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

Dyna mo hum Dagney Taggart
Aug 26, 2012 - 10:46pm

Noise abatement

One must know how to employ the use of a gag ball in some situations.

Dagney Taggart
Aug 26, 2012 - 10:50pm

@reefman

Simply stated, log charts are good at showing percentage differences. As a trendline, the points along the line have no relationship to one another.

Again, silly.

Counterfiat
Aug 26, 2012 - 11:03pm

log chart

I really liked that log chart - well done.

agNau
Aug 26, 2012 - 11:03pm

I think......

This is what supressed paper price looks like when it is overwhelmed by REAL physical demand. Watch it as it continues to rise. Beach Ball! I am Convinced this rise will amaze. $37 ?

Fired
Aug 26, 2012 - 11:09pm

Contest suggestion

When and at what value GSR meets the PoS.

Strongsidejedi TF
Aug 26, 2012 - 11:19pm
Dagney Taggart
Aug 26, 2012 - 11:31pm
thisismynewname
Aug 26, 2012 - 11:39pm

The Rocket

I can't comment on the AG price - my opinion is worthless because I'm smoking too much hopium with my OTM SLV Calls. Come on baby! Daddy needs a new set o' wheels!

Colonel Angus
Aug 27, 2012 - 12:01am

Dagney...way off on the log charts

Have you ever done statistics? Logcharts are used to see if there is an exponential relationship in data. Typically, this is done artificially by taking the logarithm of a variable and using it is a variable in a linear regression. So, for instance if I thought that Y = a*e^bX, I would take the log (or ln for some...it's really just a constant difference, so it doesn't matter) of Y and hope to get some form of log(Y) = c + bX. Letting a = e^c, I have the form for which I was looking. The same can apply if you just eyeball the situation to get a feel for whether there is an exponential relationship.

Some of us on the boards hold PhDs in math, stats, econometrics. If you don't understand the topic, leave it to those people. I certainly am out of my league when it comes to livestock (we only have chickens at our house) so I wouldn't have the temerity to call anything silly that someone like Katie Rose tells us about goats. And now I can see me getting suckered into believing something for admitting my ignorance. (My mother has several goats at her vineyards and winery, and all I know is that my herding dog loves to go out there and practice her skills.)

reefman Dagney Taggart
Aug 27, 2012 - 12:08am

One poster is confused by log charts.

One poster is confused by log charts.

Simply stated, log charts are good at showing percentage differences. As a trendline, the points along the line have no relationship to one another.

Again, silly.

I would suggest that this poster familiarize themselves with log charting before putting more feet in one's mouth. Cheers.

Dagney Taggart
Aug 27, 2012 - 12:41am

Thanks Colonel....

for your constructive reply. No I'm not a PhD. But neither is 99.x% of this board or Clive's readers/subscribers. It sounds like it takes a lot of mental horsepower to understand what is going with Clive's chart so it begs the question, "Why put something out for clients that they for the most part cannot understand?"

I wonder why Turd doesn't post log-scaled charts.

Terabyte
Aug 27, 2012 - 12:43am

Anyone want to start a pool...

..on when the waterfall begins?

Planters
Aug 27, 2012 - 12:46am

I'll take monday 2pm :)

I'll take monday 2pm

:)

thisismynewname
Aug 27, 2012 - 12:48am

@Terabyte

I'm positioned for the up escalator - so count me out on the waterfall pool.

reefman
Aug 27, 2012 - 1:00am

Dagny, Log charts are very

Dagny,

Log charts are very common. You are correct that they show percent gain, which is more important to investors than linear gain. On a close time-frame we use linear, but for longer term gains we use log.

Check this story out. If true, then Ben Bernanke needs A TRILLION STIMULUS QE on Friday, or he is FUCKED. Can you say CURRENCY WARS?!

China has announced a total of 8 trillion yuan (£800bn) of "stimulus projects" to try to boost confidence in an economy that appears to be cooling faster than expected.

https://www.telegraph.co.uk/finance/china-business/9500548/China-announces-800bn-stimulus-to-boost-confidence.html

atarangi
Aug 27, 2012 - 1:01am

No more waterfalls for me - - -

I'm stocking up on altitude sickness pills.

Terabyte
Aug 27, 2012 - 1:11am

@Dogma

Don't tell anyone else here, but just between you and me... I'm actually on your side. But I think we'll know for sure by noon.

reefman
Aug 27, 2012 - 1:16am

Regarding log charting and why it is useful for profits

Regarding log charting,

I don't care if silver goes up a dollar, or two dollars, or thirty dollars. I only care about PERCENT.

If silver was at $10/ounce, and it went up one dollar, that is a TEN PERCENT move up. But at $30 it takes a three dollar move up to make that same TEN PERCENT. These sorts of moves are MUCH EASIER to see on a log chart than on a linear one.

Let's say gold eventually moves up to $3,200/ounce. If one was to buy in today at (approx) $1,600, they would make a 100% gain. But if one was to buy in at $800 they would make a FOUR HUNDRED PERCENT GAIN.

