Burning Down The House

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.


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.


About the Author

turd [at] tfmetalsreport [dot] com ()


Aug 25, 2012 - 4:16pm

Top Ten!?

Cryin' shame about Kodak...

My Great Grandmother worked there on the roof making prints. Passed down some "valuable' stock, now worth ZIP!

edit: Bah! eleven. I'll type faster next time.

Aug 25, 2012 - 4:19pm

The Captain

Grand Funk Railroad -- I'm Your Captain

Thanks for the new thread on a Saturday

Tomorrow nights opener in Asia should be interesting, you would think.

Aug 25, 2012 - 4:25pm

We are the hyenas!

We are the hyenas or at least some of them.

Turd's army is buying now, we, and others like us, will bring the leader of the pack down.

Time is on our side.

Stack away. Bring the leader down!

Aug 25, 2012 - 4:30pm

Yes, DPH

Keep in mind that the first order of EE business will be claw back the 15 cents or so of gains that were put on after the Comex close.

This happens so frequently on a Sunday that it is almost certain to happen again tomorrow. After that, I'd expect an Asia rally, some London selling and then a continuance of the rally in NY. $31.50 would seem to be the next target.

Aug 25, 2012 - 4:43pm

@Boswell: Kodak

When I was in junior high and high school, back when they called them that, I was a photography buff. I had my own darkroom where I made B&W prints and color slides (yay, Ektachrome!). When I left home for the service and eventually a life on the road I had to give it up--no place to set it up. I've always wanted to get started again, but I guess I've put it off too long :(

Digital photography has come a long way, but to me it cannot yet match film processed by hand. Something about the minute fractal qualities of silver iodide crystals gives it a warmth and living quality that pixels just can't duplicate.

Video unavailable
Jeremiah Jr
Aug 25, 2012 - 4:45pm


I happen own a company in the photographic industry and know many of the senior executives at Kodak, some of whom are personal friends for many years. It is a shame what has happened to a great American icon such as Kodak, their market cap used to rival many of the major US corporations in years past.

Kodak may very well not emerge from the Chapter 11 reorganization, I see it as 50-50 right now, they have not received the bids they hoped for from two large block of digital imaging patents that are on the block, thus my segment of the industry went up for sale last Thursday.

Hard to say what will happen, hopefully someone will grab the output segment and continue the brand perhaps with different ownership. If not, and they are broken up, Fuji will then be in control of the silver halide output for the entire world. They will absorb as much as possible the demand from the Kodak customers, but it may end up like musical chairs if one needs photographic paper to run your business. In the end Fuji would by those oz's that Kodak would have used.

Either way it is sad to see the garage sale that is unfolding at which once used to be Eastman Kodak.

Aug 25, 2012 - 4:58pm

re: London selling

Note that London bullion market is closed Monday 27th Aug for the bank holiday...

Aug 25, 2012 - 5:05pm

got through to some relatives . . .

my aunt bought $6k of 1oz. Ag bars and my mom is going for $5k of ASEs. It's a start.

Aug 25, 2012 - 5:06pm

Is Samsung the next Kodak?

Remember those days when Kodak was a sponsor of Disney theme parks?

Wow...Kodak is yet another company downed by Apple Inc.

Disney Sing Along Songs - 1990 Disneyland Fun - Making Memories

Will Samsung be next?

I don't think so.

Here's why.

The Koreans and Asians have been stockpiling gold for the past few years.

Instead of paying Apple the $1.05 billion in damages, Samsung should string out the litigation.

They should plow the $1 billion in USD's into the silver market.

Then, Samsung can cut a deal with the Chinese for the FoxConn production.

Apple may have won the battle, but they've just managed to kill their supply chain and to assist the NorKor and PRC in hobbling the defense of South Korea.

One billion dollars is enough to screw up South Korea's economy, but the South Koreans are one step ahead.


Note: "The total book value of its gold holdings was at $3.0 billion, it added. The South Korean central bank said it now ranked 40th in the world in gold holdings at the end of July, up from 43rd in June."

Why is this relevant.

Apple needs Asia more than Asia needs Apple.

Tim Cook needs to play nice, or his company may find manufacturing costs skyrocketing and the availability of rare earth elements for construction very restricted.

Aug 25, 2012 - 5:11pm


A'hhh...that has a nice ring to it at this point. It's been awhile.

Staind-It's been a while lyrics

Subscribe or login to read all comments.


