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

Marcus
Sep 27, 2011 - 7:38pm

Still too shaky

I respect your analysis, Turd, but with all due respect, I believe I'll hold back on buying back in just yet. I would rather buy at a higher price and be sure that gold has truly achieved escape velocity and is headed higher than to buy in at this point when another smackdown is certainly possible. No doubt prices will be higher weeks or months from now, no doubt at all. But neither can it be denied that the powers-that-be can definitely inflict more damage on a short term basis (that very recent spike down to 1540 might be the first caress as well as a harbinger of what is yet to come, but we won't know it unless viewed in hindsight, and hindsight will be available only with the passage of a bit more time). I'm a speculator, sir, not a gambler. I'll wait a bit longer until I'm fairly certain that the shakeout has exhausted itself and I know which way the wind blows. Chicken I might be, but I'm only trying to survive in order to fight another day.

ScottJ
Sep 27, 2011 - 7:41pm

Rocket Science, Not Quite... EE Science, You Betcha

Not Rocket Science.... but definitely a science to the madness.... if you can figure out their game.. or that you are playing a game against them in the first place.

I think paper gold/silver retest 1584/28 area over the next two days, while equities begin to fall.... and on Friday the trade gets veryyyyy interesting... in my opinion only.

If gold and silver can find a bottom at lower highs (1584/28), it could be setting up for another stock market tank job (on Greece problems, what else), and gold (& silver) catching the safehaven bid alongside the US Treasury Bonds could be playing itself out again (Bernanke has more bonds he needs to flock people into).... it would certainly make sense in why Gold was knocked down before another "safehaven" run.

The reason I don't think the gold trade will go the other-way (down) is because it will strain the physical trade too much....and they have already made their "statement attacks" in the after-hours raiding Sunday night... If it was meant to be lasting, it would be during regular trading hours.

Here is the Head and Shoulders in Equities Market as we speak is practically formed....



Also, I believe there is too much fear in gold/silver trade... perfect scenario for it to go back up again. Especially when people see paper gold and silver under 1600 and 30 again for a short while (next two days?), and all of the TV analysts can suggest to short gold and silver.... as they are "clearly a bubble" (bear trap anyone?).



The way that equity markets recover after a tank-job is the hyper-inflationary Europe TARP package (helped financed by the FED, as US Banks safety may be cited?). That and some outright Keyenesian policies in the US to induce the politicians and bankers only plan..... stimulate now at the cost of tomorrow.... regardless of any facts concerning the matter.

Also... the old war engines may be "revving up" the western economies again.... The chairman himself said he expects defense spending to increase in the latter part of 2011 (in his first Fed Press Meeting) to help positively affect the GDP..... sick this is a "vital part of our economy," isn't it? It really is not... the masses have just been taught that it is....

Just my thoughts.... nothing concrete.

RightBrain
Sep 27, 2011 - 7:48pm

nice turd.

stack on.

Farpdinkle
Sep 27, 2011 - 7:49pm

Explore your options...

Now is a good time to check numi's at coin shows, your LCS, flea markets and e*ay...

Keep your options alive in several directions. Smart players can have a blast...even without the blastoff, lol.

- Farpdinkle

exiledbear
Sep 27, 2011 - 7:50pm

Something to pay attention to going forward

Look at the spread between the paper quotes and physical. It would not surprise me if they start to widen, where paper gold starts to lag physical more and more, where physical is driving the bull market up and not the other way around.

I think at some point the paper markets are not going to be a good indicator for the real price people are paying for gold.

FFFMarcus
Sep 27, 2011 - 7:51pm

@marcus re: Still too shaky

I am no sage and do not claim to be. Just a guy with a laptop and plenty of financial beatings.

Agree with you in that a double bottom or worse is entirely possible as "they" try to discredit any and all gold and silver as currency rumblings.

In today's update, John Lansing (fairly good at major trends, but not so good in the stock picking area, but I digress) said that he is steering clear of gold and silver (the metals and the miners) for the balance of this year. He thinks TPTB are going to push the technology sector to new highs between now and year end.

Lansing is just another data point...not saying he is right or wrong. Just something for all to watch and see. Maybe the Cartel is going to allow the techies an opportunity to exit their shares on a high...who knows?

2009...hot oil sector

2010..hot metals sector

2011..hot tech sector??

¤
Sep 27, 2011 - 7:53pm

Fed. getting nervous and defensive?

Fisher: Central Bank Is Under Attack Q By Vivien Lou Chen and Margot Habiby - Sep 27, 2011 5:09 PM ETTue Sep 27 21:09:47 GMT 2011

Federal Reserve Bank of Dallas President Richard Fisher said the central bank’s independence is under attack from both ends of the political spectrum in Congress, and he singled out two of the critics by name.

“We are being attacked from the right and from the left, and I don’t see much difference between a certain congressman from Texas named Ron Paul and a certain congressman from Massachusetts named Barney Frank,” Fisher said in response to audience questions after a speech in Dallas. Paul is a Republican and Frank is a Democrat.

Fisher’s remarks are uncommon among central bank officials, who tend to defer to Congress and its members, said Sung Won Sohn, former chief economist at Wells Fargo & Co. The Dallas Fed chief is the only member of the Federal Open Market Committee to have run for Congress, losing as a Democrat to Republican Senator Kay Bailey Hutchison twice, in 1993 and 1994.

His comments are “true as a factual matter,” said Sohn, who served as a White House staff economist under Richard Nixonfrom 1973 to 1974 and is now a professor at California State University-Channel Islands. “But a person in the position of president of a Federal Reserve bank should be careful about what he says and how he says it because the Fed actually reports to Congress and Congress can do anything it wants to the Fed.” ...

https://www.bloomberg.com/news/2011-09-27/fisher-says-central-bank-is-un...

boatman
Sep 27, 2011 - 7:53pm

u got it scottj

problem is, gold is trading COUPLED to the dow....look at today....

and i feel a dow move to 10,400 n so does my expert ph.d. TA guy

me thinks christmas is coming TWICE THIS YEAR!!!!

this ain't over.......tho my stomach wishes it was!!!!!!

bounces off 1530 again???? or lower.....

2nd CHANCE TO LOAD THE TRUCK????

before beginning another upward climb.

just sayin......

exiledbear
Sep 27, 2011 - 7:54pm

What's the current spot price? 1647?


And there's the last 1oz Krugerrand traded on Ebay. That's a spread of over $100. My guess is that spread will widen as time goes on.

¤
Sep 27, 2011 - 7:55pm

Destroy theirs/Make them buy yours/Sound strategy

Iraq Makes First Payment to U.S. for F-16 Jets Q By Viola Gienger - Sep 27, 2011 5:31 PM ETTue Sep 27 21:31:27 GMT 2011

Iraq moved ahead with its plan to buy 18 Lockheed-Martin Corp. (LMT) F-16 fighter jets, making its first payment on a $3 billion program that would help the new government maintain security after the U.S. military leaves.

“A long-term strategic relationship with Iraq is important,” Pentagon spokesman George Little said. “We seek to find ways to enable the Iraqis to provide for their own security and to add to greater stability in the region.”

The base value of Iraq’s jet order is about $3 billion, Little told reporters at the Pentagon today. With all options for equipment and services, the total value of the agreement may reach $4.2 billion.

The program, outlined in a September 2010 Defense Department notice to Congress, includes 18 F-16 Block 52 variant jets. Iraq’s air force was largely destroyed in the wars in 1991 and 2003 and during the years between when the U.S. enforced a no-fly zone...

https://www.bloomberg.com/news/2011-09-27/u-s-has-received-first-iraq-pa...

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