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

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  308 Comments

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Justin
Sep 28, 2011 - 3:59pm

@ Always Learn

Most here will refrain from giving opinions/advice on what others should do with their own money, but if you have that much time to wait and aren't leveraged, personally I would hold out even if we go a little lower from here. Considering that the money is for a down payment on a home for you and your wife, once you break even or see a profit, go ahead and cash out based on your comments. Odds are in favor of silver being much higher by the time you need the money, but gambling with money you can't afford to lose is risky and leads to bad calls and emotional trades. Best of luck to you and your wife with the home purchase.

jhutchesShill
Sep 28, 2011 - 3:25pm

Same Boat

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

always_learn
Sep 28, 2011 - 2:58pm

Still struggling...still look for advice/help

The time I asked for help, and time now, silver down from
30.50 to 29.50. I hate to post mesg like this, i know this
forum is for discussion of PM, not for trading in particular,
but I am just dying here.

To answer some of the advice, the position I have is not
leveraged so I have time to wait out, but it is part of
money for a house downpayment my wife and I plan to purchase
within next 12months. Also considering AGQ is not like SLV, it
loses value very quickly if Silver continues to slip.

My mind is blank now.

One thing I don't understand is that nowdays, it seems like
PM trades not related to other asset at all except reverse to
what USD is doing. In early Aug., when S&P down, PM rises,
now it's down regardless of how S&P up or down. If there is
manipulation for PM like everyone believes on this board(i believe it too),
then how should we trade them? Buying physicals and shorting
paper?? I am so confused now. And I am looking at such a big loss
within 24hours.

I am so dumb...i can't believe myself get into AGQ so casually
without thinking hard.

Please give me your opinion on what's the realistic chance of
Silver climb back to 32-33 range before the end of 2011.

50%, 80%, 99% or it's anyone's guess. Right now, I am afraid
of Greek drama plays out, S&P have a Lehman episode, and EE would
take the chance to beat down PM to the doghouse. If Gold drops
lower to 1200-1400 range, the Silver would likely to be in the
range of: 20-24 with the Gold/Silver ratio climbs back to 60s...
If that happens, then my AGQ position is looking at 60% loss,
instead of now looking at roughly 20% loss.

32.50 --> 29.25 --> 26.325 --> 23.69 --> 21.32 (10% loss each step)

1 --> 0.80 --> 0.64 --> 0.51 --> 0.41 (20% loss each step)

Thanks in advance.

Shill
Sep 28, 2011 - 2:36pm

Still in my long call SLV yes

Still in my long call SLV yes I have bleed some for sure, but I have plenty of time to recoup my losses.

Not budging, and I am not leveraged.

Bay of Pigs
Sep 28, 2011 - 2:30pm

@Tom L

"Nothing about this has been in the least bit normal"

You got that right brother. It only compresses the spring tighter until it snaps . I used to think (7-8 years ago) that 2500-3000 gold would be the top for gold. That's not even going to be close at this rate. Probably double or triple of that conservative looking number now.

silverwoodTom L
Sep 28, 2011 - 2:26pm

@ Tom L

I would be willing to bet that the Fed has many contracts with various PhD behavioral psychologists. And they use their intelligencia in their think tank.

Key Economic Events Week of 9/21

9/21 8:00 ET Goon Kaplan
9/21 10:00 ET Goon Evans
9/21 Noon ET Goon Brainard
9/21 6:00 pm ET Goon Williams & Goon Bostic
9/22 10:30 ET Chief Goon Powell on Capitol Hill
9/22 Noon ET Goon Barkin
9/22 3:00 pm ET Goon Bostic again
9/23 9:00 ET Goon Mester
9/23 9:45 ET Markit flash PMIs for September
9/23 10:00 ET Chief Goon Powell on Capitol Hill
9/23 11:00 ET Goon Evans again
9/23 Noon ET Goon Rosengren
9/24 1:00 pm ET Goon Bostic #3
9/24 2:00 pm ET Goon Quarles
9/24 10:00 ET Chief Goon Powell on Capitol Hill
9/24 Noon ET Goon Bullard
9/24 1:00 pm ET Goon Barkin again & Goon Evans #3
9/24 2:00 pm ET Goon Bostic #4
9/25 8:30 ET Durable Goods
9/25 11:00 ET Goon Evans #4
9/25 3:00 pm ET Goon Williams again

Dr G
Sep 28, 2011 - 2:19pm

There was a new sticky/thread

There was a new sticky/thread started about 45 mins ago, for those that are only refreshing on this page.

71185208
Sep 28, 2011 - 2:16pm

C F

I'm with you there...everyone wants tolerance (rightly so) but I find often people have a free pass to be intolerant and insulting when someone mentions Jesus or quotes a Bible verse.

argent rampant
Sep 28, 2011 - 2:12pm

@always_learn

Don't know much about your current position but, as a general rule:

The hardest thing to do is cut losses. Because you are just SURE your position will reverse and zoom up as soon as you sell. But you have to do it and do it decisively and quickly, especially with something like AGQ. Save what you can and start again.

Tom L
Sep 28, 2011 - 2:11pm

@CpnScarlet

This whole move down has been performed in such a manner as to induce the maximum amount of emotional and financial pain. Nothing about this has been in the least bit normal. It has all happened with the intent of a bully beating someone to within an inch of their life.

