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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turd [at] tfmetalsreport [dot] com ()

  439 Comments

Number 47
Jun 27, 2012 - 7:33pm

@NW VIEW

Sorry, I'm not at all sure what you meant there, I even read that bit of the bible you recommended, (and I'm an atheist)

Are you calling me a troll or a prophet? I can assure you I'm neither.

Please clarify. I am at odds.

Katie Rose
Jun 27, 2012 - 7:38pm

warnings everywhere

I just joined Turd's other site and found that most of the content was not available. Internet Explorer kept warning me it was insecure and kept blocking the content. I'd say "allow" and it would be blocked anyway.

I'll be listening to the podcasts, but frankly, my first experience freaked me out. So I suspect that many of us will continue to post here as this site is much more user friendly and much better built. And I can hat tip as liberally as I like.

Here I can talk about goats and alfalfa and the future reproductive Hell unfolding with GMO grains, grasses, etc.

And I like the mods here! They keep the discourse civil.

tobydanieltpbeta
Jun 27, 2012 - 7:42pm

Lol, thanks for the laugh

Sorry, I should have said the mid 20's to the mid 30's. Yes, it is a large range! However, silver trades in freaking huge ranges. Lets see, over the past year and a half to two years we have been from the mid 20's to 50 back down to 26 back up to 37 or so and back down to 26. So if you have not retired yet on that, I dont know what to tell ya;) Not even Hurricane Hunters get knocked around like this!

On another note to what DR. G wrote me, I hope I am wrong, but I dont think an overt QE will do much for the metals. Just going over history and history shows that we went from a little higher than we are now to 50 within a year or something like that and back down to where we are now which is lower than right before we started QE2. Yes, we may get a great spike up in silver but whos to say those that are in control of the price of silver wont just bring it down right back to where we are right now. Clearly its not very hard for them to do this. Algos tripping stops. How easy can that be? Markets can stay irrational longer than we can stay solvent.... definitely applies to silver.

The Green Manalishi
Jun 27, 2012 - 7:43pm

Latest from Teri Buhl

JP Morgan Managers Being Told Trade Loss is $9 Billion

Posted by Teri Buhl under Bank Fraud
[3] Comments

Banking competitors are trying to lure away top talent at JP Morgan by highlighting the recent prop trading losses are likely to affect bonues and Jamie Dimon isn’t being honest about how bad the loss will be. On July 13th the banking giant will announce 2nd quarter earnings and a real-time number is expected on how many billions net income gets wacked with because the London whale trade has been wound down or they’re willing to admit how bad the wind down will be. Last week Mark DeCambre at the New York Post wrote his JPM sources expect the loss to be between $4-6 billion – JPM’s estimate in May was only $2bn. But I heard this week JPM managing directors are being told it’s more. To the tune of $9 billion – Ouch!

More: https://www.teribuhl.com/2012/06/26/jp-morgan-managers-being-told-trade-loss-is-9-billion/

TheGreatKD
Jun 27, 2012 - 8:11pm

New Site

Is anyone else having trouble logging in to new site ?? Won't accept my password and when asks for new password to be sent to my email the link won't open to reset the password ??? KD

ClinkinKY
Jun 27, 2012 - 8:18pm

Impeachment insurance

Excuse me, can you tell me where I should order?

Magpie
Jun 27, 2012 - 8:22pm

For Bron

Not really all that important, but I have been drooling over this beauty for a long time. I check in once in awhile to see if they will sell it in the U.S., but according to the site:

This product is currently not available for your region. Please try again later or choose another product in order to continue.

Why not?????

I don't have enough dry powder for one right now, anyway, but if I did...........

Magpie
Jun 27, 2012 - 8:33pm

A GMO rant for Katie Rose

https://uppitywoman08.wordpress.com/2012/06/26/monsanto-threatens-to-sue-states-for-gm-labeling-the-real-reason-senate-rejected-gm-label-bill/

While we are fighting over which detached elitist Presidential candidate who doesn’t give a shit about us is going to take us to hell at the slowest rate, and while we are focused on what to do about controlling women and gay people, Big Agra and Monsanto are stuffing our bodies with ammonia, antibiotics, scraps previously only approved for dog food, and Genetically modified produce that is so riddled with chemicals you now have to scrub them as if you are prepping them for surgery. And they are getting away with it.

TheGreatKD
Jun 27, 2012 - 8:35pm

Yes

They are fiddling with it today, working to add an "s" onto the initial signup page http so that everyone will relax about security.

Bron Suchecki
Jun 27, 2012 - 8:39pm

Bron, thanks

Will post whatever response I can find from "N".

Thanks for checking it out for him.

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