Caution For Monday

142
Fri, Feb 3, 2012 - 4:37pm

Just a quick warning for early next week as I do not like the way things traded today.

Several things concern me for PM prices early next week.

  1. Gold and silver rose yesterday and broke through resistance on good volume and increased open interest.
  2. In light of today's action, this looks like a trap that was set by The Forces of Darkness.
  3. The PMs were pressured all day even though the POSX sold off all day and finished basically unchanged.
  4. Other "risk assets" such as stocks and copper traded higher all day
  5. Gold was then raided for $15 on the Friday afternoon Globex.
  6. Notice on the chart below that this raid occurred before a small Pig rally. Not during or after.
  7. After steps 1-6, does a Friday afternoon raid indicate that someone got word of a pending Cartel short-selling attack for Monday?

So, anyway, we'll see. DO NOT BE SURPRISED, though, if the metals take it in the shorts pretty good on Sunday night and Monday. IF they do, look for gold to drop to 1720 and potentially even 1705-1710. Silver will likely fall to 33 and even 32.80. At those points, both will present rather compelling buying opportunities.

At any rate, I hope I'm wrong and everything springs higher on Monday and all of next week. However, with both metals overdue for a little pullback and with the action we saw today, we should all be mentally prepared for some tough action early next week.

TF

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vamoose1
Feb 5, 2012 - 6:10pm

Hecla 3 The Good.

This doesnt sound like any trip to Hollywood to me Mr. Moose, have you checked the water quality in that swamp you frequent/? Fair enough.

But this stock has a decades long anvil sitting on it, its down from 23, and recently 12., its trading at about ten times (unheard of for a silver company let alone one with a( newly initiated) silver indexed dividend policy, ) and i take the position that markets discount.

To make 100 times your money, your vehicle better be a total POS , universally despised, pounded into depradation, because you want the law of small mumbers working for you. If you bought it at 20 it would have to go to 2000, buy it at 5 and its only 500, nothing to it, hahahaha.

So whats the driver, well, obviously a reset of the silver price, a move into the hundreds, since if we adjust that 50 bucks back in 1980 where silver traded (admittedly in the Hunt corner, ) , adlust it for credit creation, etc etc , well todays equivalent is, round numbers, about 500 dollar silver, presupposing there is any, which there isn.t.

Could Hecla make 20 dollars a share, the very low billions, certainly it could , the current cost of production in both mines is just above zero Greens Creek is MINUS) so the silver proceeds drop straight to the bottom line. The earnings leverage to the silver price is jaw dropping. A normal multiple for an unmanipulated silver producer is 30 times not a crippled 9 times.

Dividend. say again? Silver companies don't pay dividends, its unheard of, true, until this year when these PM companies, seeing their stocks being pounded, began to learn the words naked shorts algos and HFTs and realized that short sellers PAY the dividend to longs, so Hecla with several peers has just initiated a silver indexed dividend, a percent and a bit now but , and this is unprecedented, the dividend TRACKS the silver price automatically. Think about that for a minute, life becomes progressively more painful for naked shorts, and at some point they scramble. And it would be quite a delicious irony to get a 12 percent yield on a silver stock, i mean thats truly funny.

The key to the mint is a rising silver price, a seriously rising silver price. It not only rocket propels this company's earnings, It kills those algos , who we may thank for their machinations one day, since this stock would be 12 rather than 5 without them. They have given us our multiplier. Thanks geeks, we will bury you. Deep.

Lucky Friday.

This is the troubled mine. Its 20 percent of Hecla. Closed for another 11 months by Mine Safety after the accidents. Maybe not, they have to clean and rehab a 5000 foot main shaft, but i have seen some rather obviously professional miner posts saying they can do 50 feet a day, its underway as we speak 24/7. Thats a little over 3 months, not a year. Its an election year, the Governor of Idaho is holding enthusiastic public meetings, 250 hungry families are sitting waiting to go back to work in Silver Valley. Plus the silver will in all likelihood, if you buy the bull story, get sold for far more than today. We better not have an accident. This is not riskless, another accident would close that mine, and god forbid we have a problem in Alaska.

Takeover

This company is a sitting duck, its cash rich with a severely impaired share price, it would not surprise me in the least, and its bye bye upside.

Another Accident at Either Mine.

