Shake A Stick At This

278
Wed, Sep 26, 2012 - 12:31pm

Here you go. More charts than you can shake a stick at. (Whatever that means.)

Let's start today with crude because I just think it's messed up. Price rallies from late June to mid-September with never once seeing more than 3 days in a row of declines. In fact, it barely did that earlier in September. You could just as easily say that it never had more than two, straight down days. And then, just as QE∞ was announced AND tensions ramped even higher in the MENA, price collapses? And it's now down for 7 of the past 8 days? We'll talk in a minute about how much of this corresponds with the surprise POSX rally over the past week but come on...7 of 8 days down for a cumulative 10+% move?? This seems very fishy, particularly when gasoline was just reaching $4/gallon in the U.S. and the presidential election is just 6 weeks away. Very fishy, indeed.

But getting back to The Pig...The question is: What the heck is going on here? Why on earth would The Pig rally immediately following the announcement of QE∞? I've spent some time thinking about this and this is the best answer I can come up with:

Remember that the POSX is an index against all other, major fiat currency. Even though it is quite clear that unlimited QE will eventually make The Pig relatively worthless versus hard assets, in the short term, the global flow of funds is actually toward the dollar and treasuries as The Bernank has effectively assured perennially-nervous international investors that there will be no default, at least not in non-inflation adjusted dollars. Against this backdrop and in the very short term, QE∞ is judged to be dollar positive. Seriously. I know that sounds crazy...and it is...but that seems to be what has happened over the past two weeks. The good news is that the POSX is finally reaching the end of the raid for this bounce as the area around 80 will once again serve as resistance. I would now expect a few weeks of volatile, sideways action before The Pig resumes its downtrend.

So, in the context of The Pig apparently being the driver of short-term events in the commodities sector (where gold and silver are incorrectly relegated for now), any gyration by The Pig seems to flow immediately into buy or sell orders for the metals. We saw an exaggeration of this earlier today. The POSX began to rally at 5:35 EDT this morning and immediately the metals began to roll over. WOPRs, programmed for profit by actual human beings, began to build up sell orders for the Comex open and....WHAMMO!....the open is ugly and short-term technical damage ensues.

So, now that both metals appear to be in short-term corrective phases, where do they go from here and where might they bottom? Before we go there I want to reiterate again: QE∞ ASSURES THAT METALS ARE GOING MUCH, MUCH HIGHER. THERE WILL ALWAYS BE, HOWEVER, BRIEF PROFIT-TAKING CORRECTIONS WITHIN THE PRIMARY TREND.

The charts below spell it out quite plainly. Let's look at gold first. Tremendous physical demand makes further downward action unlikely but I can't help but think a weak-hand clearing plunge toward $1725 is coming. Note that this type of move would also have a very pleasant impact on the short term RSI.

Silver is clearly in a corrective phase, too. Though it is holding in there quite nicely today and though it, too, is seeing considerable physical demand, the 12-hour chart sure looks like a brief drop below $33 is in the cards. I'd love to see it as I'm sitting on a little cash that is burning a hole in my pocket as I type.

Just a couple of other items to consider today. First, there's this article I found linked at the GATA site. Nothing earth-shattering, but it's a reasonably competent summary of how things may eventually play out. https://www.internationalman.com/global-perspectives/manipulation-of-the-gold-price

And I have another book recommendation for you. You've likely seen me mention before that "The Big Short" by Michael Lewis is a real eye-opener. Lewis puts the entire "2008 Financial Crisis" in easy-to-understand terms and everyone here should read it.

Lewis' new book is a follow-up called Boomerang. It's not as good as "The Big Short" but very, very interesting nonetheless. Please read it. One of the chapters describes California as Italy or Spain as they relate to The Pig and The Euro, respectively. Along those lines, look at his headline from ZH. https://www.zerohedge.com/news/2012-09-26/california-screaming-4th-muni-bankruptcy-looms-atwater

OK, that's all for now. It has taken me quite a while to type this up and now I see that the metals have rallied smartly during the interim. That's great. Glad to see it. This does not, necessarily, make this post obsolete, however. Stay on guard and look for another dip.

