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 ()


yangster boatman
Aug 27, 2012 - 7:54am

Boatman, it's got nothing to

Boatman, it's got nothing to do with being a hater, I actually want to hear about metals from clinkin, I just feel with all his "toons" the same way I do when I drive past advertising billboards, it just feels like noise and brainwashing. For the record I don't care who wins the election, which is why cant stand the the politics. Peace.

Aug 27, 2012 - 8:04am

re: seriously depressed

MOST [but not all---these being the ones that got it right] models on isaac have repeatedly overstated future strength.

re: '' hurricane spaghetti models" post........they've moved that 'cone' so many times its rediculous........real forecasting requires model success evaluation on a weekly and daily n hourly basis n then overweighting current best ones........which had isaac staying a trop storm n passing west of key west.

isaac will cross coast slightly west of mouth of mississippi as a low to mid cat 1...strength being more certian than place......best 'guess'

water temp AS TO DEPTH is VERY cool on this path [shallow warmth].

atmosphere is not conducive to much strengthening.....much dry air surprising coming from the SE.

but both TWC and NOAA n NWS will not tell u this least people start drinking n stop preparing......n turn off TWC and go back to 'the 3 stooges'.

Colonel Angus
Aug 27, 2012 - 8:06am

to yangster

Sure clinkinky posts a whole lot of cartoons. Some of them are even funny...but this video is certainly relevant and germane to the metals.

First, they defined metals as money. Then when that became to constricting for their purposes, they tried to tell us that metals were commodities and were happy to let them go off on their own doing their own thing. Then when it became apparent that people were using the metals as a means of telling them that their policies were screwing up and gave us assured destruction, they tried to once again tell us what the metals were worth. And they are trying to do that again today.

If you can't see the humor in the video, it likely means that you have drunk the KoolAid so much that you really need to start checking your pulse. You may already be in Guyana and dead. Look, I'm a Ron Paul supporter, and there has been some very scathing kinds of videos and cartoons released about Ron Paul. Some of those were even funny. I can laugh at myself. And do you know what Horace said? "What stops a man who can laugh from telling the truth?"

What I find is that if something gets under my skin, I need to look at the root cause. Is it because I am holding a viewpoint that is inconsistent, or is it that the person just speaking was so grossly off base as to bring up the anger I have when people try to lie to me? You'll have to determine this for yourself. My apologies if you are Jerry Yang and have had a really tough time since, well, forever. My thought is this....

lighten up, Francis
Aug 27, 2012 - 8:07am


drive by them.....what i plan to do if romney is elected and the cartoons are about him [and most will be well deserved believe me]

if politicians did not 'control' or effect the economy.......then all politics would have no place here.

peace also......in kilos or pounds.

Aug 27, 2012 - 8:09am

my answer to snarky comments on the nobel prize post

and i am not jewish.

'If the Arabs put down their weapons today, there would be no more violence.
If the Jews put down their weapons today, there would be no more Israel '.

a fact no thinking person can argue with.

Aug 27, 2012 - 8:19am

Older Talking Heads...

The older meteorologists had less technology but seemed to be more often correct in their hurricane forecasts than the new crop of hype-sters. When the Weather Channel says East, look West. When everyone says the metals charts look perfect for a blast up, look down. When London markets are closed but to a few HFT's, look out...

Video unavailable
Big Buffalo
Aug 27, 2012 - 8:21am

Hell on Wheels

Anybody else enjoy watching this show b/c they throw around $20 Gold eagles and make sudden jabs against the "paper" money?

Submitted by RaulPon on Sun, 08/12/2012 - 15:11

It's a story about justice, liberty/freedom, corporatism/corruption, right to defend oneself/gun ownership, military interventionism, government overreach,...and yes, even deception & lies by the "MSM" of the Era after the Civil War/Western "Expansion"(aka "Imperialism/Colonialism", in this case vs Native Americans) of America.


yangster boatman
Aug 27, 2012 - 8:34am


just givin my thoughts about the site, of course what Turd or anyone does here is totally up to them, I just happen to think that the site would be more attractive to more people (myself incuded) if the main page focused on pm's and blatant politicking were in the relevant forums. There are I am sure, many of us who think that politics as it is today belongs way in the past and as such find all the posturing a bit ....meh

@Colonel, Thank you for your insights.

S Roche
Aug 27, 2012 - 8:36am

On Topic...Queen of Versailles

because we're burnin' down tha house...all 90,000 sq ft of it... https://www.economist.com/node/21560843?fsrc=scn/tw/te/pe/allfalldown read the comments and enjoy your popcorn.

Aug 27, 2012 - 8:42am

Starting to feel like March 2011...