We do not want this. Big big trouble.

Thats about enough, the PMs just opened and my beer is cold, this of course is risky, words like diversification, and proportionality come to mind. Mining is some business. But, its one tasty setup for those who dare. Ciao people.

The reported short position for Hecla is about 20 million shares, but what is the unreported, well it could well be 60,

vamoose1
Feb 5, 2012 - 5:18pm

Hecla 2. The Bad And The Ugly.

Caution, just one persons opinion, and v. frequently wrong. ok.

So lets say a dreamer wanted to make 100 times their money, is it even possible? Certainly not often, maybe in a new issue dot com or a penny startup, but not on a listed NYSE stock.

Hecla is 120 years old, and will, barring accidents almost certainly, based on the reserves, make 200, but its a mature company, and old ladies like this don't do 100 multiples. Never. Hmmm. Maybe once every 50 years, a ridiculous confluence of circumstances sea changes a company, a miraculous new product (Apple, but Apple is young) , something like that , a purple swan.

Ok, for starters , lets face it , Hecla, for several reasons is a market pig, this is one true POS of a stock, down from once 22 to 5, while the product they sell went from 2 to 50 in the same period.Thats rather tough to do...is there something in the water table in Idaho, ?...stick to bottled.

More recently its been grinding lower, being slowly strangled from 12 bucks to 5 by propellor head algos, naked shorters, and HFTs .. which, when acting on the entire PM sector in concert with regulatory blessing as they do, get a person thinking maybe theres no bottom, lets hope we hold zero.

Secondly, they have just had 3 accidents (after an enviable safety history in fairness)with one death and probably got off lucky. Lucky Friday in Silver Valley Idaho suddenly morphed into Friday the 13TH. Accident number 3 last month was about enough for the Mine Safety folks, they shut it down, possibly for a year. CYA? quite possibly, about which more later.

Was it bad luck, bad management, or some combination, hard to know. Twenty percent of their production shut in, for up to a year, while they rehab the main shaft, but keep in mind the "good" mine, the 80 percent , is Greens Creek in Alaska and this thing is a bloody jewel box. Production costs net of byproducts are NEGATIVE, the silver is pure profit, this is a super mine, case closed ., and lets kindly not have an accident there, since for the time being we are a one mine company, which is always dangerous.

Environment, well, it was v. serious, these Idaho companies (not just Hecla..all of them) appeared to have raped most of the State of Idaho, poisoned the rivers with cyanide, , etc, back then there were no rules, and they governed themselves accordingly. After 20 years of negs they paid Uncle , about 300 million, its in the price, and its a very good thing silver woke up in 2002 , it was a close run thing. But, now they have 300 in CASH, so thee balance sheet is pretty good. Tasty in fact to hungry eyes.

What else is wrong. The Industry itself. The Lucky Friday Mine is now a mile deep, where the good stuff is, (the reserves are basically endless) and mining is a brutal business, not to mention dangerous and if we find some chicken chow mien cartons on the 5200 foot mine face, we better brush up on our Mandarin.

Management? Open question, easy target. Nobody plans accidents, and if Lucky Friday gets back up and running as expected, they are going to be goddamned careful .Thats an if. keep in mind the silver which would have been sold is still there, why not sell it in the hundreds rather than 26.

Earnings. So yes Hecla takes a 23 percent earnings hit on the closure, but, lest we forget , we are 30 percent up off the lows in the silver price, and sit in about the same place. If we hold 33.

So a few ifs for sure. leavened by price one hopes. Print, thats about enough ugly.

cpnscarlethenry
Feb 5, 2012 - 5:02pm

@henry - I never said

@henry - I never said anything about temple prostitutes. Now let's be intellectually honest. Wives and concubines are OK, temple prostitutes and Moabites, Ammorites, Edomites, etc. ...now that's something altogether different. When it's in the Bible in black and white, you need to be correct and in context.

¤
Feb 5, 2012 - 4:41pm

Smiddy

Not sure if if they can actually disguise a take down on a late Friday when it's that large in such a short period of time. Maybe a singular entity broke ranks a bit and saw what was coming tonight or Monday. maybe nothing much happens and we go mostly sideways in a wait and see mode.

It's all guess work to some degree because it seems anything is possible. I think as we get into this further (PM manipulation) that we'll see stuff we never considered. Yikes!

