A Rally Cometh?

300
Tue, Oct 11, 2011 - 6:29pm

Though I am still guarded in my short-term optimism, I have been itching to give you a rally thread. A couple of items have come together today so I'm ready to stick my neck out just a bit.

Before we begin, I'm not talking about THE rally. I'm talking about A rally. The metals still have lots of work to do in order to generate sufficient speculator interest to really get things rolling. However, all trips begin with the first steps and I think that we are close to embarking on a fun, little journey.

First of all, look at the HUI. After having been savagely beaten for the past two weeks, it has bounced off of what looks to be stout support around 500. It went out on its highs today and rests tonight at its highest level in over a week. This is very encouraging.

Even more encouraging are the latest Open Interest numbers. During the trading day yesterday, gold rose about $35 and silver closed nearly unchanged. However, gold open interest declined by about 2300 contracts while silver expanded by about the same number. How can this be, you ask? Actually, it makes perfect sense when you dig into the numbers and, while keeping in mind that this is primarily guesswork based upon experience, begin applying some common sense.

In gold, the change in OI was primarily due to a 2100 open contract reduction in the Dec11. This is short-covering, my friends, most likely of The Cartel variety. From this, we can conclude a number of things:

1) Just more proof that this latest $200 beatdown in gold was orchestrated by The Cartel in order to allow themselves room to cover contracts at lower prices.

2) Net short-covering (buying) by The Cartel yesterday provided the impetus for the $35 gain.

3) Net short-covering (buying) created conditions of more buyers than sellers causing the gain.

4) A short-covering rally of this magnitude is a clear signal that the selling pressure of the specs is nearly exhausted. In other words, those who were going to sell have now sold.

All in all, this is a reason to be short-term bullish.

In silver, the picture is the same but different. Yesterday's OI expanded by about 2200 contracts and almost all of the expansion was in the Dec11 and Mar12 contracts. However, silver was unchanged. Again, how can this be? It's quite simple, actually. Nearly every new spec buyer was countered by a new seller. Believe it or not, this is actually a "normal" market in silver. Specs buy and The Cartel supplies the fresh paper. It's worked that way for years. The odd thing is the apparent willingness of the shorts to add to positions ahead of the CFTC meeting scheduled for 10/18. Here's what I'm thinking:

1) Total volume was very light yesterday, around 29,000 contracts. Maybe it wasn't JPM supplying the fresh paper. It could have been some other seller or any of the "raptors", as Ted Butler calls them.

2) Silver was up almost $1 today. If I'm right, then the OI numbers we get tomorrow afternoon (again, the numbers tomorrow reflect today's close) will show a total OI that is nearly unchanged vs Monday.

3) Why would that be? Because today's rally in silver was caused by some additional new longs (more OI) and some fresh short-covering (less OI). This would produce a $1 rally on very little OI change.

Anyway, what does all this mean?

The miners are rallying. Many here feel, as do I, that moves in the miners precede moves in the metals.

Open interest looks to have bottomed. Spec selling has ended and spec long money looks to be moving back into the metals. Short-covering by The Cartel looks to be intensifying as they fear that they will not be able to shove prices much lower.

Now, let's look at the charts. First, gold. Note that gold is pressing up against significant resistance between 1680 and 1705. Should it clear that area...and I have a sneaky suspicion that it soon will...your next target is 1755-1765. That may not sound like much but that would be a $100 rally from where we stand this evening. Not too shabby. Additionally, a rally that carries gold back to 1765 may extend through there and, by extending higher, would excite more spec longs back into the pit. Gold could trade back above 1800 very quickly.

Once again, silver is the same yet different. Technically, it is trying to rally but it is going to be really hard for it to get through 33-33.85. Really hard. In fact, its best chance may be to sneak by that entire area in a day or two. Never let The Cartel know what hit them. Either way, IF it can get through 34...and that's a big IF...it will move quickly toward $37 and, from there, be poised for a late-autumn rally back toward the highs of August.

OK, so there you go. Like I said, I've been itching for a rally and it certainly looks like we are on the edge of one. Yes, I know I've been warning you about the potential for drops to $1500 and $24. That potential still exists. However, please keep in mind that I can only work with current information. Situations change and we have to be able to adapt and adjust to the changes. For now, many signs point to a rally. Let's just see what happens.