Resistance at 30.75 holds us back for a while. Then, once we blast through above 31 and get the inevitable pull-back, price bounces right off 30.75 before taking off again. Love it. We've seen this movie before and it is a fun ride.

My 2 cents only: Dips will be smaller and less obvious than they have been, so you may have to trade into dips on smaller time-frames but don't get overly aggressive and never ever use up all your powder. The raging bull is a double edged sword because it is forgiving in that if you miss-time a dip and buy too early, all you have to do is be patient and ride it out and time will erase your mistakes. BUT it can also lure you into being too aggressive and deploying more funds than you should on a headfake "shallow dip"... money management is key. Mentally move your stops upwards and adjust for the price action, but have the discipline to sell if your stops are violated... you will have many more chances to buy back in if you are patient and pay close attention.

Greed and fear must both be controlled. Don't get too greedy and overextend, but don't panic in the inevitable downdrafts- they are your entry points and should be greeted as an old friend.

S Roche
Aug 27, 2012 - 8:45am


52 week MA...

Mr. Smith Pining 4 the Fjords
Aug 27, 2012 - 8:46am

Apt Observation

Sound observation and good points on tactics and psychology. If we run to the highs of last year around 50 dollars, there will be plenty of points to add money!

Aug 27, 2012 - 8:46am

Did I miss a headline?

I saw two posts here about Chinese QE and the pressure on Ben to do likewise this week.

Did ZH miss the story? I try to catch all their headlines at least each day.

S Roche
Aug 27, 2012 - 8:51am

@Dr J

It was a Telegraph UK story with a sensational headline...rounding up a series of projects announced by regional Chinese GEs over the last few weeks/months to stave off reduced growth...AUD down today on fears of a Chinese slowdown...

paulindoon Doctor J
Aug 27, 2012 - 8:58am

Re: Did I miss a headline?

Here's a copy/paste of my post from last night:

Maybe the Ag/Au rise has something to do with stimulus from China:

China announces £800bn stimulus to boost confidence


Now that China has launched, how far behind will Ben be??

tmosley boatman
Aug 27, 2012 - 9:00am


Get your collectivist shit off main street or you will join Bill on my ignore list.

Your comments are collectivist in nature, and fail to understand the difference between self defense and aggression. For a race of people who were so severely persecuted by the Nazis and others, they sure do spend a lot of time and money rounding up people and putting them into ghettos, then rolling in with tanks, planes, and armored bulldozers to met out the collective punishment. But it isn't the Jews that are doing that, is it? It's the Israeli military. Just like it isn't the Palestinians launching rockets at Israel, it's Hamas and individual terrorists.

Claiming that anyone who disagrees with your disingenuous bullshit "unthinking" pisses me off to no ends.

BillAuAg ivars
Aug 27, 2012 - 9:02am

Log charts

Using semi-log charts is racist.

Using x-y plots is racist

Aug 27, 2012 - 9:20am

looking good turd

1/they took back the globex gains

2/asian rally,the high was 31.25

3/london selling ok

4/new york rally?i m ready

Big Buffalo
Aug 27, 2012 - 9:21am


What the F just happened to OIL?

Aug 27, 2012 - 9:25am

wauw,so fast

wauw,so fast

Aug 27, 2012 - 9:26am

Gold in Swiss Francs

... is about to break its record highs :

Aug 27, 2012 - 9:32am


knock yourself out

Aug 27, 2012 - 9:34am
Aug 27, 2012 - 9:35am


reacting to lesser hurricane intensity projection

Aug 27, 2012 - 9:40am

If you can get a dip toward $94

I'd be on it like white on rice, like ugly on an ape, like stink on shit.

Swift Boat Vet ClinkinKY
Aug 27, 2012 - 9:49am

Drill Instructors (DIs) Ermey

The first time I saw Full Metal Jacket I thought they got my DI from boot camp! I had a grizzled, tough as nails Chief Gunners Mate who could be Ermey's twin.. That SOB pulled NO punches. It felt like I died and went to hell for a while! Ermey really did a masterful job at showing what it was really like in boot during the Vietnam years.


Aug 27, 2012 - 10:12am
tmosley boatman
Aug 27, 2012 - 10:14am


I will, should you do it again.

Swift Boat Vet yangster
Aug 27, 2012 - 10:20am


I'm glad, for you and your family's sake, that your attitude toward the PMs isn't the same as your attitude regarding politics. You may not care about politics, but politics TOTALLY cares about you! Good money is politics, and people not caring about politics has gotten us into this dire predicament.


Revolucion TF
Aug 27, 2012 - 10:37am

If you can get a dip toward $94

And CL is not manipulated?

Who do you think might be selling nearly 60,000 contracts in an hour or so at this stage of the game?

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