the 50DMA. There is congestion at the $1625 level that goes back to ALL the way to late July (LOL). I would be hard pressed this (healthy and needed) correction go below $1550.

Now I am wishing I stayed in my Sep GLD Puts... would've made a NICE 500% profit on them from Monday. But I remember remain humble and be glad I made >200% on them. I don't need to get slaughtered in this market.

Just my thoughts, FWIW

DM

PS Nice to see an early morning report from Turd.

Tesla
Aug 25, 2011 - 9:38am

@ndmaster

Wow a member for 4 whole minutes - welcome to the board - try not to disrespect the Turd, thanks man!

Dr G
Aug 25, 2011 - 9:40am

Before we get all excited

Before we get all excited about silver, don't forget The Bernank tomorrow. That could send silver down in the short term. And, sometimes such a reaction is very short-term (lasting only until Asian trading begins for example).

This, in addition to London being closed on Monday, tells me that there may be more pain coming. Let things settle a bit before jumping in the shark waters.

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