Max Q

308
Tue, Sep 27, 2011 - 7:00pm

Whoever told you that trading and stacking precious metals "wasn't rocket science" was lying. When watching the video below, be sure to note what happens at the 0:55 and 1:15 marks.

STS-133 Space Shuttle Launch

After a decline of epic and historic proportions, the PM charts tonight stand just below their points of Max Q. "Huh?", you ask. From Wikipedia:

"In aerospace engineering, the maximum dynamic pressure, often referred to as maximum Q or max Q, is the point at which aerodynamic stress on a vehicle in atmospheric flight is maximized. There will always be a point where the dynamic pressure is maximum. That point is max Q.
In other words, below max Q, the effect of the vehicle acceleration overcomes the decrease in air density so as to create more dynamic pressure (opposing kinetic energy) acting on the craft. Above max Q, the opposite is true. The dynamic pressure acting against the craft decreases as the air density decreases, ultimately reaching 0 when the air density becomes zero.
During a normal Space Shuttle launch, for example, max Q occurred at an altitude of approximately 11 km (35,000 ft).[1] The three Space Shuttle main engines were throttled back to about 70% of their rated thrust as the dynamic pressure approached max Q;[2] combined with the unthrottled solid rocket boosters, this reduced the total thrust by about 5%.
During a typical Apollo mission, max Q occurred between 13 and 14 km of altitude (43,000–46,000 ft).[3][4]
The point of max Q is a key milestone during a rocket launch, as it is the point at which the airframe undergoes maximum mechanical stress."

Got it? Me, neither. But that's not the point. In our example here, the PMs have rallied from deeply oversold territory. This part of the flight (the liftoff) was easy. Just light the fire and watch it go. However, any rally after such a steep selloff is inevitably going to reach a critical point on the charts where the rally either reaches escape velocity and continues on OR the gravity of the selling pressure becomes too great to overcome and things head back down. This is area on the charts is our Max Q. This is our point of maximum dynamic pressure.

On the charts below, I've outlined the clear areas of Max Q. In gold, it's 1670-1682 with a continuance of pressure all the way to 1705. In silver, it's the area between 32.35 and 33.85.

The thrill ride of the liftoff is over and the engines have been throttled back. We've reached the point of Max Q. Will we be able to clear Max Q? Will we hear the command "Go For Throttle Up" and continue the rally or will our mission end with a diversion to Diego Garcia? (Trust me. No one wants to be diverted to Diego Garcia.) We should have the answers to these questions very soon.

Here's some extra stuff to help you pass the time while you wait. First up, Eric King interviewed John Embry of Sprott Asset Management late yesterday and the entire interview can be found through the link below. It's brief but quite interesting. Equally interesting, in light if the beating it took today, is the intro ad for Santa's stock.

https://www.kingworldnews.com/kingworldnews/Broadcast/Entries/2011/9/26_John_Embry.html

Next, Jeff Nielson has penned another interesting article:

https://www.bullionbullscanada.com/index.php?option=com_content&view=article&id=22271:precious-metals-vs-us-treasuries&catid=48:gold-commentary&Itemid=131

This "Silver Summit" sure looks like fun. I can't attend but perhaps one of you would like to go and report back for all of us?

https://cambridgehouse.com/conference-details/the-silver-summit-2011/48

Lastly, the article below was brought to my attention this morning. I must admit that it is somewhat challenging to get your arms around but it is worth the time and effort to try. For me, the collapsing lease rates for gold are a clear and obvious signal of massive, direct Central Bank intervention in the gold markets. As the article states, without this intervention, gold would be in backwardation due to extremely high physical demand and, as you know, backwardation is a sure sign of an impending short squeeze. Of course, I could be wrong so I'm interested to hear everyone else's interpretation.

https://ftalphaville.ft.com/blog/2011/09/14/677021/why-gold-forward-rate-inversion-is-important/

Also note that the article was written on 9/14, fully one week before the latest massive beatdown. Hmmm. It would sure seem that someone or something leased a boatload of gold at extremely cheap rates to overwhelm the market and set prices tumbling. Was Wednesday night into Monday morning just a continuation of the central bank intervention we first noticed three weeks ago after the SNB devaluation of the franc?