Nice thoughts up above.

I'm out of paper right now after getting my skin peeled from me in Jan. 12' options but I'm not letting it bug me. I bought just as much phyz over the last couple years so I'm good with what I have and it's a good feeling to have that no matter what the markets throw at us at times. I've been helping my dad in the paper market and it's working out pretty well so far for him and guiding someone else in the market is way different then using my own funds and how I've traded at times. Good and bad.

The different perspective on risk management has been real helpful. I consider any money I've lost to be my tuition and I've learned from it. I'm trying to sponge up as much of what's happening now in these markets and geo-politics. It'll come in handy going forward as the stakes in PM prices get higher. We haven't seen anything yet.

vamoose1
Feb 5, 2012 - 4:05pm

Hecla... background noise. 1.

First, everybody does their own DD, so this is decidedly not a recommendation, furthermore, i am speaking my book here, its purely imho and I am a very odd duck when it comes to where silver is going. My numbers are of course off the wall ridiculous, but in all candour, how do you price something that for practical purposes has ceased to exist, ...where North American domestic silver production has now, and rather suddenly been outstripped by one ounce coins!! Thats laughable.

Coins are for collectors like us, the true silver users are of course industry, by a factor of 6 maybe 8 , and there are (est) 50 thousand factories worldwide using silver in ten thousand (and growing daily) apps, and they CONSUME it. In fact they destroy it by consuming it in such tiny amounts its not economically recoverable, ... maybe at 500 we can send some coolies into the landfills to recover those Johmson and Johnson bandaids. Sold to you.

The problem (for Blythe and Timmah, ) is these products number in the scores of billions, they are tiny inputs to the unit cost structure, so , with silver at 475, if Apple has to add ten bucks to a phone, or Boeing has to add ten grand to a 300 million dollar Dreamliner, they couldnt give a flying. Literally, in the case of Boeing, because they are not stopping the assembly lines for proportionate nickels and dimes. And for practical purposes silver is IRREPLACEABLE.

Not a chance, we sit on the cusp of an incipient industrial panic, a collective GROK, maybe at the this springs purchasing manager convention, when tongues get loosened in the Circus Circus rotating bar , they compare notes, ....hows biz.... pretty good, ..... silver seems a hair tight though. You too? Thats all it will take, lets see how long these coin sales continue from the US Mint. Or if the word confiscation enters the language, in which case it should be followed by the words midnight , taxi, and shovel.....

This fool thinks silver (and in particular the stocks) represents the single best investment opportunity he has seen in 48 years of flailing. Its downright wild. Pets.com with real puppies. All the gold in the world is a 75 metre cube i could fit in my back yard. Its all still here, dispersed yes, but still here, just looming doing dick. yes pretty Indian ladies wear silver, but its very personal, dowry stuff, walking bank accounts, ...they are accordingly highly price insensitive btw, and as for Grannys forks, forget it , they were melted down in 1980 when we first visited 50. On to Hecla pls.

vamoose1Exbroker
Feb 5, 2012 - 3:14pm

@ Ex Broker /Hecla

As a matter of fact so did i. Silver looked stubbornly resilient. I guess we will find this out over the next 24 hours. The board is gloomy, the COT ain't great, there are various other quibbles, in fact its been generally gloomy since December, and understandably after these ferocious beatdowns. However i do recall the board being pretty peppy at 1925 Gold , and apoplectically bullish with silver at 49,..... so from a contrarian standpoint ....you get the drift. I am one lonely bull, moooooooooooo.

I think we are in an hellacious manipulated reflation effort for the election, one (of many) features of which is a major stock market wealth effect effort. So i expect stocks to rise, completely counterintuitively right into November with the PPT jamming the futures so egregiously that the indices make new HIGHS. Is it real or is it memorex, oh its memorex all right, but the real numbers show an America melting away, and alarmingly quickly imho, so there is nothing they will not do. Bernanke came right out and said it. We will inflate, we will zirp to infinity we will QE , Euro will QE, it'll shock and amaze ya.

So my bet is silver fools us, just does a pause , and tries the 40s, and one hot spring or summer day, we meet Area 51. And then brace yourself. Thats a 32 year breakout, unprecedented in the history of technical analysis. Will I end up wearing this? Entirely possible. Nothing new. caveat emptor.

