On The Lookout, Part II

439
Wed, Jun 27, 2012 - 10:31am

When you eat, breathe and sleep your work, sometimes inspiration strikes you at the most odd of hours. Last night, I'm tossing and turning, trying to relax when the following pattern came to mind.

First, let's review a few things to insure that we are all on the same page. In Comex silver futures, there are five "delivery" months. These are the contracts that are the most actively traded because they are the contracts with the most volume and open interest (liquidity). These five contracts are considered "delivery" contracts because they are the ones through which holders most often take actual physical delivery of metal. Yes, the other months do see some delivery action but it is the months of March, May, July, September and December where the bulk of the physical settlement takes place.

If one desires to take delivery through The Comex, one must first buy a futures contract. Let's say you wanted your 5000 ounces of silver in March so you purchase a March12 contract. When you buy the contract, you only have to put up part of the money, this is your initial margin requirement. However, once the contract expires, The Comex will ask you to put up all of the money needed to purchase the silver. The date where "100% margin" is required is known as First Notice Day. It's a sort of put-up-or-shut-up type of thing. By late February, trading in the March contract will have ceased so The Comex wants you out of the contract. Only those with intent to take delivery are allowed to continue to hold it and all of them must have 100% of the cost of delivery in their respective brokerage accounts by First Notice Day.

It is on First Notice Day that we get some idea of how many contracts are standing for delivery. Recently, this number has been coming in anywhere between 2,000 and 4,000 contracts, or roughly 10,000,000 to 20,000,000 ounces of silver. OK, are you with me so far??

Here's the rather alarming trend that hit me late last night:

For the December11 contract, first notice day was November 30, 2011. Closing price that day of the March12 contract was 32.87. BY 12/29/11, the MARCH12 TRADED AS LOW AS 26.50. DOWN 19.38%.

For the March12 contract, first notice day was February 29, 2012. Closing price that day of the May12 contract was 34.70. (It was even higher at 37.26 on 2/28.) BY 3/22/12, THE MAY12 TRADED AS LOW AS 31.18. DOWN 16.32%.

For the May12 contract, first notice day was April 30, 2012. Closing price that day of the July12 contract was 31.01. BY 5/16/12, THE JULY12 TRADED AS LOW AS 26.73. DOWN 13.8%.

Graphically, it looks like this:

Uh-oh. Maybe now would be an excellent time to go back and read this post from last Saturday:

https://www.tfmetalsreport.com/blog/3940/lookout

As you know, yesterday was option expiration and the final trading day for the July12 contract. The action now shifts to the September12 contract. First Notice Day for the July12 contract is this Friday, the 29th. If things get a little dicey next week and into mid-July, don't say you weren't warned. That said, I firmly believe everything I put into the Saturday post referenced above. IF a washout through $26 materializes, please do not panic. Recognize it for what it is: The Closing Acts of The Silver Cartel. Once they are net flat or even net long, things are going to get very exciting around here.

Be patient. Think clearly. Be rational. Prepare accordingly.

TF

p.s. My intention is to update TurdTalksMetals with a new podcast, every day by 4:00 EDT. Today, there will likely be a bit of a delay, however. Thanks for your patience and thanks to all who are supporting the new venture.

About the Author

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  439 Comments

Dr Gtobydaniel
Jun 27, 2012 - 6:16pm

Silver in my opinion will

Silver in my opinion will trade rangebound in the 20-37 range till the US economy collapses.

tobydaniel, I like your post. Thanks for it. I think you are selling yourself a bit short, though. I think silver will trade range bound until the focus is back on the US economy (ie, Euro is old news). At that point the metals move up and continue to do so until the economic collapse.

QE will put focus back on the US economy. A debt downgrade will put the focus back on the US economy. Europe somehow being saved will put focus back on the US economy.

Until then, sideways.

Tube
Jun 27, 2012 - 6:30pm

Magpie

I've got family in CO Springs. Two of whom work at the Airforce Academy. I've got some crazy pictures of the fire coming over the mountains on my iPhone from last night. They evacuated the campus...

