Read This Now

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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

survivalwstyle
Aug 30, 2011 - 8:24pm

news from a socal coinshop

damn it was busy. did not get a chance to sit down aLL day. Ag flying out of the shop today. sold a 1/2 bag and not 15 minutes later another dOOd came in and bought us out of 90%. sold over 200 ag rounds. have 6 left. did purchase 20 ASE this afternOOn. bought at spot but seLLing at 48 if you want them. do have about 6 tubes of these laying around. i did purchase a 5 oz libertad for myself that came acroSS the counter today. first 1 of those i have sEEn. what a beaut. sold to me at spot, which is why i work this as my 2nd job in the afternOOns for .50 90% an hour. had to niBBle. there is a 50 peso that has my name on it, but am waiting for payday on that one...

¤
Aug 30, 2011 - 8:29pm

After the coming global collapse — the big wake-up call

Paul B. Farrell Archives | Email alerts

Aug. 30, 2011, 12:01 a.m. EDT

A 20-rule manifesto for New No-Growth Economics

Commentary: Classical economics is fatally flawed

SAN LUIS OBISPO, Calif. (MarketWatch) — Yes, a New Economics. With new rules. Why? Classical economics is fatally flawed. So investors better learn the new rules that will win in the New Economy. Delay, deny, you’ll lose.

After the coming global collapse — the big wake-up call — classical economics will be exposed as a fraud sabotaging investors, destroying America.

Yes, new rules. Why? Because everything you know about economics is wrong. Everything. The old economics is a rigged game in a Wall Street casino. The cards are stacked in favor of the banks and their co-conspirators, political lobbyists, corporate CEOs and the Super Rich. The house always wins. You always lose. Worse, America is losing.

Here’s why: All classical economic ideas derive from one central idea. Not a scientific theory, merely an unproven hypothesis. Worse, all economic conclusions are based on this illusion, a fantasy, myth, wishful thinking. Consequently, all economic conclusions are speculations.

This central hypothesis of today’s economists — from Ben Bernanke’s Fed staff, economists in the World Bank, IMF, CBO and White House economic advisers, to economists at Wall Street banks, think tank and academic economists — is the unquestioned acceptance of the dogma of “Eternal Growth.”

Get it? All economic thought evolves from one unproven and fatally flawed hypothesis: The unscientific assumption that the global economy will continue growing indefinitely … that the world’s economies will be able support global population growth indefinitely … and that all necessary commodities and essential natural resources will be available indefinitely to sustain the world’s relentless economic and demographic growth....cont.

https://www.marketwatch.com/story/a-20-rule-manifesto-for-new-no-growth-economics-2011-08-30?link=home_carousel

SilverWealth
Aug 30, 2011 - 8:32pm

give the guy a break people

Dark Matter is just trying to learn and is confused I think.

I strongly recommend a mentor. Without one you are roadkill in the metal's market. You need someone who has 20 to 30 years experience trading commodities and metals and who is conservative. You do not need promises or the advice of internet sites regardless of how well meaning and at times accurate the advice may be.

I am therefore contradicting myself. But I would go directly to Morris Hubbart and watch how he trades and also checkout Stewart Thompson and his site. Google both of them. Learn via daily mentorship. Otherwise you will be whipsawwed all over the place by all kinds of opinions and end up completely confused and frustrated.

Incidentally the S&Pee has been going up on light volume into a Holiday. Thats a big red flag. I think when the boyz come back from their summer in the Hamptons chasing Ukrainian hookers that they will sell this market down hard and I think it will then take miners down with them. Sad to say. I will continue to sell into strength and wait for what I feel is coming. We have had a nice bounce in GDX and GDXJ but these are not ordained by the Pope and pigs get slaughtered. Just my opinion. I think the equities market crashes bigtime next week, whether it double bottoms off the last low or slices right thru is anyone's guess. What happens to gold and silver then is anyone's guess. I cannot think that far ahead.

Turdle GG
Aug 30, 2011 - 8:33pm

Help me interpret Santa

Dear Extended Family,

Gold corrects $212.50, rises $50, drops $50 and today is trying to rise another $50.

That is a range of roughly $275 in just a few days. That is certainly what I call a hard chop, this time with a penchant to break out to new highs. That is exactly what I expect.

Kenny Adams points out that he feels 15 to 18 days from the first break is the fastest that this chop can resolve itself to a new high.

I have told my family, outside of myself, that there are two people who would protect them in these outrageous world markets. It would be Monty Guild for investments and Kenny Adams for speculation. Both match uncommon skill with absolute ethics.

