In The Woods

312
Thu, Sep 8, 2011 - 9:25am

The overnight action is the PMs is certainly encouraging and it would seem as though the half-life of central bank gold intervention is now about as long as central bank currency intervention. We all know, however, that it is still too soon to let our guards down. The quick recovery in price may only serve to embolden our increasingly desperate adversary, so, much caution is still warranted.

That said, I do not want to minimize the importance of the overnight reaction in price. The SNB attack of early yesterday sent the metals markets reeling. The attacks were timed to have a spillover effect onto the Comex and December gold traded as low as $1794 by mid-morning. In the old days, this would have sent gold into a tailspin as weak-handed longs began to race each other for the exits. They knew they were no match for the central banks and The Cartel.

Note, though, how yesterday was different. Once the Comex was closed, things began to improve almost immediately. Baby steps at first but then a full-blown rally overnight in Asia. Our longs are no longer weak-handed. They are resolute. They are buyers of size and they seem to pounce on discounted prices. This must be very discouraging to The Cartel. They are trapped in an untenable short position and they are being forced to cover at increasingly higher prices. HAHAHA!

To that end, I feel I must state this again. Please be sure you are making note of which "analysts" and "traders" are calling a "bubble". One only needs a cursory understanding of the Commitment of Traders data to deduce that there is no such thing as the CoT data since early August has clearly shown that the primary driver of price to this level has been Cartel short-covering. A bubble presumes retail buying. Average, everyday investors rushing in to buy something. The greater fool theory in action. Think dot com. Think Las Vegas real estate. Cartel short-covering does not create a bubble. As stated ad nauseam, the weekly CoT report is a very important, fundamental statistic. Any serious metals analyst knows this. Accordingly, any serious metals analyst knows that gold is not a bubble. The boneheads calling gold a bubble are, therefore, not serious analysts and should be ignored. Do not forget them, though, as they will most assuredly resurface in the future to once again proclaim an end to the gold bull. Remember who they are so that you can ignore them in the future, too.

The next question we need to ask is: Why are the banks so desperate to cover? Ponder that one for a while. I've got my thoughts on the subject. I'd be curious to hear yours.

Here are your charts for this morning. I see they are already becoming outdated as the metals have continued to rally while I type.

Remember today that my warning of yesterday was not to sell, it was not to buy. I stand by that. With the active central bank intervention of earlier this week, it is still too dangerous to be boldly buying with confidence. For now, I am simply holding my positions. The only trades I made yesterday were to re-cover my October gold calls. You may recall, I have been long October calls but, from time to time, I've been selling some calls against them (creating a spread) whenever I felt that risk was high. I've been taking the "short" side off and "opening up" my calls when I feel that risk is minimal. My current trading portfolio is as follows:

Long Oct 1900 gold calls vs short Oct 2000 gold calls

Long Dec 1900 gold calls vs short Dec 2200 gold calls

Long Dec 50 silver calls vs short Dec 60 silver calls

About 25% cash. Patiently waiting.

Lastly, I would be remiss if I didn't print the chart below. Several Turdites have sent it to me looking for my opinion and I feel it deserves your full consideration.

About the quickest way to go broke trading futures is to go around declaring that "this time is different". However, in this case, I feel this time truly is different.

This chart covers the previous 32 years of Keynesian central banker-dominated thinking. We are at the end of the Great Keynesian Experiment. The current system will not be continuing much longer. A new paradigm will soon be emerging. Therefore, while price will still correct from time to time, historical correlations such as this one are of minimal significance.

I've got lasts of 1862 and 42.42. It will be a very interesting day so try to keep an eye on things. More later. TF

About the Author

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turd [at] tfmetalsreport [dot] com ()

  312 Comments

Tom L
Sep 8, 2011 - 11:02am

Pressure Building

in TRX, guys. Watching it intraday is interesting. Volume is beginning to increase w/o a beat back by the shorts. I wouldn't not be surprised if there 's a breakout of $5.94 today. And if it doesn't happen it'll only serve to make the coming short squeeze that. much. more. epic.

Like the stock or not, the hourly chart is showing accumulation over the past 4-5 weeks.

Ta,

Tom L
Sep 8, 2011 - 11:05am

WTIC prints $90 again

a neckline break (around $90.50-.60) of the Inv. H&S I'm looking at on the hourly chart would be ugly for the shorts in Oil. With the DOW/S&P recovering, this might happen today.

Ta,

ReachWest trinistand
Sep 8, 2011 - 11:06am

Re; SVM - Seeking Alpha Article

@trinistand:

Thanks for posting the link to that article - it's an excellent overview of things at SVM, especially given that it comes from the perspective of a Shorter who was looking at taking a short position in SVM.

Bottom line = Go Long!

Dr G
Sep 8, 2011 - 11:07am

@BillAuAg, you make it sound

@BillAuAg, you make it sound like ANY of our prior, much less the current, commander in chiefs have had a clue. I live in a border state. None of them care about the borders. It's a $hitfest out here.

And I disagree that Paul doesn't care about other issues. I think he realizes that if we take ourselves out of other people's business our country will be safer in the long run. Let's leave people alone for once. We don't have to rush in and be the heroes all the time. Maybe it won't work, but the current methodology isn't working either.

Shill
Sep 8, 2011 - 11:07am

USO calls getting some nice

USO calls getting some nice movements...sweet.

Shill
Sep 8, 2011 - 11:15am

11:01a BREAKING Oil

  1. 11:01a

    BREAKING

    Oil inventories down 4 million barrels: EIA

Mikey
Sep 8, 2011 - 11:15am

@NW View, Rhodesia all over

@NW View,

Rhodesia all over again.

Jasper Puddlemaker
Sep 8, 2011 - 11:16am

I just have to say "thanks" to EE...

"Thank you" EE and TPTB for simplifying my life this last week. I had to focus on moving our daughter across the northern border to start college, so just didn't have a lot of time available to play "Global Economic Collapse" last week. But, you made my life a LOT easier by:

A) Eliminating the reason I held some Swiss Francs (don't have to mess with that now).

B) You put up the "Big AU Sale" sign at the same time I waved "bye bye" to the Swissie.

Thank you! Great timing! (Wish we could do it again sometime, but I guess we won't since we have now run out of perceived "safe haven" paper currencies. Oh, except for the $US <cough>)

Boardwalk
Sep 8, 2011 - 11:18am

Turkeys

Eric,

You seem in a better mood today.

Aren't you glad that you still have that turkey CMA today? It's fattening up nicely and will be a delectable treat to eat come (insert appropriate December holiday here).

exiledbear
Sep 8, 2011 - 11:20am

Always remember the old ditty of the short seller

He who sells what isn't his'n

Must buy it back, or go to pris'n

As far as why the banks are covering now, I ask a different question. Why didn't they have their positions closed out when gold moved north of 800? Why would you stay short in what was by then AN OBVIOUS BULL MARKET?! This is Speculation 101, you'd think it's something they would've known. I wouldn't have stayed short past 800, I would've closed it all out and slunk off back to the den to lick my wounds.

I mean, up to that point, you could've made the argument (rightly so) that it wasn't in a bull, but this was yet another bear rally, and it would've been reasonable to make a bet accordingly. I Thought Different(tm), but I could've been wrong.

I look around me at the people in power and control, and all I see for the most part are idiots. The ones who aren't idiots seems to be criminals.

Maybe there's malice involved here, but I'd rather explain things with stupidity first before resorting to malice.

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