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

Woody Mornings
Oct 12, 2011 - 12:00pm

MF Global daily metal commentary

Video unavailable

Please take a look at the comments section of this video......I'll cut and paste a couple.....

"Phil did you see the CNBC article stating the CFTC has the vote in inact position limits. Vote is on the 18th. Should see metals Bounce. What you take?

AAE2009R 2 hours ago"

"There are already position limits in place. Now if the position limit is decreased which is highly likely, your thought process is that some "big short" would need to cover sending the market higher. As much as I want to believe this. I don't see it happening. Argue with me all you want. I've seen and heard this story a thousand times. The reality is no one can confirm exactly how that "big short" maintains its position." - Phil

mfglobal 42 minutes ago Anyone care to comment on Phil's response?......there are more on actual youtube page.
cpnscarlet ewc58
Oct 12, 2011 - 12:04pm

@ewc58 - And that's cool, but

@ewc58 - And that's cool, but I'm just going to make sure that people know what I think about this one.

PS - Are you really O-4 or is that just a handle?

pourty
Oct 12, 2011 - 12:08pm

Breaking News! Gold to hit $1300!!!

I couldn't stop laughing just reading the headline. On the other hand, I keep thinking: Yes! Please God, let Gold go down to $1300... I can't even imagine what a brilliant buying opportunity that would be... (if you could find anyone willing to sell gold at that point).

Well, I can dream, can't I?

Gold to $1300

¤
Oct 12, 2011 - 12:16pm

Both at the same time

Provoking China: Selling F-16 to Taiwan or The Currency Bill? Submitted by Static Chaos on 10/11/2011 23:31 -0400

By Static Choas

Monday, Oct. 10 marks the 100th anniversary of the Xinhai Revolution that ended the Qing Dynasty as well as 2,000 years of Imperial China. Sparks have always been flying in the Taiwan Strait between Taiwan and China with the latest being the F-16 fighter planes Taiwan wanted to buy from the U.S.

From an op-ed piece by Bloomberg editors:

"The U.S. is obligated by a 1979 law to supply weapons to Taiwan, whose government broke from mainland China in 1949 after the Communist Party came to power. Taiwan had wanted the U.S. to sell it 66 newer versions of the aircraft, and leaders of both parties in Congress pressured the administration to do so. China objects to any arms sale to Taiwan."

https://www.zerohedge.com/contributed/provoking-china-selling-f-16-taiwan-or-currency-bill

Shill
Oct 12, 2011 - 12:24pm

Great post Tom...Spot

Great post Tom...Spot on.

10yr yield 2.22
SKF down to 71.49

Sitting in Nov XLF puts just incase.

¤
Oct 12, 2011 - 12:25pm
Shill
Oct 12, 2011 - 12:26pm

Approval rating for Congress

Approval rating for Congress at all-time low

CHICAGO (MarketWatch) -- Public approval of the job performance of Congress has scraped to an all-time low, according to a new Gallup poll released Wednesday. Just 13% of Americans currently approve of the way legislators are doing their jobs. The institution's ratings have been in the cellar for months, holding below 20% ever since June. Gallup noted that in 2011, Congress is on track to mark its lowest annual average approval since the pollster began measuring it in 1974. Previous lows were the 18% recorded in 1992 and 19% in 1979, 2008 and 2010. The latest survey was conducted

WillieJackBrownLee
Oct 12, 2011 - 12:26pm

Spec interest

"The metals still have lots of work to do in order to generate sufficient speculator interest to really get things rolling."

See, this is what I've been saying for weeks. I don't know where this interest is supposed to come from. With OI constantly contracting, I know some see that as meaning less shorts to tangle with, but it also means longs are pitching and hitting the Ole Dusty Trail. And with leverage gone from the Crimex, I don't see new interest in great enough numbers to drive price significantly higher.

The shorts are covering in small enough lots to keep price down, the strong hands are buying in small enough lots to keep price down and quietly accumulate physical. As we all know, small specs went the way of the dodo, if not in May, then certainly after the last smackdown. So, someone please explain why we think some magnanimous entities are going to show up like knights on white horses and save our underwater holdings and make this trade profitable again.

My predictions? $36 Ag, EOY, $1680-1690 Au

I'm not trying to be confrontational, but genuinely want an explanation. Keep in mind I know nothing.

Shill
Oct 12, 2011 - 12:31pm

So, someone please explain

So, someone please explain why we think some magnanimous entities are going to show up like knights on white horses and save our underwater holdings and make this trade profitable again.

Metals have and always will be a speculative trade, and speculation is money. Some hold for the TEOTWAWKI and some hold due to PM's inflationary purposes and some hold it for investment as well as collectable purposes. But it is speculative. All markets are these days, there will always be buyers and sellers, until it stops dead in its tracks. But don't hold your breath waiting for the Belly up version of this play, you will grow old and grey waiting.

Be well

Tom L
Oct 12, 2011 - 12:31pm

and all 13% of them hang out

and all 13% of them hang out at the HuffPo.

Ta,

ewc58
Oct 12, 2011 - 12:32pm

Peek-a-Boo.... We see you...

For what you are

question
Oct 12, 2011 - 12:33pm
Economical Disaster
Oct 12, 2011 - 12:34pm

re: Breaking News! Gold to hit $1300!!!