OK, that's all for today. TF out.

9:00 am EDT UPDATE:

I don't a lot to add this morning other than to point out that the overnight spikes died as price entered the MaxQ zone and as the LBMA opened. That certainly shouldn't surprise anyone.

For today, watch the lows from before the spike. Those levels are around $30.75 in the Dec silver and $1635 or so in the Dec gold. Let's look (hope) for some support there should selling intensify.

Believe me now and hear me later, you should definitely take time to read this:

https://www.zerohedge.com/news/step-aside-bbc-trader-head-unicredit-securities-predicts-imminent-end-eurozone-and-global-finan

Perhaps, though, you should watch this first. It might help with the Hungarian translation:

https://www.hulu.com/watch/276401/saturday-night-live-hans-and-franz

TF

About the Author

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turd [at] tfmetalsreport [dot] com ()

  308 Comments

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kirbyman1
Sep 30, 2011 - 12:32am

my goodness people! cut your

my goodness people!

cut your losses and get out while you still can!

the yonk
Sep 29, 2011 - 12:53pm

Dorothy' silver slippers

Just tap the heels together three times and say "there's no place like home."

OC15
Sep 29, 2011 - 10:13am

I'm with IVARS

Dude was uncannily accurate with his gold and silver calls. He's got silver trading in the 30's till next April. His models and timing were really very close on both gold and silver.

Also, I am about done listening to these KWN interviews. All these guys were cheerleading silver to $50 and gold to $2,000 within weeks. Now they are coming on explaining to everyone "what happened" or "why it needed to correct to form a stronger base" instead of owning up to mistakes in their calls.

Child Please.

How long have you guys been doing this? What is the depth of your connections in this industry? You couldn't see this coming after doing this 20,30, 40 years??

I'll tell you something else. It is good to have contrarian opinions in this forum. It helps keep people level. Some of you guys hand out troll cards like they are going out of style when people challenge Turd or have a different perspective on the situation. There is alot of cheerleading that goes on in this forum. I participate in it as well. Time to wake up to the possibility that gold and silver are not going to the moon on our desired time frame.

Shill
Sep 29, 2011 - 8:18am

with SLV long. Shil what is

with SLV long. Shil what is your strike and date?

Morning, $39 October. Plenty of time.

Patience.

stoneeh
Sep 28, 2011 - 9:10pm

Btw today at the bullion

Btw today at the bullion dealer (ProAurum, the biggest in the Central European space), I had a talk with one of the managers. He mentioned something about where silver prices could go and that it's better than paper money; I mentioned one of the charts that shows that the average price of silver during the last millenium, corrected for today's inflation and in today's dollar, has been around 1000$. He replied, well, Mr. ......., then we're all millionaires.

Just found it funny, also discussed the supply/demand fundamentals with him and he was very well educated about it; still when he mentioned the "millionaires" I knew he still measures his wealth in paper terms.

stoneeh
Sep 28, 2011 - 8:59pm

This week's COT report I am

This week's COT report I am really looking forward to. OI down huge for both PMs for Tuesday, so I'm guessing really lots of shorts covered.

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apex101
Sep 28, 2011 - 7:41pm

1480 is indeed possible

1480 is indeed possible (Check one of my last post). I hate to call this to early but gold might make a double bottom at 1530. Martin Armstrong is kinda of crazy to me. Although is very accurate and his calls shouldn't be taken lightly. Personal 1480 test would be good. Gold got way to ahead of itself going to 1920. My aunt was asking me how to buy it when it was around 1880. Thats when i knew an intermediate top was in. Its been said a thousands times over and over again. What has changed since yesterday? Just buy physical don't trade this market. Trading means your playing on their turf.

RockinJohnnyT
Sep 28, 2011 - 5:02pm

@Tom L.

What do you think of Armstrongs readings on Gold?

"For now, gold’s highest weekly closing was indeed the last week of August. As long as that holds, then the retest of support is likely. A daily closing below 1730 will warn of a sustain decline ahead and a weekly closing below 1605 will signal a correction is indeed underway."

The computer say ~1400 if it does a weekly closing below 1605 - what is your take on that?

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