Burning Down The House

266
Sat, Aug 25, 2012 - 3:36pm

We had an awesome week and the charts look great. More importantly, a fire has begun that will eventually consume the entire House of Lies.

At first glance yesterday, the CoT hit me like a punch to the gut. I was wrong about something and I hate being wrong. You see, as last week progressed, I became increasingly convinced that JPM's massive silver short position was coming under assault by the other "commercials". I likened this idea to a pack of hyenas sensing the weakness of the leader and turning upon him. Clearly the report, which shows positions as of last Tuesday, does not support this analogy.

Yet.

Instead of attacking the leader, the pack chose to support the leader, instead. All of the buying in the 8/15-8/21 timeframe came from the specs, both large and small. All of the selling (to the tune of net short 9000+) came from The Forces of Darkness. The Evil Ones unloaded 4651 of their longs (10%) and added 4424 brand new shorts. (For those keeping score at home, that's about 22,000,000 ounces of paper "silver" created out of thin air.) Never fear, Captain Metaphor is here with a new one for you to consider.

The action last week is akin to the actions of an arrogant and drunk homeowner who foolishly built his castle along a tinderbox-dry ridge, confident that his homemade firewall would always protect him. Through the years, his house has stood firm against the elements and the homeowner has grown complacent and comfortable. Last week, the homeowner started down his usual path of preparing for the winter. He has once again begun to stockpile gasoline, liquid propane, kerosene and other accelerants. He places them within his house, confident that he can safely use and remove them at his leisure and blind to the danger a fire would present to his fiefdom.

What he apparently doesn't realize is that a conflagration will soon jump the firewall. His castle, which he thought impervious, will soon be consumed in a fire of his own making.

So, upon further review, I am not the least bit concerned about the makeup of the latest CoT. The homeowner has simply placed himself in greater peril by his actions this week. His house is burning yet he slovenly continues his business. Fat, happy and blissfully unaware of the disaster at hand.

Video unavailable

As we prepare for next week, I thought it appropriate to give you these charts. Look very closely at them and they will tell you a lot. Let's take them one by one. First, an up-close look at a weekly silver. Note that the price has apparently closed right on top of the Battle Royale II line. Might a raid come from here? Of course. However, silver closed Friday above all of its moving averages. Every single one. This is very bullish from a technical perspective and will almost certainly lead to a rally on Monday as technical-based, momentum-chasing spec money comes charging in. The next resistance point that I see is near $31.50, which would be well above the BR2 line.

The weekly chart of gold shows that is is clearly above its Battle Royale line and, like silver, gold closed Friday above its 10-day, 20-day, 50-day, 100-day and 200-day moving averages. Once it surpasses 1680, gold will move effortlessly higher toward 1700. (More on that level in a minute.)

And these next two charts should be as reassuring as a hug from an old friend. Note that, after peaking in late April of last year, silver price declined into May of this year, where it began riding higher and consolidating along the long-term trendline. If silver could not be broken down last September, last December or even this May, it ain't gonna be broken down now. Soon, The Battle Royale will be won and silver will move on toward further fights at $33 and $36. For now, though, study this chart and smile.

And while you look at this gold chart, keep in mind that ole Turd very much likes to discover patterns that no one else has yet noticed. Look closely. Gold has followed this channel, this "managed ascent", for nearly four years as part of the larger bull market that began in 2001. Now, look even closer.

Recall that, just yesterday, we discussed the significance of 1665-1675 as it related to the S&P downgrade of the U.S. and The Panic which gripped The Gold Cartel in the weeks that followed. Beginning the following week, gold began to trade uncharacteristically above and outside of its long-term channel. If you count the total amount of time between the breakout UP and the final fall back WITHIN, you get a total of 17 weeks. Fast forward to today. In early May this year, gold fell DOWN and out of its long-term channel. If you count the total amount of time between the breakout DOWN and today, you get a total of 16 weeks. Does this mean that next week is the transition week where price straddles the lower line of the channel, currently near 1700? Will the first week of September bring price action that finally places gold squarely back within the channel? Who knows. But, would you be the least bit surprised by a "candle" this week that lies upon the channel line and a "candle" next week that lies within the channel? I wouldn't be.