One thing worth watching is the PSLV site. When PSLV1 was done 14 months ago, it blasted silver from 17 to 50 in 5 months. The bars arrived 3 months late, the dates on them postdated the issue, still warm from the refinery, ie, there is no physical silver. Its gone.

PSLV2 has just been done for 350 million in physical silver, and this is week 3 . No delivery yet, but i do note that Kodak went t u at a convenient time, and carries a material recovered silver inventory, make that carried...... the Receiver is JP Morgan.

So perhaps it will not take 3 months (it should take a week tops) to deliver the physical for PSLV2, it was telegraphed that it was coming, and appearances count, so all that old Kodak film is being trucked out of Rochester into the refinery as we speak. My point is that Sprott is on record as saying he will announce when the deliveries are complete, announce it on the PSLV site, so i am watching that site, but if we have to liquidate major corporations to maintain the silver supply illusion, which i maintain is the case, it blunts the argument for sub 30 silver. People, face it, there IS NO silver, its gone, sitting in landfills, up in smoke in cruise missiles, and the criminals are turning cartwheels , reduced to blatant criminal acts, in a failing attempt to obscure the facts of the matter.

The fact is that there really is no number for silver, its comically mispriced , a myth being diddled to persuade (is there anybody really left?) the hoi polloi that the worlds reserve currency belongs outside a lavatory. :)

Be Prepared
Feb 5, 2012 - 2:55pm

Last-a-roni!

I have seen the land of Last
and it was behind the Line of Many.
I heard a Mighty Roar
and it shook the bravest
and emboldened the weakest.
It was a message of freedom...
It was a message of courage...
It said fight for the righteousness
of the innocent and the lost....
Fight for those forsaken and
cast asunder to rot in the pile of evil.
Though blood may be the payment,
it's joys are to be unshackled from bondage
and to see the way forward with the freshness
of being first at the table of creation!

Poetically crafted by Be Prepared

Smiddywesson¤
Feb 5, 2012 - 2:29pm

DarkPurpleHaze

Well, they could make Monday a slaughter day, but then again, why would they telegraph it into the close? Wouldn't they want to lure in more longs to the slaughter with higher prices?

There's an idea woven throughout many of your posts that I am completely on board with, and I haven't emphasized it lately, but if I was TPTB, I would save a portion of my margin hikes and my mojo to drive down PMs and PM stocks just before the big event to pick up bargains.

That's their M.O. in stocks. They strain and strain to hold up the bull market as long a possible after a big shock that signals the party is coming to an end. The idiot bears see the market needs to collapse, so they start to short, ignoring the fact that the Boyz will do anything to fulfill the adage, you sell when you can, not when you want. So the Boyz have their buddies in banking and government change the rules to make an environment where they can exit. They sell off their positions in the rock stars and move money into the Russel 2000, knowing the average Joe won't notice the change as long as the overall market indexes don't go down too much. The significant change is the Boyz move from highly concentrated positions in a handful of rock stars (which is how you make money on the way up) to numerous smaller positions that are easier to exit ( which is how you get out at the top without driving down prices and causing a panic). This is when analysts and market pundits who don't have their sh*t together remark about how the market is ramping higher with new leaders. Graduates from the University of Duh don't understand that new leaders mean the Boyz are selling. After the Boyz finish the arduous task of getting out of their difficult to exit positions, THEN the market falls, but the Boyz jump to short positions, not just to make money but to sow panic and shake loose shares at the bottom to pick up bargains. This particular late stage bull doesn't fit the pattern exactly, because it is being held in suspended animation for reasons of MOPE, but this is the pattern of bull markets.

So why should the PM bull be any different? The Boyz are stacking physical and trading paper. Regardless of how much physical they have, they will play the paper game the same way they always do. They will run prices down to pick up bargains at the end of the run. PM prices are in a bull market created by the end of the old system. Before the old system goes belly up, the Boyz are coming after you with everything they have. If you have physical, you can easily ignore this attack. However, if you are in some sort of paper position like PHYS, you have to ready yourself for the possibility that your account may drop by 50% or more before the big payout.

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¤
Feb 5, 2012 - 2:13pm
¤
Feb 5, 2012 - 2:12pm

Last!

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