Read This Now

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184
Tue, Aug 30, 2011 - 4:21pm

No catchy title to this update. I just want you to read and ponder this post. Then, plan your trades accordingly.

Let's start with silver where the technical picture is more clear, at least in the traditional sense. Take a look at the chart below:

I've shown this chart several times in the past week so it should look familiar. Something new caught my eye today. Have you seen the new OI numbers? Our friend, "Tesla" has taken it upon himself to update the comments section with the latest numbers each afternoon. (Thanks, Tesla!) Keep in mind that the OI numbers are always basis the close yesterday. So, today's numbers show us the OI from Monday. That said, the number is once again amazingly low at 112,795 contracts. Again, as a reference, the OI in late April was approaching 150,000. Fully 20-25% more! Now stick with me on this. Maybe I should lay this out chronologically to make it easy to follow? OK, here goes:

1) Since silver bottomed around $34 in early July, the channel I've drawn has contained price.

2) Note that on two occasions, 7/13 and 8/19 (points 1 and 2 on the chart), silver decisively broke through the mid-line and proceeded to move sharply toward the top line.

3) Total OI on 7/13 was about 113,000 contracts. By the peak on 8/5, it had risen to about 119,000.

4) Total OI on 8/19 was nearly 116,000 contracts. At least week's peak, it had risen to nearly 122,000.

5) Today's OI is all the way back down below 113,000.

6) Look closely. Price once again sits poised to burst through the mid-line, which is near $42.

Conclusion: Watch price and OI very closely for the next 48 hours. IF silver accelerates through $42 on rising open interest, there is a very high likelihood that it is once again making a move toward the top of the channel. A move that corresponds in magnitude to the previous two would take silver to 45.50-46.00, perhaps as early as next week.

Now let's move on to gold. When I say it's not as "traditional" technically, it's because I'm using this crazy, reverse pennant as a forecasting tool. I'm not sure you're going to find the "reverse pennant" in any books about TA but I'm quite sure that none of those books ever anticipated the end of the dollar, either.

Similar to silver, gold currently sits very close to the midline of the pattern. Note that the previous two occasions when gold broke through the midline (mid July and early August), gold proceeded to ride the upper trendline for about two weeks before falling back. IF gold can once again break through the midline, it will likely charge toward the top line again. This would take the price to near $2000. The OI numbers in gold are similar to silver, too. After peaking at 532,000 last Monday, total OI as of yesterday is all the way back to 501,000. A drop of almost 6% in one week!

Conclusion: We may be on on the verge of another massive rally in gold. Your signal will first be a move through yesterday's high of 1841.50 and then a burst through the midline, currently in the area around 1850. Should gold move conclusively through 1850, it should move to new highs in relatively short order and then continue to make new highs through mid-September.

WARNING: Don't go getting overly excited and carried away at this moment. Nothing is pending until the metals break through those midlines. The open interest numbers suggest that the breakthroughs will come in the next 24-48 hours. They may not. If they don't, I will continue to monitor these charts until they do.

I feel that this is pretty important info so I plan to leave it up all night as the lead, above-the-fold story. I will probably leave it up tomorrow, too. Be sure to refresh the homepage from time to time if you're looking for updates as they will be attached as addenda to this post. TF

9:15 EDT UPDATE:

Sort of a bland trade this morning. The metals tried to rally overnight but they were beaten back at the regular, appointed hour of 3:00 am EDT. It appears, at this moment, that the metals will struggle to trade higher today. 1841.50 is still acting as a resistance point for gold and silver has yet to reach 42, yet alone 42.30. Let's just sit back and watch and see what the day brings us.

A couple of other things...First, this silver update from GoldCore via ZH is worth your time:

https://www.zerohedge.com/news/silver-ready-breakout-technicals-and-fundamentals-suggest-50oz-early-autumn

Second, a friendly reader sent me this chart of the open interest in silver since March. I have neither the time, inclination or technical know-how to superimpose the actual price of silver onto this chart. However, it would probably be a rather insightful thing to do. Anyone want to take a stab at it?

That's all for now. TF

10:50 EDT UPDATE:

This is certainly something to watch over the next hour or so.

About the Author

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turd [at] tfmetalsreport [dot] com ()

  620 Comments

MadMayor
Aug 30, 2011 - 4:25pm

Second

Darn, second.

Debbie Downer
Aug 30, 2011 - 4:27pm

Third :)

Third :)

treefrog
Aug 30, 2011 - 4:27pm

first!

first!

turd, there may not be a "reverse pennant" in the books, but there is a "megaphone."

Aug 30, 2011 - 4:28pm

Thank You

Insightful analysis! Its one of many good reasons why we come to this site.

Many thanks to Turd and Tesla.

Dr G
Aug 30, 2011 - 4:34pm

Great analysis as usual. This

Great analysis as usual. This move in silver is primed, and it comes at the start of the traditional buying season for many of our friends around the world. Turd's charting says silver moving to $46 based on the upper trendline, but it seems once we approach that region we may get more action, much larger OI, and a burst through $50. Sounds crazy, but I believe it will play out that way. I think $50 will act as a magnet to pull silver up. After that undoubtedly some profit taking and a drop back, but this move will merely instill confidence that silver isn't dead and is ready to roll. Those OI numbers we are seening could be the lowest we see in silver for months.

infinite_easing
Aug 30, 2011 - 4:35pm

so would we be looking at

so would we be looking at profit taking around 1975-2000? Seems like a logical development, barring more grim news out of the EU.

dolphindude
Aug 30, 2011 - 4:35pm

I got powder to burn. Maybe

I got powder to burn. Maybe Sprott physical gold, half and half with Sprott physical silver. Thanks Turd and Turd Nation.