Bluefin771
Jun 27, 2012 - 6:54pm

Excerpt of Willie's Latest

Regarding my post above on First Day Trends, Jim Willie has another piece out at https://www.marketoracle.co.uk/Article35356.html . A couple of relevant paragraphs: EFFECT OF ABSENT GOLD ON BIG U.S. BANKS A hidden massive sinkhole effect like seen many times in Florida could be close at hand. The financial press reports absolutely nothing on the tremendous loss of gold bullion in Western banks since February. Heck, the gold community seems largely unaware also that around 6000 metric tons of gold bullion have departed Western banks (mostly London) in recent months. The effect will be felt somewhere and soon, by sheer laws of nature. The big US banks might have only one asset of undeniable value, Gold. As they lose that asset during the process by which Eastern entities strip gold via forced demands during margin calls in off-exchange transactions with extreme pressure applied, some big US banks are being pushed closer to a death event. A string of bank failures could be nearby. These banks are far more hollow as structures than perceived. Continued television advertisements, sports sponsorship, and billboard lights do not demonstrate solvency, only zombie activity that lacks vigor. Begin the death watch for Morgan Stanley, which has endured the debt downward. As is the usual mantra by shamans, it was not as bad as expected. All hail. To prevent the sinkholes from causing the next damage, in a hidden desperate maneuver, many cartel banks will attempt to move gold bullion from private executive accounts to save themselves. They will surely continue the illicit practice of raiding allocated accounts, replacing them with gold paper certificates. They will complete the trifecta by draining the SPDR Gold Trust, removing inventory by privileged shorting practices. The entire migration of gold creates an extreme risk for the Western banks, the true asset evacuated. They have many assets on their balance sheets, mostly toxic paper from USTreasury Bonds, Euro sovereign bonds, mortgage bonds, mortgage loan assets, corporate bonds, commercial paper, and commitments tied to derivatives. The great majority of such assets on balance sheets is toxic paper, in a fast-paced process of imploding in value. Those balance sheets also used to contain gold bullion in high volume. That is no longer the case, the bullion having been leased & sold in past years and raided in a massive systematic scale in recent months. The bank balance sheets have been thus hollowed out, leaving their structures to stand on toxic paper, and much less on sturdy inert gold metal. Recall that insolvency plus illiquidity forces bank failure. The many bank runs are like a grand final hollowing process that affects the entire banking sector in lost reserves, large and medium sized banks alike. The absent reserves remove liquidity, amplified by the fractional system. So Jim thinks the draining is up to 6000 tons since the operation started last fall. Again, Bloomberg is unlikely to give a reliable figure on the remaining pot size. But gold (and silver) is rare. Which is why they are called precious metals and silicon isn't. The other thing Jim's piece reminds me of is systems and folk's thinking. The latter was well covered by some posters in yesterday's thread. Basically, how the question or observation is framed often sets up how the subject is thought about. This is the job of the mainstream media. And this media is always (officially anyway) surprised by events that independent thought often sees coming. I'm thinking here of poor Catherine at the NYTimes being unsure why people are losing trust in major institutions. As for systems, one of my favorites is where a linear system meets a discontinuous event. Consider the situation of the temperature system and a pot of water. The water starts at room temperature and is heated to 211.9 Fahrenheit (Earth sea level pressure). The temperature of the water goes up in a linear fashion as heat is applied. The mainstream media reports the pot is still full of water. They may or may not report on the temperature. Now raise the temperature one more degree. Assuredly the mainstream media will be surprised when they look at the pot again to report that the pot is empty (the pot is uncovered in this case). With all gravity they will announce who could have foreseen that just a one degree rise would cause the pot to empty? The folks not on the approved expert list like scientists, engineers and housewives probably knew what would happen in advance. Too bad their credentials weren't in order. Now Jim is saying that Morgan Stanley is getting hot. Heat is continually being applied. Because the Morgan pot has been full of water from room temperature to 211.9 F, as more heat is applied conventional wisdom (mainstream media) says things will continue to be fine. I can just hear the mainstream justify this by saying: Look at their track record. Besides, Morgan Stanley is too big to fail and the Fed would never let it happen. Jim thinks the scientists, engineers and housewives in the major banks have a different opinion. Although their credentials are in order, they are not telling the media what they honestly think (or are doing). So one day, typically from the period of Friday close to Monday open, the pot will be found to be empty. Mainstream media will be surprised. So will their non-thinking audience. I wonder if Catherine will connect the dot to the lack of trust survey? Probably not.

