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

dziprickunderwaterfrog
Aug 30, 2011 - 11:06pm

Nadler is... 'Nadless',

I have e-mail him many times about his... 'analysis'.

More specifically, I asked him if he really believes that everyone should have 10% of their portfolio in gold and what is the percentage of people that even OWN gold, never mind 10% of their holdings. I have also asked why he always refers to investment in gold as gambling, betting, speculating, and many other derogatory statements to anyone that invests in gold.

He never responds to my e-mails.

That guy is the biggest joke in the gold investment community. The day he says to buy gold and silver is the day we know we are at the top and it is time to take profits and move on.

D

¤
Aug 30, 2011 - 11:08pm

They can't even print them correctly (so they say)

DPH: You can't help but notice the amount of gold on the new $100 H'mmm....I wonder what ZH would uncover or hypothesize about this sudden inability to print a certain denomination that has undergone a radical facelift and screams "gold!" . It certainly isn't a greenback any longer.

Now if they could only figure out how to print money again. Wonder if they're having trouble printing $50, $20, $10, $5 and $1 bills? Why so behind schedule that you don't even hear about it? Maybe they've switched over to $1000's instead.

It says 2009 on the bill from it's concept introduction.

Jim-M
Aug 30, 2011 - 11:12pm

Day Jail Silver Trading "System"

I call my job "day jail" because that's what it is. And I have just enough interruptions and time demands that I KNOW I'll miss a waterfall or two down each month, destroying profits when my dumb @ss is all-in at one big price instead of scaling in.

Comments, observations, suggestions, and ridicule are all welcome... teach me something, please.

Over time, I've been trying to develop a good compromise that eliminates as much greed and risk as I can while taking into account my day jail conflicts. So here it is, the "Day Jail Silver Trading System."

Basically, you scale into long positions after MAJOR waterfalls.

My first cut at the criteria is...

  1. 1-Hour chart shows minimum five (5) consecutive red candles.
  2. Bollinger Bands relatively narrow prior to waterfall and dramatically expanding during and after.
  3. Slow Stochastic < 20% (peak)
  4. RSI < 20% (peak)
  5. Buy: SLV/GLD/AGQ/UGL or 3-6 month out ATM Call options (or similar) by scaling positions in as the price falls or bounces in that area.
  6. Hold to your target % gain. Often times, the price recovers in a week or less, which would yield a significant profit.

Buy trigger (besides my wanting to puke) would be closing with an entire candle back inside the Bollinger Band. Note that the price seems to fall below the lower BB virtually every time.

RISK ALERT - If we get a May Silver blow-off, you MUST sell relatively quickly. If you wait for 4-5 hours of price falling, you're probably close to bottom for all but the rare blow-off. In that case, you probably need a mental stop to keep from losing it all. For me, one easy way to know if the huge blow-off might occur is whether all my Turdite brethren are partying with a zillion fiatsco's... if so, the EE will want to tame the bull(sh!t).

Setup tips -for day jailers....

  1. Configure underling alerts to page/text/email me (yes, all three!) when underling (SLV or GLD for ex.) drops 5% in a trading day. Schwab does all these with alerts. This is my "fix" to being away from the spot price some of the day. Bonus - I get to forget about it without worrying too much (or so I dream).
  2. Create a watch list that has the predetermined buy ticker such that you can make the trade on your smartphone or quickly via the internet. This is important for call options if you try to use your phone b/c you might lose 50 cents or more on the underling before you find the right ticker for a 5-month out call option.
  3. Make sure you buy enough time such that you can make a good profit just returning back to the pre-waterfall price. Keep in mind, farther-out options will not have the same leverage action as nearer-term options. That's the price you pay for reduced time risk. As brother Turd always says, be sure to buy time.

OK, fire away. What am I missing? What should I consider or do that I haven't mentioned or thought of?

Thanks!

- Jim M.

llaettner
Aug 30, 2011 - 11:14pm

Returns, hum

Looking at daily goals, Stellar is 2% or higher, Good is 1%, Bad is -1%, I suspect your Annual return will vary on your investment style, how many trenches of money you utilize at a single time. 100% compounded return is decent, haven't reflected enough on other values.

rjsand¤
Aug 30, 2011 - 11:15pm

New $100's

DarkPurpleHaze,

You've read Bix Weir's comments about the new $100's?

https://www.roadtoroota.com/public/261.cfm

¤
Aug 30, 2011 - 11:19pm

@rjsand

No, but I will. Thanks

UncleFester
Aug 30, 2011 - 11:20pm

Dark Matter

Unfortunately you were just tossed in the deep end and told to swim. See the charts I posted above. The Au prices are retarded right now, at this moment. Ag gets pulled along for the ride. Nature of the time, my man...the deep end, capiche? You've got a currency storm out there in the real world and b/c currency = debt, that means a debt storm. The currency in your pocket is someone else's IOU. Everyone is up to their eyeballs in debt and that debt ain't going away! Lots of currency (debt) but no wealth. Capital markets are totally FUBARed. Understand that and you understand the stacking mentality. 1) Stack and get out of the way. 2) If you've got the balls, set aside some coin for trading. But understand this...everyone (and I mean everyone) has no clue where this market will go. Your guess is as good as Turd's or Turdle's. Hat tip to you for hanging in there after all the Fight Club rants! Stick around and trade some punches.

Fester

Jim-M
Aug 30, 2011 - 11:20pm

@rjsand.... that is Awesome!

I suspect stalking and anonymous voyeurism are not so different..!! Sweet, thanks!

redwood
Aug 30, 2011 - 11:21pm

Thanks llaettner

That's very helpful. Investment advisors I've talked to have always stated anything over 20% annual return is very good. That struck me as low. 100% compounded return is decent and certainly in the last couple of years in the metals market has been doable, but even 50% I think is O.K.

Jim-Mllaettner
Aug 30, 2011 - 11:23pm

@llaettner

You got it. I've found that, now that I'm willing to take my losses when I'm wrong relatively quickly, my gut already knows when the trade has failed. And when I exit, I feel a lot better.

I like what Atlee said the other day (and the other and the other) over in Pailin's Trding Forum - he never lets his opinion get in the way of the trade (or something very close to that). Essentially, park the Ego.

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