Here's another analogy, it's very hard to see any investment go up 800%. However, if you have just THREE moves of 100% then you have achieved that 800%:

Start with $1.

100% of $1 is a $1 profit, so you have $2.

100% of $2 is a $2 profit, so you have $4.

100% of $4 is a $4 profit, so you have $8.

In just THREE moves of 100% you can get EIGHT HUNDRED PERCENT MOVE!

And that is the power of power. The power of log. Let's just say that sophisticated investors much prefer log charts to linear ones when calculating Profit/Loss. And I don't mean that to sound derogatory.

I have a coworker who tells me a stock went up $1, or 20cents, or $4, or what ever. This information is useless to me. I want to know the PERCENT move. For example a $1 move on AAPL which is $663 per share is NOTHING to me. But a $1, in Tinka Resources, which is trading at like fifty cents ($0.50) is MASSIVE.

philipat
Aug 27, 2012 - 1:39am

Waterfalls

Don't go chasing Watefalls..............................................

Dagney Taggart
Aug 27, 2012 - 1:51am

@reefman

Percentage gain was always the extent of usefulness of a log chart to me. And yes you're right, percentage gain is what matters. The AAPL retail crowd, for the most part, isn't going to understand that the 1.50 PDL I bought 2 weeks ago outperformed them. Of course that's not a good long-term comparison though.

Turd talks about a "1% daily cap in gold" quite a bit. So maybe a log chart could demonstrate this thesis, no? Maybe that's not the right application.

Back to my point, it still seems more practical to use straight lines where there is a linear representation of information, not a logarithmic representation. To each his own.

With respect to the big picture and who is running the show at the moment, a question: WWWD (what would WOPR do)?

Bongo Jim
Aug 27, 2012 - 2:15am

Ever notice...

How the huckster uses misdirection?

ClinkinKY
Aug 27, 2012 - 2:43am

How Do You Commemorate The Death...

...Of The First Man To Walk On The Moon?

Why, you post a pic of yourself looking up at same. Really?

https://barackobama.tumblr.com/post/30199041207/neils-spirit-of-discovery-lives-on-in-all-the-men

ClinkinKY
Aug 27, 2012 - 3:30am

'Full Metal Jacket' Star Fired for Criticizing Obama

R. Lee Ermey, the actor best known for his role as the drill sergeant in Stanley Kubrick's "Full Metal Jacket," claims he was fired by GEICO for criticizing President Obama.

During an impromptu interview with TMZ, Ermey also said, "If you’re a conservative in this town, you better watch out" (videos follow with transcribed highlights and commentary):


Read more: https://newsbusters.org/blogs/noel-sheppard/2012/08/26/full-metal-jacket-star-says-he-was-fired-geico-bashing-obama#ixzz24jHV5LWS

----------------------------------------------------

Language warning for the easily offended:

Reach Around
ClinkinKY
Aug 27, 2012 - 3:57am

A test-Delete this if you must mods, but this is NOT RACIST...

...I'm just tired of the political correctness here. If we can't discuss reality then what's the use?

Bob is a Racist
ivars
Aug 27, 2012 - 4:17am

Log charts

When value axis is a logarithm of the price, while time axis is linear, a straight line on such chart represents exponential connection between consecutive points on that line, i.e. price - A*exp ( bt) (since ln (A*exp(bt)= ln(A)+bt, which is the equation of a straight line in Cartesian (90 degree) coordinates ) . In case of silver, which has followed exponential function in its price growth trend line since 2001, log charting and straight line trends are very useful to see long term trend channels.

As here (it is a log chart, sometimes called also semi-log as time is linear):

I hope I am not being too emotional over the issue.

ivars
Aug 27, 2012 - 4:24am

Buying at 31,5?  In my plans,

Buying at 31,5? In my plans, I should by small amount at 31,5. Do i really have to do it today?? That is happening way too fast, but on other hand, 31,5 is not too high price for silver , as with every day its breaking the barriers this time AND lowering GSR, the potential bottom is creeping up as well. If today ends above 31, I would say 29 is the minimum we can ( if) see ever. 29 would also then be a 50% fibo retracement from last move up.

Torpedo Fish
Aug 27, 2012 - 5:04am

btfd

back to 29 ? time to BTFD

yangster
Aug 27, 2012 - 5:28am

clinkin

I thought this page was supposed to be about pm's, I would love to come here and not have your politics in my face every day. I come here for info about pm's, your stuff really puts me off and actually turns me off your political ideals. Sorry I have to IU you. Please keep it about pm's or save the politics for the appropriate forums, as I would love to know your insights about the metals.

boatman
Aug 27, 2012 - 7:32am

keep it up clinky

only haters hate.


Aug 27, 2012 - 7:40am

Yes London is closed today

This was posted in reference to timing...

Submitted by Turd Ferguson on August 25, 2012 - 3:30pm.
MODERATOR

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.

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