Not-so-happy Tuesday

334
Tue, May 22, 2012 - 10:21am

Just some wild-eyed speculation here so proceed at your own risk.

Recall first the concept of "Happy Tuesday". The idea behind it is this: After a week of downside manipulation, The Cartels attempt to "cover their tracks" ahead of the CoT survey each Tuesday. The Cartel short-covering (buying) on Tuesdays would often lead to UP days, thus the term "Happy Tuesday". Pondering this yesterday, I came up with the idea that today would be a DOWN day. Why? The opposite effect, actually. The short squeeze in gold of late last week was likely initiated by new longs being added by The Cartel and their buddies. Yesterday and today, in order to "cover their tracks" and not make this week's CoT appear even more bullish, selling ensues. Ring the register, book some profits and paint the CoT, all in one move.

It looks like we have seen just that overnight and this morning. In fact, there even appears to have been some brazen attempts to jam price lower and back down through the 10-day MA. It didn't work...so far...but that doesn't mean they won't try again, especially after the London PM fix at 10:00 am EDT. It's the area around 1575 that they might be shooting for so let's watch that number closely later today.

Speaking of the squeeze last week, we can finally draw some conclusions now that the OI numbers are in. Remember that the gold OI on Thursday expanded by a whopping 17,000 contracts on the initial $38 move. This was exciting as it showed new LONG interest entering the pit. However, on the extension of Friday when price rose another $17, total OI contracted by 4,300. This is short covering. So, a bottom is made and a rally begins with the 17,000 new contracts but the bounce ends with short covering, NOT more buying. After yesterday's action, we are now in a bit of a tug-of-war zone, loosely banded by 1560 and 1605 and I expect this to continue for a little while.

The silver action was even less inspiring than gold. While price rose $1.52 on Thursday and Friday, the total open interest fell from 113,663 to 112,914. This tells us that some new longs were added but even more shorts were covered. No new liquidity bothered to show up and this is a continuance of the trend that began post-MFG. There simply isn't any, regular interest in trading silver. All that remains in the pit are Cartel monkeys and HFT algos. For this reason, it's still very hard to get excited about the short-term prospects of paper silver. Price once again found a floor under $27 and that's a good thing. However, where is the enthusiasm and liquidity necessary to drive it substantially higher? FOR NOW, it's just not there. Like gold, I see a rangebound trade for a little while, banded by 27.50 on the low end and 29.50 on the high end.

Now, please don't misunderstand what I'm telling you here. I'm still extremely excited about where the metals are headed, particularly silver. The ranges I've described above are for the short term, maybe the next week or two and into early June.

Here are some news items that merit your attention and discussion. First, ZH did a little forensic investigation and uncovered some rather interesting info. In summary, it looks like the Rob Kirby estimate of $18B in losses for JPM might be a little low. https://www.zerohedge.com/news/did-fed-just-give-us-very-big-clue-just-how-big-jpms-cio-loss-may-be

Here's a post from Gene Arensberg that seems to confirm what I've been saying for weeks regarding the CoTs: https://www.gotgoldreport.com/2012/05/cftc-managed-money-short-positioning-high-for-gold-silver-.html

Egon von Greyerz has gotten some bad pub recently because he's begun to give price predictions to KWN. (Bad idea, Egon. Remember, rarely/never give date and price in the same sentence). Regardless, the guy is knows his stuff and he is one of my favorite gold "commentors". I want to draw your attention to something else he told Eric King yesterday. This idea that, even in Switzerland, your gold is not really your gold, is something about which I've heard anecdotally before. Well, here it is again. Smoke or actual fire??

"Von Greyerz also told KWN that a major Swiss bank did not have a substantial amount of allocated gold which they claimed to possess for their client: “We are stressing to investors to take their gold out of the banking system, not only because there are runs on banks that will continue, but the risk of being in the banking system is major. So you should take the additional step of not just owning physical gold, but also owning it outside of the banking system.
We (just) had an example of a client moving a substantial amount (of gold) from a Swiss bank to our vaults, and we found out the bank didn’t have the gold. This was supposed to be allocated gold, but the bank didn’t have it. We didn’t understand why there was a delay (in our vaults receiving the gold), but eventually we found out why there was a delay (the bank didn’t have the gold). It’s absolutely amazing, but not surprising.
This confirms what I’ve always thought. Not only should you not have gold in banks or even unallocated gold, but even allocated gold. It seems that some banks don’t even possess that. So the risk of having gold in the banking system is major.”

Full text found here: https://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2012/5/21_Greyerz_-_Customer_Shocked_Allocated_Gold_Not_in_Swiss_Bank.html

Finally, some serious homework for you. IF YOU HAVE TIME, please utilize it to read these two essays/presentations from Alasdair Macleod. This material was presented last week at the Sprott Hard Assets Investment Conference in NYC. The first "lecture" was primarily focused upon economics and the root causes (Keynesianism) of our current predicament. ( https://financeandeconomics.org/Articles%20archive/2012.05%20Economic%20speech.pdf). The second lecture focused primarily upon gold and silver and their role in the future. ( https://financeandeconomics.org/Articles%20archive/The%20gold%20bullion%20market.pdf) Again, there is a metric ton of information here but, if you take your time, you'll learn a lot.

That's all for now. Have a fun day. TF

About the Author

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turd [at] tfmetalsreport [dot] com ()

  334 Comments

Stratajema
May 22, 2012 - 10:26am

Uh oh

Some retail PM coins carrying larger premiums (e.g. Perth Mint coins) are showing out of stock. My view is that the coin dealers are pulling them so they don't sell them at a loss.

But coin dealers gotta cash flow, so they are still selling the low premium coins.

Einherjar
May 22, 2012 - 10:26am

First?

A Bad Market is Feeding on Itself Today

A Bad Market is Feeding on Itself Today - Rick Rule
Groaner
May 22, 2012 - 10:27am

Just think where the metals would be trading if they didn't

smash them early this morning.. they cant resist because they get more bang for their naked shorts on globex.

Eric King
May 22, 2012 - 10:28am

Connecting several peaks,

Connecting several peaks, especially the top of the most recent downtrend points the resolve date to July 26th. The Fed is meeting on July 31st and the market is telling us that silver will not resolve until we hear the outcome of this meeting.

As painful as the last year has been, I adopted James Turk's philosophy of regularly buying physical no matter the price. Over time, this has served me well and in particular the last 8 months have been a fantastic opportunity to build my stack to a level I didn't think I would reach for a few years to come.

Buy the dips under 28, keep stacking and wait for benny to hit turbo at the end of July.

Eric King
May 22, 2012 - 10:30am
agNau
May 22, 2012 - 10:30am

Derivatives?

What's going on behind the scenes with those pesky derivatives and the Morgue? I'm smellin something.

Roger Godberd
May 22, 2012 - 10:32am

Queazy Money

Eurobonds, IMF, Club Med...all demanding more cash. Ching ching baby, roll those presses & stack that phyzz.

S Roche
May 22, 2012 - 10:33am
Punk-Assets
May 22, 2012 - 10:36am

I just hope the metals stay

I just hope the metals stay at least below $1600/ $29 for the next several months because I should have plenty of extra cash to REALLY stack em up. Everybody has their plan I guess. Wishing for higher prices at this point is not part of mine.

Groaner Eric King
May 22, 2012 - 10:36am

Big brother is watching.. more than ever

How easy it is for them to track down every person on this site and do a cavity search when Uncle Sam wants your metals.

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