Bron Suchecki
Jun 27, 2012 - 6:57pm

@TF

I will enquire internally when I get into the office but it would be helpful if you can get the client to say whether the trade was done with our retail shop, www.perthmintbullion.con, or Depository and/or supply a transaction number. I assume you can access my email from my account here. I am surprised at this because retail demand is slow at the moment and while the refinery makes each bar size in bulk batches (for cost efficiency) it shouldn't take that long.

Ned BradenTube
Jun 27, 2012 - 6:57pm

Audit The Fed !

While I am as excited as anyone about this prospect; let's not forget that the Senate version of this bill, S. 202 is stuck in the Senate Banking Committee chaired by Senator Tim Johnson of South Dakota. For all we know, he can sit on the bill and do nothing. And there are only 20 Co-Sponsors (out of 100) of S. 202.

That's why we need all Audit supporters to pressure Senator Johnson to bring S. 202 up for markup in his committee.

No Audit will happen without BOTH Houses voting.

Call your state senators NOW and demand they support the Senate bill !

NW VIEWNumber 47
Jun 27, 2012 - 7:01pm

@47- TROLLISM

The world is filled with trolls and few prophets. Most have a high value on their own wisdom and discount anything that does not fit into their own roadway of understanding. It takes a Powerful force within to break our basket full of lifetime events which have formed our trollism. The majority mind set will set the future direction of the masses. One must pray that a true seer will come forth who will redirect the minority to the Truth.

I like the scripture John 8:48 wherein the real trolls in that era, who were the 99.99% majority, spoke to Jesus "The Jews answered Him, are we not right when we say You are a Samaritan and that You have a demon ( that you are under the power of an evil spirit)"?

This site of Mr. T.F.'s is unique. There is enough friendship among the members to allow a true troll and/or a true prophet access to break the group mentality. Try that in the church system or the political system or even the school system and see how quickly the door will be opened for ones exit. Thanks Mr. T.F. - jmo

I Run Bartertown
Jun 27, 2012 - 7:05pm

Black Lawmakers Plot 'Walkout Strategy' During Holder Contempt

https://influencealley.nationaljournal.com/2012/06/black-lawmakers-plot-walkout-s.php

The Congressional Black Caucus has called a members-only "emergency" meeting on Thursday to plot a "walkout strategy" ahead of the scheduled contempt vote of Attorney General Eric Holder later in the day.

(Mod Holliday edit: You were ok until the last part. The story stands on it's own merit. Thanks for your anticipated co-operation going forward. )

tpbetaDr G
Jun 27, 2012 - 7:07pm

@Dr G

"Silver in my opinion will trade rangebound in the 20-37 range"

Christ on a goddam bike that's one hell of a range. You could retire on that.

I Run Bartertown
Jun 27, 2012 - 7:15pm

Bravo, Clerk! Owners should take note.

https://www.sentinelsource.com/news/local/clerk-loses-job-over-stand/article_87627ed5-5d4e-5ff0-a781-f14deb034771.html

"The store clerk was fired after she refused to take a customer’s Electronic Balance Transfer card to pay for cigarettes...“I made the statement, ‘do you think myself, that lady and that gentlemen should pay for your cigarettes?’ and he responded ‘yes,’ ” Whiton said.

The next day Whiton said the customer’s foster mother came to the store to complain. Whiton received a call later that day from the company’s home office in Maine, telling her it had received a complaint about her and reprimanded her.

“I said I would bow out gracefully and give my notice because I didn’t want to be a part of it. I’m 65 years old, you know?” Whiton said.

Charles E. Wilkins, the general manager of the C.N. Brown Co. that runs the stores, said the EBT cards in the cash phase could be used for any items, including alcohol, tobacco and gambling. Wilkins said the company gave Whiton the option of staying but she said she would not accept the cards anymore...“She didn’t think it was right and just wasn’t going to sell to people in that program anymore,” Wilkins said.

I am curious why someone old enough to buy cigarettes needs a foster mother. I predict my research will reveal a program whereby foster care money continues to be paid well into adulthood, for the 'underserved communities'...I know this because I'm a prophet (or maybe just because they always do crap like that).

agrock
Jun 27, 2012 - 7:28pm

out of stock....

checking around to get some more phyzz - man gainsville coins, tulving, apmex not sure if it is price beatdowns ... 'out of stock' on a crap load of AG/AU products.

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