Regards,
Jim

Does "15 to 18 days from the first break" mean 15 to 18 days from the day we bottomed at near 1,700?

hauzit
Aug 30, 2011 - 8:34pm

Scott J

I've been hearing a lot of "Noise" and hype regarding gold and the play upward. Because of what happened last with SLV, my inner voice is saying that GLD should be going down to 1700's and maybe 1600. Your view counter to Turd, gives some logical reasoning to validating some of my inner voice. Keeping my "puts" on for now.

maravich44survivalwstyle
Aug 30, 2011 - 8:39pm

s UR iVALL wTHi #sTY leS A N d s H ia lE b Au f.

1O gO TT it. m Uch OuS, Gr aCIas.!

DrutDark Matter
Aug 30, 2011 - 8:41pm

wait for 13xx then and take

wait for 13xx then and take another long term step toward 20xx

¤
Aug 30, 2011 - 8:41pm

@DPH - That Reasoning is Flawed

I enjoy reading your many posts. This blog is a fantastic place because you share your thoughts and insights (and videos).

However, that nut job Farrell has gotten into the good stash, and his brain is addled. His reasoning is so utterly flawed as to be nothing more than mere wishes, from a utopian point of view.

Keep posting, though.

Potato
Aug 30, 2011 - 8:41pm

Need a litter help learning...

I read Turd, KWN, Trader Dan and all of you for few months, but I still play safe with longs (Sprott Physical and miners). I do not rely only on Turd; I try to make my mind out of all my readings, and I consider myself the only accountable for my mistakes... but so far so good thanks to everyone. I purchased SVM @ 7.75 few days ago many were recommending this company; good call.

But now I would like to learn about your play ground (PUT and CALL) so I plan to do is going through CBOE Learning Center tutorial someone here mentioned about (I do not remember exactly who).

Any help/orientation would be very appreciated about these points:

- Any other good tutorial about Put/Call. How to interpret OI tables like you are doing.

- Best stock info tool available (chart, options, shorts, etc) - I registered 30 days to StockWatch but is there any free or better tool ?

Also a suggestion, a kind of TurdWiki to learn how to trade, built and maintained by the community, would be a great addition to the site.

Thanks in advance.

porkyp
Aug 30, 2011 - 8:45pm

Front Page of the biggest English Language newspaper in HK

From today

China punters sway gold market

Bonnie Chen

Wednesday, August 31, 2011

Mainland punters have emerged as a formidable force in the international gold market and are one of the main reasons for the ongoing volatility in gold prices, say Hong Kong industry sources.

The spot price of gold has lurched between US$1,640 per ounce and US$1,900 in the past month.

From 7.30pm Hong Kong time yesterday the price went from US$1,785 to US$1,840 in a matter of hours in New York trade.

A source in the market saw 7,000 contracts being placed via electronic trading at the start of this period. Heavy volume of bullish bets placed on the gold price by mainland punters also pushed it higher, the source said.

Emperor Financial Services assistant vice president Sam Lee Chun-wai estimates the global trading volume of gold amounts to US$1 billion daily.

Mainland punters by themselves cannot move the market, he said. But Lee noted that an appreciation of the yuan amid continued economic boom in China has boosted the firepower of mainland players.

"Buying commodities with US dollars has proved to be an attractive investment for many mainlanders in the last few years," he said.

According to a report in Yangcheng Evening News last Wednesday, just one city in Guangdong province - Guangzhou - has 2,000 underground investment companies dealing in gold and foreign currencies.

Investors can leverage up to 100 times their principal with such black- market brokers, the daily said. The black market for gold in China sees up to 100 billion yuan (HK$122 billion) worth of trade every year, the report said.

Legal exchanges around the world have acted swiftly to curb volatility in the price of the precious metal.

The US-based CME Group raised trading margins of gold by the most in more than two and a half years last week, leading to a 4 percent drop in the spot price.

CME increased margin requirements on its gold futures contract by 27 percent, the second hike in a month, following similar moves by the Shanghai Gold Exchange and Hong Kong Mercantile Exchange earlier this month.

Mainland punters are taking advantage of the situation, sources say, by going both short and long on the metal.

End-of-month settlement for futures contract has also helped raise volatility, said traders, who also noted that the US$1 billion daily trading volume of the gold market is relatively thin compared with the oil market, which sees a much higher volume.

"Contrary to what many people think, it is not unthinkable that on certain days, mainland punters may emerge as a dominant factor on the international gold market," a source said.

Mainlanders have certainly emerged as the largest players in the Hong Kong gold market in recent years, traders confirm.

Local analysts estimate they now account for up to 70 percent of the daily trading volume on the Hong Kong open market.

The SAR also allows out-of-market gold trading and this is very attractive to mainlanders, traders said. Last night, spot gold was up 2 percent, reaching as high as US$1,822.50 an ounce in New York afternoon trade.

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