Hate it. Hate it. Hate it! As you might imagine, I take this "responsibility" pretty seriously so it bugs me to no end on the occasions when I am dead wrong. Two weeks ago, I proudly gave you another "Turd Bottom" in gold and, this time, I was wrong. The questions now are: 1) Why? and 2) What happens next?
Let's work on the "why" part first. Perhaps it's nothing more shameful than simply jumping the gun. Soon after the Leap Day Beatdown, I posted charts that showed that gold might fall as far as 1600 and that silver could see 31, maybe even 30. Maybe I just got impatient and went looking for bottoms too soon. This could be the simple answer but we'll only know for certain once we are granted the hindsight necessary to accurately assess the battle.
My underlying fear, though, is that post-MFG, The Comex is completely broken. I say this because everything that The Turd has traditionally used to predict price suddenly seems in question.
- RSI and MACD point to oversold
- Lease rates neutral
- Occasional backwardation in price indicates physical tightness
- Reports of significant physical demand at these price levels
- Open interest at remarkably low levels
- CoT reports undeniably bullish for both metals
I still expect that prices will bottom soon, in the area where I'd originally projected. Both charts will be painted with massive, reverse head-and-shoulder bottoms and happy days/smiling faces will return to this site. However, we must be aware of the possibility that a disconnect is finally occurring between paper and physical price. There should always be an arbitrage. The paper markets should always have some connection to reality. But, in the post-MFG world, are we seeing something different? If, as I've speculated, The Comex is now entirely ruled by The Cartels and The WOPRS, who is to say that price cannot continue lower? Yes, there are high net worth individuals, large institutions and even countries that are desperately accumulating gold. But do you think that they actually care if The Devils keep jamming the price lower? They likely welcome lower prices! A sovereign nation or central bank that is planning on buying significant amounts of gold this year certainly has an average price in mind that they are willing to pay. If The Forces of Darkness and some WOPRs are intent upon jamming price lower, the Sovereign will gladly pull its bids, let price fall and pick up physical metal at a later date and at a lower price. So, we must be careful here. Yes, price should definitely bottom very soon. IF the metals "markets" are still at least partially-linked to some level of reality, price will soon reverse and this manufactured correction will end. BUT, we must be aware of the possibility that this will not soon end. IF the Cartels and the WOPRs truly are the only remaining players of size in the pit and IF they just continue to sell, price will continue to fall regardless of the fundamentals and the technicals. It will, eventually, bottom and the stage will be set for The Mother of All Short Squeezes (TMASS), but that could literally be months from now and at a much lower price.
One more thing. I mentioned back on Friday that this week was going to be all about The Pig. Now, this hasn't overtly been the case but look at what the FOMC minutes did to the POSX chart. Note that, just as The Pig threatened to break down and through the trendline from the late August bottom, the Fed magically rides in for the rescue. Coincidence? Rrrrright...I think you know by now how I feel about coincidences.
OK, that's all for now. As I close, I see that things still look rather lousy at 1622 and 31.52. Hang in there and keep the faith. The truth, the facts and simple logic are all on our side. Brighter days will return soon. TF