Donate Shop

Get Your Subscriber Benefits

Exclusive discount for silver purchases, and a private iTunes feed for TF Metals Report podcasts!

Key Economic Events Week of 7/15

7/15 8:30 ET Empire State Fed Index
7/16 8:30 ET Retail Sales and Import Price Index
7/16 9:15 ET Cap Ute and Ind Prod
7/16 10:00 ET Business Inventories
7/17 8:30 ET Housing Starts and Building Permits
7/18 8:30 ET Philly Fed
7/19 10:00 ET Consumer Sentiment

Key Economic Events Week of 7/8

7/9 8:45 ET Fed Stress Conference, three Goon speeches
7/10 8:30 ET CGP Hump-Hawk prepared remarks
7/10 10:00 ET CGP Hump-Hawk House
7/10 10:00 ET Wholesale Inventories
7/10 2:00 ET June FOMC minutes
7/11 8:30 ET CPI
7/11 10:00 ET CGP Hump-Hawk Senate
7/11 12:30 ET Goon Williams
7/12 8:30 ET PPI

Key Economic Events Week of 7/1

7/1 9:45 ET Markit Manu PMI
7/1 10:00 ET ISM Manu PMI
7/1 10:00 ET Construction Spending
7/2 6:35 ET Goon Williams
7/3 8:15 ET ADP June employment
7/3 8:30 ET Trade Deficit
7/3 9:45 ET Markit Services PMI
7/3 10:00 ET ISM Services PMI
7/3 10:00 ET Factory Orders
7/4 US Market Holiday
7/5 8:30 ET BLSBS

Key Economic Events Week of 6/24

6/25 10:00 ET New Home Sales
6/25 1:00 pm ET Chief Goon Powell
6/25 5:30 pm ET Goon Bullard
6/26 8:30 ET Durable Goods
6/27 8:30 ET Q1 GDP final guess
6/28 8:30 ET Personal Income and Consumer Spending
6/28 8:30 ET Core Inflation
6/28 9:45 ET Chicago PMI

Key Economic Events Week of 6/17

6/18 8:30 ET Housing Starts and Building Permits
6/19 2:00 ET FOMC Fedlines
6/19 2:30 ET CGP presser
6/20 8:30 ET Philly Fed
6/21 9:45 ET Markit flash June PMIs

Key Economic Events Week of 6/10

6/11 8:30 ET Producer Price Index
6/12 8:30 ET Consumer Price Index
6/13 8:30 ET Import Price Index
6/14 8:30 ET Retail Sales
6/14 9:15 ET Cap Ute and Ind Prod
6/14 10:00 ET Business Inventories

Key Economic Events Week of 6/3

6/4 All day Fed conference in Chicago
6/4 10:00 ET Factory Order
6/5 9:45 ET Markit Services PMI
6/5 10:00 ET ISM Services PMI
6/6 8:30 ET US Trace Deficit
6/7 8:30 ET BLSBS
6/7 10:00 ET Wholesale Inventories

Key Economic Events Week of 5/28

5/28 10:00 ET Consumer Confidence
5/30 8:30 ET Q1 GDP 2nd guess
5/31 8:30 ET Personal Income and Consumer Spending
5/31 8:30 ET Core Inflation
5/31 9:45 ET Chicago PMI

Key Economic Events Week of 5/20

5/20 7:00 pm ET CGP speech
5/21 10:00 ET Existing Home Sales
5/22 2:00 ET FOMC minutes
5/23 9:45 ET Markit PMIs
5/24 8:30 ET Durable Goods

Key Economic Events Week of 5/13

TWELVE Goon speeches through the week
5/14 8:30 ET Import Price Index
5/15 8:30 ET Retail Sales and Empire State Manu. Idx.
5/15 9:15 ET Cap. Ute. and Ind. Prod.
5/15 10:00 ET Business Inventories
5/16 10:00 ET Housing Starts and Philly Fed
5/17 10:00 ET Consumer Sentiment

Recent Comments

by dangerkitty, 27 min 1 sec ago
by AGXIIK, 50 min 37 sec ago
by Mickey, 55 min 28 sec ago
by Stevediva, 1 hour 1 min ago

Forum Discussion

by Scarecrow, 4 min 30 sec ago
by ancientmoney, 16 min 7 sec ago
by Scarecrow, 29 min 28 sec ago
by Green Lantern, 40 min 6 sec ago