Read This Now

620
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

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Vincent
Aug 31, 2011 - 1:03pm

horror2

New Dual Hurricane & Tropical Storm Threats Going Into Labor Day Weekend
https://247wallst.com/

FortinbrasHard Rain
Aug 31, 2011 - 1:01pm

@HardRain re: Taxes

Yes, if you sell your gold or silver, it is taxed at 28%, technically/legally speaking, on ANY amount.

That said, most dealers will tell you, "That's between you and your accountant." If the transaction is more than $10,000, then yes, they do have to report the transaction to the IRS. Some people will tell you, "Go sell less than $10,000 at a time," but if you ever get audited, good luck.

As for swapping silver for gold and vice versa, it DOES fall under "1031 - like kind exchange" and is thus a "non-event" in terms of taxes and I have done it several times. HOWEVER, your broker will treat it as a sale and a purchase. It is up to YOU to take care of the tax paperwork and the swap must be transacted on the same day (even if you don't take delivery of what you swapped for for a few days or weeks). By this I mean the following - I coordinated with my broker, brought a truck load of silver to his place where I "sold" it to him and "bought" gold, but the gold didn't get delivered to me for 2 weeks, but the "transaction" was on the same day. I do the swap with my broker, paperwork with accountants. There are some brokers out there in the world who will handle all the paperwork for you too, but I prefer my local guy for a whole host of reasons.

Hope that helps, keep your nose clean. It's rarely worth it to try and skirt the system... the way IRS computers work takes YEARS to catch up to the paperwork. I can guarantee you this... if you conduct a reportable transaction, and the broker sends paperwork to the IRS and you don't report it that year, here is what will happen... nothing... for several years... you think you are free and clear... then, 4, 5 or 6 years from now, you get a letter from the IRS because their slow assed computers finally found a 1099 from your broker and no match on your return. You now have an issue.

Again, some brokers are "more friendly" than others, but keep your nose clean IMHO.

mrgneiss
Aug 31, 2011 - 12:57pm

@Ninja Report - I agree that

@Ninja Report - I agree that a lot of traders are probably waiting for the NFP to clear before getting back in and that is probably a smart move for any leveraged silver products. Good to hear you're a long time bull! I'm not a perma bull either (well, I am in the long term sense), and I was advising people on Kitco to get out or buy protection back in Mid-April.

Swift Boat Vet
Aug 31, 2011 - 12:53pm

OK ScottJ I give up

What was this protest against anyway?

Ninja Reportmrgneiss
Aug 31, 2011 - 12:49pm

@mrgneiss

Good info, and like you, I remain long-term and even mid-term bullish in both Gold and Silver for all the reasons you list and a few more. My physical remains quietly stacked in a dark place.

My risky leveraged Silver paper positions, however, have been closed today and will remain so for the next few days while I watch for the typical short term craziness that pops up at certain times. I will likely wait until after the NFP report before wandering back in.

If gold hits a dip, I may buy into it, but for the next few days, I will sleep better with some dry fiat powder.

Shill
Aug 31, 2011 - 12:49pm

Jobs, with every company

Jobs, with every company Obama states is great closes their doors.

Another one bites the dust.

Solyndra to Declare Bankruptcy | NBC Bay Area

Is this President for real or what? And where the hell is Congress? Oh wait I forgot. on vacation. Hard working fellows.

TruBlu11¤
Aug 31, 2011 - 12:43pm

@DarkPurpleHaze

The breathtaking moment will come. In textbook chart fashion, gold came back to the 1830-33 level and built a base for the next move back up to 1841ish (and hopefully over) to 1855. Now we just have to see if we get that bounce through 1841 today or as ScottJ posted earlier, if we don't, we may go down tomorrow. I think gold is strong today, so I favor the bounce up and through today but I think he is correct.

BTW-keep the music vids coming. Love them.

cpnscarletScottJ
Aug 31, 2011 - 12:42pm

@ScottJ - Thanks, I see where

@ScottJ - Thanks, I see where you're coming from. If we get 25% of what you're hoping for, it'll be a good event.

Dr G
Aug 31, 2011 - 12:41pm

@DPH

I too would like to see that seasonal chart updated to include more recent data. Certainly 2008,09,10 and now 11 have been different for silver than were those earlier years.

There will also come a point where that chart will be worthless because the moves and gains in silver will be so drastic that it will overshadow all of that other data. Maybe 2010/11 was the start of that, but we won't know without an updated seasonal chart.

Tom Lcpnscarlet
Aug 31, 2011 - 12:39pm

@cpnscarlet

Even if the EE is destroyed, that doesn't change human nature. Even if the Fed is toppled, people will still have to work at being "good".

You know, I'm not sure this is the right way to look at it. I think that people will take advantage of whatever situation is presented to them. If there exists a possibility to take something from someone else without reprisal a person will tend to do it. This is true in any context from inter-personal to the capital markets.

Invariably, when you look at an imbalanced market there is always some gov't intervention, no matter how well-intentioned, that creates said market imbalance and by the nature of gov't fixes it as permanent, as opposed to the market which will see the imbalance (arbitrage) and seek to reduce and eliminate it.

It's this process of institutionalizing corruption that is the heart of what we're fighting against and responding to by betting on the end of the Great Keynesian Experiment. If you want approach (not achieve, b/c that's not possible) a corruption-free environment then you have to embrace voluntary interaction at all levels of human contact. The issue we have now is the inertia of multiple generations of people inculcated in some socialist ideology, be it Fascism Communism, Progressivism, Moronism, etc, and the deleterious effect on perception, world-view and limbic response to stimuli that exists all through the societies.

I could go on about this for weeks. I'll stop here.

Ta,

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