Well, that's all for now. Go relax and enjoy your weekend. Do not let the CoT (or anything else for that matter) bother you. Over the past eight trading sessions, silver has rallied nearly 10% and The Evil Empire has not participated. In fact, the have only impeded the rally at their future cost and peril. What is coming will truly be explosive and historic. Like me, you should just remain patient and diligent, adding to your stack whenever possible.

TF

About the Author

Founder
turd [at] tfmetalsreport [dot] com ()

  266 Comments

twippers
Aug 25, 2012 - 3:42pm

First?

No way. Holy smokes, I can happily go to silver heaven now.

Cononish1314
Aug 25, 2012 - 3:47pm

Gold, silver lor bronze medal or something

Courage, brothers [and even Ayn Rand-reading sisters]. There's such a thing as the last days of the Hapsburg or Byzantine Empires.

tobydaniel
Aug 25, 2012 - 3:47pm

Well

I considered not even writing second because I actually do have a life other than checking TF metals on Saturday:)

ferretflat
Aug 25, 2012 - 3:48pm

Im going in again today

I'm going in again today to stack more phyzz!

tobydaniel
Aug 25, 2012 - 3:48pm

Geeze, I dont feel bad after all!

Four people wrote before me! Man! lol

Mariposa de Oro
Aug 25, 2012 - 3:49pm

Numero uno??

Can't be.....

Edit: Should've known better with my stupid dial up, lol.

Katie, how is the garden?

Galearis
Aug 25, 2012 - 3:54pm

Thurd?

I am flummuxed so much I forgot what I was going to say!
L.

tobydaniel
Aug 25, 2012 - 4:02pm

Turd, two serious questions

First off, what is the EE? Also does the CoT really matter anymore? The reason I ask that is because in the past, there have been really good CoT reports and really bad CoT reports but none seemed to change the boringness of the metals this summer. They did nothing out of the ordinary until now. It seems as though we are being lied to. I mean, why would they not lie to us and put a fake OI out there for everyone to see? They do it with Unemployment, inflation and on and on. To me, the only way that we can really know whether or not the Cartel is truly in trouble is with delivery troubles like Sprott is having and also the mainstream media when they say that gold and silver are not a good investment to cover their butts. Im just learning like everyone else here on this board but those have been on my mind. Thanks!

SV
Aug 25, 2012 - 4:08pm

Loving the Sunday Reports!

Exciting times for TF Metals! Hey, man, your adsense ads don't show on my computer, but i don't have an adblocker. I will double and triple check, but its true for me and one other person. I get zerohedge ads fine...

Kodak Drive-By Shooting? Selling Their Silver?

Eastman Kodak announced Thursday that it is eyeing an end scene to its print film, photo paper, photo kiosk, commercial scanner, heavy-duty commercial scanners and corporate software divisions, as it looks to sell them. The move comes on the heels of chapter eleven bankruptcy this past spring, and as the business auctions off its portfolio of digital patents. The move was expected, but not until the beginning of the year. The company said that it is selling a business unit which includes its “traditional photographic paper and still camera film products.

According to Bloomberg News, Eastman Kodak consumes approximately 8.5 million ounces or $300 million worth of silver each year for its manufactured goods and supplies. This is a sufficient amount of silver to put pressure on the silver market considering inventories at the COMEX are purported to be around 35 million ounces of unallocated silver.

Sprott Asset Management had communicated with investors just days before the Kodak bankruptcy informing them Sprott’s Fund has raised enough money to take delivery of ten million ounces of silver. The big question is, from where would they take this silver delivery?

The Kodak bankruptcy will be handled by a specialist from FTI consulting, Dominic Di Napoli, who has worked for JP Morgan and Goldman Sachs.

Kodak Drive-By Shooting? Selling Their Silver?

heyJoe tobydaniel
Aug 25, 2012 - 4:15pm

@tobydaniel

EE is Evil Empire. Check out the Turdism tab at the top of the page. Other definitions can be found.

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