TF

About the Author

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turd [at] tfmetalsreport [dot] com ()

  278 Comments

Eric Original
Sep 26, 2012 - 12:33pm

First?

First?

EDIT: Sweet!

FUBM coming up. Buy, buy, buy, or cry, cry, cry.....

agNau
Sep 26, 2012 - 12:34pm

Agreed @t/a

Retests of b/o's and MA's and S/R levels? HUI USD METALS The world continues to contract, and the magicians cover the debasement with deflationary indications for the eye. Slowing economies everywhere present fertile ground for the debasement to continue. Oil demand simply has to be lower, making for less difficulty pushing down a major indicator of inflation temporarily. The surge in dollars MUST play into any tangible item eventually, particularly those of limited supply, that are in greater demand. Tamping of prices will continue until the revelation of "no supply". I am watching the above for cues to next moves higher. I am increasingly of the controlled ascent school. Throughout the 80's and 90's the descent was controlled by selling of CB stockpiles to check price. Today I believe we have seen the variety of tools used...it now is a matter of predicting the combinations and timing of their use, and the resulting effects. Just as with each additional dosing of QE we note less effectiveness, so too with the effectiveness of suppression of metals.

dontezuma
Sep 26, 2012 - 12:41pm

Fibonacci

If you're into that kind of thing, we should all be expecting a normal retracement to 31.70ish or 30.50ish. (61.8% and 50%) No cartel action required, just normal retracements.

DayStar
Sep 26, 2012 - 12:41pm

Need a break

Now I am reading (SilverDoctors.com) that JPM has the silver and is just using the free Fed money and spreads to make money. It still does not excuse or explain the waterfall events, though. https://www.silverdoctors.com/is-jp-morgan-shorting-paper-metals-while-acquiring-massive-physical-stockpiles-of-gold-silver/

DayStar

Nana
Sep 26, 2012 - 12:43pm

Up Is Down

Right is wrong

Evil is good

The world has been turned upsidedown by the PTB....and the saddest part of it is the people allowed it to happen and continue to allow it to happen.....

DayStar
Sep 26, 2012 - 12:43pm

The Doc is linking an email

The Doc is linking an email from Miles Franklin that purports to "explain" how The Cartel does business. It is complete bullshit and I have commissioned a good and extremely-qualified friend of mine to type up a reply. No because I don't like MF or anything. It's just that the source, this Trader David R character, uses the classic form of a disinformation plant and it will be fun to see it refuted.

Daedalus Mugged
Sep 26, 2012 - 12:45pm

Really?

Not much into games, but I have never seen no comments before.

It was odd...I would have thought is would list '0 comments' but for those who have never seen it, it says, "Add a comment"

Who could really add a comment to the Turd? Can't comment but can question...

There was a post at silverdoctors, but it really came from Ted Butler with a hint of Jim Sinclair, but the essence of it was that the reason the CFTC has not come down like a ton of bricks of JPM re:silver is that they cannot. JPM actually has the physical metal they are short in the paper markets. I have heard this hypothesized before but this was supposedly a leaker. If you have zero cost money, and own warehouses, you can buy physical and sit on it (cost of cash and storage approximately zero), sell the future paper for higher than spot (normal contango) and make money. Effectively earn the carry with no actual price risk. Keep doubling down for fun and profit for decades, and you end up with a huge position. You can time things to manipulate the hell out of the paper market, and you have the physical if the whole house of cards comes down.

Turd, any thoughts on this? Believable? Preposterous?

Green Lantern
Sep 26, 2012 - 12:45pm

scratch that

scratch that.

murphy
Sep 26, 2012 - 12:46pm

congrats

to a wily veteran to grab the first post position. No substitute for an old timers experience.

dropout
Sep 26, 2012 - 12:49pm

The Only Fundamental Commodity

OIL.

It runs everything.

Its in everything.

And there is a finite supply.

Without oil - literally everything grinds to a halt. Including life for much of humanity.

Not hard to figure what is so special about all the trouble in the mid-east. Control of oil. Period.

Thats the ONLY reason Uncle Sammy is there in force. Who is the aggressor in Iran? Why?

Oil. Uncle Sammy wants control, by installing a puppet regime in Tehran that he can control, and insure that oil continues to trade in US bucks. Uncle Sammy wants to protect the petro buck.