Have a great evening and a fun Wednesday. TF

9:50 a.m. EDT UPDATE:

The Battle Is On.

After a strong overnight rally, The Evil Empire is actively suppressing price this morning. Note that two forays into the Max Q resistance area have been repelled by The Forces of Darkness. The Evil Ones saw gold approaching 1700 and silver above 33 and knew they had to act. Knowing that today is Wednesday, which means that they have until next Tuesday to cover any new short positions, Satan's Spawn have been actively supplying fresh paper metal this morning. The keys to watch from here are the support levels I've drawn below. Holding those levels will indicate that short-term specs are returning to the market. Getting that money back is vital to turning the charts higher and forcing our Tyrannical Oppressors to retreat to higher ground.


More later. TF

About the Author

Founder
turd [at] tfmetalsreport [dot] com ()

  300 Comments

johnboatcat
Oct 11, 2011 - 10:34pm

Wow!

What was that DPH? Payback or fat finger? :-)

backseatdriver
Oct 11, 2011 - 10:34pm

redwood

Exactly, its what they do. Right now big institutional dollars are sucking money into their FRN barrels, getting ready to pull the plug. Nothing but a suckers rally, regardless of how far it runs. Its no coincidence that there are still over 8 million shorts on the S&P in regards to OI. When the next leg down happens, you can bet the big boys wont be holding the bag. They win in both directions, every time.

BSD

¤
Oct 11, 2011 - 10:39pm

MOAQE'S = "... by making sure they have enough oxygen..."

DPH: I have no idea what the final combined number of EU & Fed. QE's will be but it will be shocking. When they talk about capital and having plenty of it ready and at the same time they are also talking about there not being enough currently only means one thing...MOAQE's is going to happen and Geithner is pretty much confirming the need for it.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

Europe Must Go Beyond Recapitalization: Geithner Q By Cheyenne Hopkins and Peter Cook - Oct 11, 2011 7:46 PM ETTue Oct 11 23:46:09 GMT 2011

U.S. Treasury Secretary Timothy F. Geithner said European leaders must go beyond a planned recapitalization of banks to resolve the continent’s sovereign-debt crisis.

U.S. Treasury Secretary Timothy Geithner

Joshua Roberts/Bloomberg

Timothy F. Geithner, U.S. treasury secretary, speaks during a Bloomberg Television interview in Washington, D.C. on Oct. 11, 2011.

“The most important problem is they have to make sure that the major economies of Europe that are under pressure now are able to borrow at affordable rates,” Geithner said today in an interview with Bloomberg Television. “They recognize the need to do more than they’ve done so far.”

Geithner will be in Paris on Oct. 13-14 for a meeting of Group of 20 finance ministers. European officials are striving to meet an end-of-month target set by French President Nicolas Sarkozy to get to grips with the crisis, which has propelledGreece to the brink of default, shaken world markets and fueled speculation that the 17-nation currency might not survive in its current form. European leaders are due to meet on Oct. 23.

“They are moving but they have some ways to go,” Geithner said. “You saw the president of France, the president ofGermany make some very promising, very encouraging statements,”he said.

“The Europeans recognize they need to put in place a much more substantial, much more powerful response if they are going to achieve their objectives, which is helping countries reform by making sure they have enough oxygen that they can get through this.”

https://www.bloomberg.com/news/2011-10-11/geithner-says-europe-must-go-b...

¤
Oct 11, 2011 - 10:40pm

wow

what the heck happened there. sorry. One moment.

¤
Oct 11, 2011 - 10:41pm

.

.

¤
Oct 11, 2011 - 10:42pm

.

.

¤
Oct 11, 2011 - 10:43pm

.

.

ewc58
Oct 11, 2011 - 10:43pm

Uhh, what do you mean "or" Hazey?

hyper-mad geek

mad hyper-geek

I think the 1st works better.

¤
Oct 11, 2011 - 10:43pm

.

.

¤
Oct 11, 2011 - 10:44pm

.

.

Subscribe or login to read all comments.

Contribute

Donate Shop

Get Your Subscriber Benefits

Private iTunes feed for all TF Metals Report podcasts, and access to Vault member forum discussions!

