Shakeout

The Turd awoke this morning to the disturbingly familiar LBMA/Comex beatdown pattern we've seen so frequently in the past. This stuff is sure getting old but, unwittingly, it appears that The Cartel is about to hand us an extremely attractive opportunity.

First, take a look at this 5-minute chart. It's a classic, coordinated attack pattern. Word leaks on the LBMA that The Cartel is going to raid the metals today. Down spikes ensue as those with foreknowledge prepare for the event. The Comex opens and BOOM!

If I were you, I would print this chart and tape it above my computer. In the future whenever you see this pattern, you'll know what's coming.

OK, onto the expected buying opportunity. It's not today...at least I don't think so...but it is coming very soon. My problem is that I have very little cash. I foolishly plunged last week when I thought we'd seen a bottom at 1800. Oops. I'm also long a bunch of Nov11 soybean calls that look like they have the potential to generate some continued losses to pair up versus all of my gains from the PMs earlier this year. Oh well, whaddayagonnado?

First, let's look at gold. It could stop and reverse right near last week's lows. It could. I don't think it will, however. Let's put the likelihood of a turn near 1770-80 at 25%. More likely is a drop all the way toward the trendline from August 8. What is the significance of that date, you ask? It is the low from the gap higher opening after the U.S debt downgrade. See the charts below. At any rate, I think it's 75% likely that gold falls all the way 1740 or so. At that point, if I had any cash, I'd be all over it. Unfortunately, I don't so I'm reduced to being a very interested spectator in this one.

Silver has fallen in line and looks roughly the same. Recall last week I mentioned that crude looked subject to a drop back to 82-85 and, if that happened, it would surely take a toll on silver. Well, nuts, that seems to be playing out. IF gold drops toward 1740, silver will have to deal with continued selling pressure. However, it now has a chart that is similar to gold. It should have substantial support near $38 or so. You can plainly see it on the longer term charts below.

Again, please understand that the days of this crappy, LBMA/Comex paper metal monopoly are numbered. "The futures 'tail' will only wag the spot 'dog'" for a little while longer. Be patient and have faith. Use this weakness against them. Buy physical and take delivery. It is truly your only protection against the madness ahead. TF

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