The guy should be fired for these preposterous remarks. Thinking the dollar is a safe haven, is like saying my maxed out credit card of $750,000, without a job, is a fine risk for a higher limit.

ewc58
Oct 12, 2011 - 12:37pm

Me, I only hold PMs

because

a. I have Authority issues

b. call me immature, I just like to annoy Jamie & Blythe

We all have our reasons.... what are some of yours out there?

gorman
Oct 12, 2011 - 12:44pm

What about Euro gold prices

Anyone kind enough to explain in layman terms why the gold price has grown in the past days in USD but has not gained in Euros?

Sorry, newbie here...

cpnscarlet
Oct 12, 2011 - 12:45pm

SGTB and Chapman - Absolutely Hilarious

Obvious disconnect between them on the latest YT vids - Chapman nails the Bill Ayres/Pinko connection, but SGT doesn't want to hear it. Here's SGT's biggest name draw to his channel, and Chapman's not agreeing with him 100%. Seems SGT is getting ansy and has to get Bob to agree that "it's not ALL commies and socialists". "Oh there marching for all the right things for the wrong reasons". What a crock. Taking this to "Occupy the Fed" may (MAY mind you) be the right direction for all this.

But never forget that explaining the actions of the Federal Reserve, Fractional Reserve Banking, and Peak Debt takes an erudite spokesman with time and a willing audience. A general mob scene is not conducive to this type of educational experience. But the Marxists always love the mob marching for "Peace, Bread, and Brotherhood".

PS - Wish I had something intelligent to say about PM action this AM, but the result of the rePOMO/TWIST and Ag/Au prices aren't making a connection in my head yet.

cpnscarlet
Oct 12, 2011 - 12:56pm

Why I Own PMs

1) The LORD has blessed my master abundantly, and he has become wealthy. He has given him sheep and cattle, silver and gold, male and female servants, and camels and donkeys. GEN 24:35 - It's God's idea of money. That's good enough for me.

2) "Scientists believe that supernovae created all the heavier elements, such as iron, gold, and uranium, that are found on earth and have been detected in objects outside the solar system. Also, there is evidence that some high-energy cosmic rays originate in supernovae." - https://www.gemologistsam.net/did-gold-come-from-a-supernova/ - Guess the Fed and the Treasury can't print it!

Shill
Oct 12, 2011 - 12:56pm
Grigeo SilverWealth
Oct 12, 2011 - 1:02pm

Yes, funny, very, very funny :)

Turd clearly has other talents that we were not aware of. I have to bookmark this page so I can go back and read whenever I want a good laugh. Too good!!

Darth Smoker
Oct 12, 2011 - 1:03pm

@ewc58

Why I buy PM? Cause my wife likes shiny things, and they go clink, or clank, it's the sound of money.

Reminds me of the time my wait staff complaining about the smell of beer brewing, I'd tell them, "that's the smell of money".

Shill
Oct 12, 2011 - 1:04pm

1:00p U.S. to increase call

  1. 1:00p

    U.S. to increase call for Europe action: Brainard

  2. 1:00p

    U.S.'s Brainard: Europe to be focus of G-20 talks

  3. 1:00p

    Consequences of Europe delay growing: Brainard

  4. 1:00p

    China should allow yuan to rise faster: Brainard

  5. 1:00p

    Europe biggest risk to globe at moment: Brainard

Shill
Oct 12, 2011 - 1:06pm
cpnscarlet
Oct 12, 2011 - 1:09pm

SVM to go much higher

SVM probably goes much higher - Why? Because I just SOLD HALF my position - things are getting dicey before the weekend and it's my only paper in the green column right now - had no choice - needed some cash on hand.

Shill
Oct 12, 2011 - 1:13pm
ewc58
Oct 12, 2011 - 1:16pm

@ ewc- re: why you hold PMs

Need I remind you, my good friend, that you don't hold PMs. You USED to hold PM's but they were all lost in a tragic boating accident some time ago. Alas.

However, if you do, in the future, acquire some PMs you might add these to the reasons why:

1. 10 oz bars make awesome building blocks for lego cities.

2. You get to make a genuine, authentic pirate map complete with dotted lines and an X to mark the spot in your yard where you buried... well, er, you are planning on placing a sprinkler. Or something.

3. Nothing says "Playa" like a 5-oz gold buffalo on a chain around your neck.

4. Gold and silver are real money. Nothing else is.

¤
Oct 12, 2011 - 1:16pm

Just heard on TV...

...that Slovakia passed that EU resolution. Let the PM price inflation begin

Tom L
Oct 12, 2011 - 1:17pm

TBT catching a bid

b/c the 30 year bond is flirting with 138.00... See my post above. That will light a fire under the SPX, and in some ways it already has. We're 15 minutes from a CRIMEX close above $1680 gold and $32.50 silver. This is a big deal folx.

I know we've all been beaten into submission in the past few weeks, but this is the moment we've been waiting for in the metals. 15 minutes to check off one of the criteria for a resumption of the short-term bull trend.

Ta,

WheelerSilver
Oct 12, 2011 - 1:17pm

Lets go Lets go!

Lets see this rally boom! ​Take it Blythe! No sellers left and they continue to short. This is madness. Anyone got any dry powder left? Now is the time people. This thing is going up up up.

_____________________________

https://www.wheelersilver.com

~Handmade Quality Bullion~

¤
Oct 12, 2011 - 1:21pm

Pining

3. "playa"......lol...nice

Shill
Oct 12, 2011 - 1:30pm

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