Key Economic Events Week of 10/14

10/15 8:30 ET Empire State Fed MI
10/16 8:30 ET Retail Sales
10/16 10:00 ET Business Inventories
10/17 8:30 ET Housing Starts and Bldg Perms
10/17 8:30 ET Philly Fed MI
10/17 9:15 ET Cap Ute and Ind Prod
10/18 10:00 ET LEIII
10/18 Speeches from Goons Kaplan, George and Chlamydia

Key Economic Events Week of 10/7

10/8 8:30 ET Producer Price Index
10/9 10:00 ET Job Openings
10/9 10:00 ET Wholesale Inventories
10/9 2:00 ET September FOMC minutes
10/10 8:30 ET Consumer Price Index
10/11 10:00 ET Consumer Sentiment

Key Economic Events Week of 9/30

9/30 9:45 ET Chicago PMI
10/1 9:45 ET Markit Manu PMI
10/1 10:00 ET ISM Manu PMI
10/1 10:00 ET Construction Spending
10/2 China Golden Week Begins
10/2 8:15 ET ADP jobs report
10/3 9:45 ET Markit Service PMI
10/3 10:00 ET ISM Service PMI
10/3 10:00 ET Factory Orders
10/4 8:30 ET BLSBS
10/4 8:30 ET US Trade Deficit

Key Economic Events Week of 9/23

9/23 9:45 ET Markit flash PMIs
9/24 10:00 ET Consumer Confidence
9/26 8:30 ET Q2 GDP third guess
9/27 8:30 ET Durable Goods
9/27 8:30 ET Pers Inc and Cons Spend
9/27 8:30 ET Core Inflation

Key Economic Events Week of 9/16

9/17 9:15 ET Cap Ute & Ind Prod
9/18 8:30 ET Housing Starts & Bldg Perm.
9/18 2:00 ET Fedlines
9/18 2:30 ET CGP presser
9/19 8:30 ET Philly Fed
9/19 10:00 ET Existing Home Sales

Key Economic Events Week of 9/9

9/10 10:00 ET Job openings
9/11 8:30 ET PPI
9/11 10:00 ET Wholesale Inv.
9/12 8:30 ET CPI
9/13 8:30 ET Retail Sales
9/13 10:00 ET Consumer Sentiment
9/13 10:00 ET Business Inv.

Key Economic Events Week of 9/3

9/3 9:45 ET Markit Manu PMI
9/3 10:00 ET ISM Manu PMI
9/3 10:00 ET Construction Spending
9/4 8:30 ET Foreign Trade Deficit
9/5 9:45 ET Markit Svc PMI
9/5 10:00 ET ISM Svc PMI
9/5 10:00 ET Factory Orders
9/6 8:30 ET BLSBS

Key Economic Events Week of 8/26

8/26 8:30 ET Durable Goods
8/27 9:00 ET Case-Shiller Home Price Idx
8/27 10:00 ET Consumer Confidence
8/29 8:30 ET Q2 GDP 2nd guess
8/29 8:30 ET Advance Trade in Goods
8/30 8:30 ET Pers. Inc. and Cons. Spend.
8/30 8:30 ET Core Inflation
8/30 9:45 ET Chicago PMI

Key Economic Events Week of 8/19

8/21 10:00 ET Existing home sales
8/21 2:00 ET July FOMC minutes
8/22 9:45 ET Markit Manu and Svc PMIs
8/22 Jackson Holedown begins
8/23 10:00 ET Chief Goon Powell speaks

Key Economic Events Week of 8/12

8/13 8:30 ET Consumer Price Index
8/14 8:30 ET Retail Sales
8/14 8:30 ET Productivity & Labor Costs
8/14 8:30 ET Philly Fed
8/14 9:15 ET Ind Prod and Cap Ute
8/14 10:00 ET Business Inventories
8/15 8:30 ET Housing Starts & Bldg Permits

Recent Comments

by boomer sooner, 1 hour 16 min ago
by boomer sooner, 1 hour 47 min ago
by Texas Sandman, 3 hours 30 min ago
by lakedweller2, 4 hours 46 min ago
by lakedweller2, 4 hours 49 min ago

Forum Discussion