What makes you think they are going to change their behaviour now?

Gold will re-test 1580... Silver I have no clue about. If the HUI doesn't break below 522 today 1) it would be a miracle and 2) it would be the only silver[1] lining in this price action.

Ta,

[1] all puns intended of course.

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Key Economic Events Week of 9/21

9/21 8:00 ET Goon Kaplan
9/21 10:00 ET Goon Evans
9/21 Noon ET Goon Brainard
9/21 6:00 pm ET Goon Williams & Goon Bostic
9/22 10:30 ET Chief Goon Powell on Capitol Hill
9/22 Noon ET Goon Barkin
9/22 3:00 pm ET Goon Bostic again
9/23 9:00 ET Goon Mester
9/23 9:45 ET Markit flash PMIs for September
9/23 10:00 ET Chief Goon Powell on Capitol Hill
9/23 11:00 ET Goon Evans again
9/23 Noon ET Goon Rosengren
9/24 1:00 pm ET Goon Bostic #3
9/24 2:00 pm ET Goon Quarles
9/24 10:00 ET Chief Goon Powell on Capitol Hill
9/24 Noon ET Goon Bullard
9/24 1:00 pm ET Goon Barkin again & Goon Evans #3
9/24 2:00 pm ET Goon Bostic #4
9/25 8:30 ET Durable Goods
9/25 11:00 ET Goon Evans #4
9/25 3:00 pm ET Goon Williams again

Key Economic Events Week of 9/14

9/15 8:30 ET Empire State and Import Price Idx
9/15 9:15 ET Cap Ute and Ind Prod
9/16 8:30 ET Retail Sales
9/16 10:00 ET Business Inventories
9/16 2:00 ET FOMC Fedlines
9/16 2:30 ET Powell Presser
9/17 8:30 ET Philly Fed
9/18 8:30 ET Current Acct Deficit

Key Economic Events Week of 9/7

9/9 10:00 ET JOLTS job openings
9/10 8:30 ET Initial jobless claims
9/10 8:30 ET PPI
9/10 10:00 ET Wholesale Inventories
9/11 8:30 ET CPI
9/11 9:45 ET Core CPI

Key Economic Events Week of 8/31

9/1 9:45 ET Markit Manu Index
9/1 10:00 ET ISM Manu Index
9/1 10:00 ET Construction Spending
9/2 8:15 ET ADP employment
9/2 10:00 ET Goon Williams
9/2 10:00 ET Factory Orders
9/3 8:30 ET Initial jobless claims
9/3 8:30 ET Trade Deficit
9/3 12:30 ET Goon Evans
9/4 8:30 ET BLSBS

Key Economic Events Week of 8/24

8/24 8:30 ET Chicago Fed Idx
8/25 10:00 ET Consumer Confidence
8/26 8:30 ET Durable Goods
8/27 8:30 ET Q2 GDP 2nd guess
8/27 9:10 ET Chief Goon Powell Jackson Hole
8/28 8:30 ET Pers Inc and Consumer Spend
8/28 8:30 ET Core Inflation
8/28 9:45 ET Chicago PMI

Key Economic Events Week of 8/17

8/17 8:30 ET Empire State Manu Idx
8/17 Noon ET Goon Bostic
8/18 8:30 ET Housing Starts
8/19 2:00 pm ET July FOMC minutes
8/20 8:30 ET Jobless claims
8/20 8:30 ET Philly Fed
8/20 10:00 ET LEIII
8/21 9:45 ET Markit flash PMIs July

Key Economic Events Week of 8/10

8/10 10:00 ET Job openings
8/11 8:30 ET Producer Price Idx
8/12 8:30 ET Consumer Price Idx
8/13 8:30 ET Initial jobless claims
8/13 8:30 ET Import Price Idx
8/14 8:30 ET Retail Sales
8/14 8:30 ET Productivity & Unit Labor Costs
8/14 8:30 ET Cap Ute and Ind Prod
8/14 10:00 ET Business Inventories

Key Economic Events Week of 8/3

8/3 9:45 ET Markit Manu PMI July
8/3 10:00 ET ISM Manu PMI July
8/3 10:00 ET Construction Spending
8/4 10:00 ET Factory Orders
8/5 8:15 ET ADP employment July
8/5 9:45 ET Markit Service PMI
8/5 10:00 ET ISM Service PMI
8/6 8:30 ET Initial jobless claims
8/7 8:30 ET BLSBS for July
8/7 10:00 ET Wholesale Inventories

Key Economic Events Week of 7/27

7/27 8:30 ET Durable Goods
7/28 9:00 ET Case-Shiller home prices
7/29 8:30 ET Advance trade in goods
7/29 2:00 ET FOMC Fedlines
7/29 2:30 ET CGP presser
7/30 8:30 ET Q2 GDP first guess
7/31 8:30 ET Personal Income and Spending
7/31 8:30 ET Core inflation
7/31 9:45 ET Chicago PMI

Key Economic Events Week of 7/20

7/21 8:30 ET Chicago Fed
7/21 2:00 ET Senate vote on Judy Shelton
7/22 10:00 ET Existing home sales
7/23 8:30 ET Jobless claims
7/23 10:00 ET Leading Economic Indicators
7/24 9:45 ET Markit flash PMIs for July

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