SilverWealth
Aug 30, 2011 - 4:39pm

thank you

Thanks to Turd for spotting the midline phenomena.

Granny sold gold and silver into strength today in increments and now awaits to see if a breakout or a pullback is the next order of business.

If a breakout, Granny may do the least likely thing. Climb into UGL and take a ride. Its like the old GTO she has parked out in the garage, the one thats gathering rust now and crawling with upholstry bugs. The one her daughter lost her virginity in. It still has the 442 hemi though and Granny takes her out on those sleepless hot nights in the late summer when she is reving up to trade the preMarket and hardly a soul is on the road, just that drunk,fat ole traffic cop Mr Peepers who is too busy leafing thru his old "Juggs" collection to notice me as I whiz by doing 135mph at 3 a.m.

¤
Aug 30, 2011 - 4:41pm

Thanking you

Thanks TF for deciphering the O/I numbers and putting them in context.

Thanks to Tesla also for doing this daily for us.

This is what is about to happen to the shorts by the PM bull once they start to rocket...

Pamplona - Espana
ScottJ
Aug 30, 2011 - 4:43pm
135

Playing Devil's Advocat...

I will play devil's advocate to the Turd's point of view of the next imminent breakout in gold/silver, as I am under the impression we may not have such a smooth ride up in the next couple of days.... but my portfolio and my interest would love to see the following be nothing more than theory.

--

First of all, there is non farm payroll report on Friday, which the subsequent days before has usually lead to a downward movement in price so the price can "recover" instead of "make new highs" on days which "judge the economy." For further information/graphs, I posted about it on the previous thread here and said this in the last thread:

https://www.tfmetalsreport.com/comment/22042#comment-22042

If there is going to be a smack-down for Non Farm Payroll (as there ritualistically is), does that mean that we have Wednesday/Thursday EE raids coming our way (that means starts tomorrow (or even today?). I think it would be safe to assume this until we see this pattern break, we should respect the fact that it often occurs. They smack-down gold/silver prior to payroll numbers so it can rise back to prior highs, therefore mitigating the damage. After all, they can't have gold and silver hitting new highs on weak data at such a critical crux such as this time.

Second of all, gold and silver have yet to break out to new "higher highs" for any sustained amount of time. Look at the gold and silver charts, especially after today when the FED has admitted they are at a loss, and yet gold can not make new higher highs...

--

And the thing that bothers me the most. Silver took a mid-day raid to stop its bullish ascent, and since has made lower highs. As much as I would like to believe, I don't think that the EE are wasting firepower here without additional firepower to come behind it.... just my thoughts, as I have seen these "mini raids" as a way to set up for larger raids. You must neutralize the short-term up-trend before you can break the trend down (from the perspective of the EE).

And....

Everyone seems very bullish and are not giving credit to the ritualistic takedowns that have happened routinely over the past year (and more I'm sure?). This is the perfect situation to crush sentiment of Gold/Silver vigilantes.

Just be careful is all I am saying....

I think very soon we will be moving much higher, but I unfortunately think a few more spirits and accounts must be broken.

There is no way to know EE manipulation is coming, except from prior evidence applied to current day situations. Using recent price cycles as the case, the next two days have a great amount of potential for such attacks.

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

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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.

Key Economic Events Week of 9/3

9/3 9:45 ET Markit Manu PMI
9/3 10:00 ET ISM Manu PMI
9/3 10:00 ET Construction Spending
9/4 8:30 ET Foreign Trade Deficit
9/5 9:45 ET Markit Svc PMI
9/5 10:00 ET ISM Svc PMI
9/5 10:00 ET Factory Orders
9/6 8:30 ET BLSBS

Key Economic Events Week of 8/26

8/26 8:30 ET Durable Goods
8/27 9:00 ET Case-Shiller Home Price Idx
8/27 10:00 ET Consumer Confidence
8/29 8:30 ET Q2 GDP 2nd guess
8/29 8:30 ET Advance Trade in Goods
8/30 8:30 ET Pers. Inc. and Cons. Spend.
8/30 8:30 ET Core Inflation
8/30 9:45 ET Chicago PMI

Key Economic Events Week of 8/19

8/21 10:00 ET Existing home sales
8/21 2:00 ET July FOMC minutes
8/22 9:45 ET Markit Manu and Svc PMIs
8/22 Jackson Holedown begins
8/23 10:00 ET Chief Goon Powell speaks

Key Economic Events Week of 8/12

8/13 8:30 ET Consumer Price Index
8/14 8:30 ET Retail Sales
8/14 8:30 ET Productivity & Labor Costs
8/14 8:30 ET Philly Fed
8/14 9:15 ET Ind Prod and Cap Ute
8/14 10:00 ET Business Inventories
8/15 8:30 ET Housing Starts & Bldg Permits

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