Only this time what he wants and what he gets, will be two completely different things.

No matter the outcome, gold and silver are the only true money. All the others are just currency.

Key Economic Events Week of 10/21

10/22 10:00 ET Existing home sales
10/24 8:30 ET Durable Goods
10/24 9:45 ET Markit flash PMIs
10/24 10:00 ET New home sales
10/25 10:00 ET Consumer Sentiment

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Key Economic Events Week of 10/21

10/22 10:00 ET Existing home sales
10/24 8:30 ET Durable Goods
10/24 9:45 ET Markit flash PMIs
10/24 10:00 ET New home sales
10/25 10:00 ET Consumer Sentiment

Key Economic Events Week of 10/14

10/15 8:30 ET Empire State Fed MI
10/16 8:30 ET Retail Sales
10/16 10:00 ET Business Inventories
10/17 8:30 ET Housing Starts and Bldg Perms
10/17 8:30 ET Philly Fed MI
10/17 9:15 ET Cap Ute and Ind Prod
10/18 10:00 ET LEIII
10/18 Speeches from Goons Kaplan, George and Chlamydia

Key Economic Events Week of 10/7

10/8 8:30 ET Producer Price Index
10/9 10:00 ET Job Openings
10/9 10:00 ET Wholesale Inventories
10/9 2:00 ET September FOMC minutes
10/10 8:30 ET Consumer Price Index
10/11 10:00 ET Consumer Sentiment

Key Economic Events Week of 9/30

9/30 9:45 ET Chicago PMI
10/1 9:45 ET Markit Manu PMI
10/1 10:00 ET ISM Manu PMI
10/1 10:00 ET Construction Spending
10/2 China Golden Week Begins
10/2 8:15 ET ADP jobs report
10/3 9:45 ET Markit Service PMI
10/3 10:00 ET ISM Service PMI
10/3 10:00 ET Factory Orders
10/4 8:30 ET BLSBS
10/4 8:30 ET US Trade Deficit

Key Economic Events Week of 9/23

9/23 9:45 ET Markit flash PMIs
9/24 10:00 ET Consumer Confidence
9/26 8:30 ET Q2 GDP third guess
9/27 8:30 ET Durable Goods
9/27 8:30 ET Pers Inc and Cons Spend
9/27 8:30 ET Core Inflation

Key Economic Events Week of 9/16

9/17 9:15 ET Cap Ute & Ind Prod
9/18 8:30 ET Housing Starts & Bldg Perm.
9/18 2:00 ET Fedlines
9/18 2:30 ET CGP presser
9/19 8:30 ET Philly Fed
9/19 10:00 ET Existing Home Sales

Key Economic Events Week of 9/9

9/10 10:00 ET Job openings
9/11 8:30 ET PPI
9/11 10:00 ET Wholesale Inv.
9/12 8:30 ET CPI
9/13 8:30 ET Retail Sales
9/13 10:00 ET Consumer Sentiment
9/13 10:00 ET Business Inv.

Key Economic Events Week of 9/3

9/3 9:45 ET Markit Manu PMI
9/3 10:00 ET ISM Manu PMI
9/3 10:00 ET Construction Spending
9/4 8:30 ET Foreign Trade Deficit
9/5 9:45 ET Markit Svc PMI
9/5 10:00 ET ISM Svc PMI
9/5 10:00 ET Factory Orders
9/6 8:30 ET BLSBS

Key Economic Events Week of 8/26

8/26 8:30 ET Durable Goods
8/27 9:00 ET Case-Shiller Home Price Idx
8/27 10:00 ET Consumer Confidence
8/29 8:30 ET Q2 GDP 2nd guess
8/29 8:30 ET Advance Trade in Goods
8/30 8:30 ET Pers. Inc. and Cons. Spend.
8/30 8:30 ET Core Inflation
8/30 9:45 ET Chicago PMI

Key Economic Events Week of 8/19

8/21 10:00 ET Existing home sales
8/21 2:00 ET July FOMC minutes
8/22 9:45 ET Markit Manu and Svc PMIs
8/22 Jackson Holedown begins
8/23 10:00 ET Chief Goon Powell speaks

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