Expecting A Bounce

238
Thu, Aug 2, 2012 - 3:55pm

Well this week has certainly played out as expected, hasn't it? The question now is: Will tomorrow be the final piece of the puzzle? Will price rally off of a lousy BLSBS report? I'm quite sure that it will. Come on in and I'll explain why.

At the risk of seeming to beat a dead horse, regular readers of TFMR (and subscribers to TTM) know that this week is playing out almost entirely as expected. Last Friday, I had hoped that his week would be an UP week but I put the chances at just 25%. The more likely outcome was an early-week rally, followed by a mid-week beatdown, followed by a Friday rally that leaves the week virtually unchanged. If you haven't yet, you can read all about it here (complete with the obligatory images of the spec sheep being sheared).

https://www.tfmetalsreport.com/blog/4053/get-ready-next-week

So what do we have so far? The early week gold rally never quite materialized as prices mainly attempted to consolidate last week's gains. Silver rallied though, rising by 54c back on Monday. But the rally toward the top of the ranges never happened because the HFTs decided to front-run the Fed and they began to sell in earnest Tuesday afternoon. From there, the gold price fell over $30 from Tuesday high to Wednesday trough and the selling has continued today. After a brief, Draghi-induced rise toward $1615 this morning, The Gold Cartel was able to smash price and even succeeded, by around noon or so, to drop price back through the 50-day MA, which is currently near $1593. Further HFT/algo selling ensued and, before you know it, price dropped all the way to $1583. With the HFTs and assorted other specs sufficiently short, price has reversed and stabilized just below $1590.

So, why do I expect a rally tomorrow?

  • Well, first of all, why not?? So far, the week has played out almost exactly as forecast so why wouldn't it continue? Seriously. The BLSBS will likely drive price back UP through the 50-day MA...which will inspire short-covering...which will push price back above $1600...which will inspire even more short-covering...and so on and so on.
  • Physical demand in London remains robust sub-$1600 in gold and near $27 in silver. This demand continues to put a floor under the paper price and will soon cause another rebound, as well.
  • And look at these charts. The correlation is undeniable. Note that, over the past month, every single time the RSI drops below 40 on these 6-hour charts, price almost instantly rebounds. The average short-term bounce in silver is around 85c and the average bounce in gold is around $30.

The final part of the "prediction" from last Friday was that, in the end, price would finish roughly unchanged for the week. (Upon further review, I'd expect The Cartels to step in late in the day with the intention of assuring a slightly down week and a red candle on the weekly chart.) Last Friday, the Oct12 gold closed at $1618. An "average" rally tomorrow would push it back to...drum roll, please... $1618. Last Friday, the Sep12 silver closed at $27.50. An "average" rally would push it back toward $27.75, up on the week but still below the early week highs near $28.30.

Of course, how would I have any idea what the NFP number will be tomorrow? I'm not a Fed governor or sleazeball, WallSt banker with inside info. I'm simply stating that, because the metals markets are so grossly manipulated on a daily basis, sometimes it's rather easy to predict what will happen next. We'll see.

Of course, if tomorrow does, in fact, play out almost exactly as forecast above, I will graciously accept all platitudes and honoraria. If it doesn't...well, I'll simply delete this post and pretend that I never typed it.

Have a great evening! TF

5:00 pm EDT UPDATE:

​I can't confirm it yet but it appears that silver margins are being reduced on Monday. Keep checking the comments of this thread for updates and/or confirmation.

Also, I just came across this GoldMoney podcast. Alasdair Macleod interviews John Butler. I haven't had a chance to listen to it yet but I'm supremely confident that is is well worth your time.

Death of the dollar: John Butler talks to Alasdair Macleod

About the Author

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  238 Comments

Boggs
Aug 2, 2012 - 4:30pm

Turd, I have tried twice now

Turd, I have tried twice now to sign up for the turdtalksmetals site and I keep getting errors. It's probably my fault as my fingers have swollen due to liver failure but I need help. Last time I emailed the site and crickets. Who should I contact?

ancientmoney TF
Aug 2, 2012 - 4:33pm

@Turd 4:10pm post

Are you thinking that paper markets and physical stay conjoined for the hot summer explosion? I'm assuming you do, and if so, do you think they will go separate ways at some point? Thanks for your thoughts.

Lumpy
Aug 2, 2012 - 4:40pm

Explosive?

I would love to hear an explosive interview/podcast with Turd and Blythe Masters.

In the spirit of being innocent until proven guilty....I think it would be explosive to give the Silver Guru herself the opportunity to defend herself on the blogoshere rather than CNBS.

It would be pretty interesting to see Zero Hedge, TFmetalsreport, Max Keiser etc. actively court the Silver Guru for her explosive interview, and collectively fill us in on her/JPM's response to such requests.

I want to hear from the people who have the power to rip me off at will.

Lanikai
Aug 2, 2012 - 4:44pm

Keep on truckin' and stackin'

just like Alf says in the post by JS, they can't say when. Summer is just warming up is some places, an with luck the mid-West-cropland will cool and get rain while the metals zone heats up to scorch the banksters.

Istack
Aug 2, 2012 - 4:47pm

Double Big Gulp

picked up 64 oz of SAE. One of these days will be the last day that we will ever be able to purchase silver at $27. Maybe it was today

Boggs
Aug 2, 2012 - 4:47pm

No, it's not your fault

We had an issue with the merchant processor and are implementing a new one. Therefore, we can't take new members until the issue is fixed.

Aug 2, 2012 - 4:51pm

I just got a note from Andy

I just got a note from Andy stating that the CME is reducing silver margins, effective Monday, but I can't seem to find the news anywhere.

Has anyone else seen this?

I can't reach him now as it is near 10:00 pm in London. However, as I refer to the "Turd Army" feed, he states that the initial margin is being lowered from $18,500 to $16,875 and the maintenance margin is falling from $14,000 to $12,500. Sounds official to me.

Keep an eye on the headlines and please post any links confirming in this thread. Thanks!

Dyna mo hum
Aug 2, 2012 - 4:51pm

@Big Buff

Hahahaha Facebook seems to have admitted today that they have 1 million fake accounts in third world countries etc . Accountability my ass.

proformatrillionaire Dyna mo hum
Aug 2, 2012 - 4:56pm

@ Dyna mo hum

I was in my bosses office earlier and CNBS said it was 83 million fake accounts or roughly the population of Egypt.

Dyna mo hum TF
Aug 2, 2012 - 4:56pm

Margin reduction

Can we all hum a few bars of that old gospel favorite "Bringing in the sheep"

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