Shake A Stick At This

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.

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.

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.


About the Author

turd [at] tfmetalsreport [dot] com ()


Beastly Stack
Sep 27, 2012 - 10:09am


The charts look great but we need the equities to cooperate here!

We all know how the charts can look in a short period of time.

I just bought oil here @91!

Giddy up!

Sep 27, 2012 - 10:08am
Sep 27, 2012 - 10:01am

Good Vibrations

I'm sorry, I just can't contain this overwhelming feeling.

The charts continue to look very promising.

I recall an interview with one of the astronauts who said 'when those Titans fire up, the vibration is unbelievable - nothing can prepare you for that kind of vibration'.

Good, good, good - Good Vibrations!!!

This baby is goin' up!!!

To the moon baby!!!

Sep 27, 2012 - 10:00am


The Great Game

An astute reader from Atlanta named Ken wrote the following in a letter to me:

"It seems that the game plan (for financial heavyweights) is to buy assets, real things that can't be papered away by the government, and pay back with depreciated dollars."

Ken gets it. Ken understands the Great Game as it is being played at the highest levels of our monetary system. The Game has two halves: going long the real, and short the symbol. That is, going long real assets by owning them, and going short the dollar and the financial system by selective and advantageous borrowing. That way if you are a hedge fund manager, CEO or "private equity" investor who has essentially gambled the world monetary system on your speculations, and you collapse the financial markets and the value of the dollar when you guess wrong - you don't jump out the office window. Instead, you enjoy an extraordinarily lucrative early retirement.

the rest at:

Sep 27, 2012 - 9:56am
Sep 27, 2012 - 9:55am

SRSRocco, I love reading your detailed reports.

Take what I post below as healthy debate. As an engineer most of my life, I tend to believe that technology can help help (and hurt) better mankind. I also realize that this information below is a sales pitch for me to buy a service so I take the statements with a grain of salt. I post this with out fully analyzing the data referenced provided and expect to get flamed for that. YEECCHHH, they even reference NPR but here is the sales pitch.....

We may never have to worry about running out of oil.

I know that sounds crazy. It's the opposite of everything you've ever seen or heard. But I'm telling you now, it's true. And the reason why could make a few investors extremely wealthy.

Yes, worldwide, we're thirsty for crude. And yes, it's all running out. What's more, what's left is either trapped in a war zone or in a dying well. At least that's the message you get from the news.

But can I tell you what nobody else is talking about these days?

See, there's an upside to every crisis. And the crisis over desperate oil demand and high oil prices is no different. How so? For one thing, the most basic good news is that new demand means new incentive for oil drillers to invent bigger and better ways to get more crude.

For instance, finding oil used to mean turning rock beds into pincushions until you got lucky. Today, we use satellites and ultrasound to find oil-rich new fields.

Meanwhile, more than half the world's oil reserves are trapped in rocks like chalk and limestone. But Norwegian scientists have just discovered how to make "smart water" — a mix of seawater and sulfate that could unlock up to 60% more oil and get it out. That alone could mean hundreds of billions of "new" barrels of oil added to the world supply.

And in Canada, engineers just figured out how to slash the cost of processing oil tar into clean-burning methane... by using a tiny microbe to do all the work for them. That's revolutionary.

Now doesn't that already sound a far cry ahead of Colonel Drake's first rickety oil drill back in Titusville, Pennsylvania in 1859? Of course it does.

With the help of technology alone, you could see oil supplies double or triple in your lifetime.

But even those are just the beginning. Because there's a very real possibility we may never have to drill for crude or fight an oil war again, starting very soon...

How "Pond Scum" Could Soon Power Your Car

You probably know, it took the earth 300 million years to "make" oil. Can you imagine what a breakthrough it would be if we could squeeze that whole process into a month... a few weeks... or even a few days? Because it looks like that's exactly what we're about to do.

That's right. As you read this, technicians in a half-dozen labs and companies are figuring out how to "make" oil — and I mean the real kind — in laboratory beakers.

It's called "cellular oil" and it could soon replace the need for every drop of oil we now get from the ground... or from overseas... and even from Alaska or offshore drilling.

Gas for your car, jet fuel for airplanes, truck and train diesel — all of it homegrown, and as much as we want. In the same way earth "made" trillions of gallons of oil... but much faster.

See, it turns out that not only did the earth use the natural lipids in algae to make oil over the millennia. Today's algae — common pond scum — is packed with those same natural lipids.

And if you think I'm talking about boring "biofuels" think again.

Scientists are turning this pond scum into real, regular petroleum. It's possible to process it the same way, too. In the same processing plants and pumped from tanks at your local gas station.

This isn't like getting "biofuel" from food crops either.

For one, you don't eat algae. So using this won't jack up your grocery bill. But also because it turns out we can get a LOT more oil out of algae than we can from any other crop source.

An acre of soy, for instance, only gives up a pathetic 50 gallons of fuel on a good day. An acre of corn, what we use for ethanol now, yields only 250 gallons of fuel. Even sugar cane only yields 450 gallons of fuel per acre.

Meanwhile, you can get up to 10,000 gallons of fuel from just one acre of algae.

How much fuel is that?

Well, think about it this way.

Right now there are more than 40,000 regular oil and gas fields around the world.

Some are huge — hundreds or even thousands of square miles.

Just the Bakken Formation alone could run as large as 25,000 square miles. It covers parts of North Dakota, Canada, and Montana.

And nobody's even sure how much oil it still holds.

Meanwhile, the U.S. Department of Energy says we could replace all U.S. oil demand with algae-oil farms totaling just a little bigger than the state of Maryland.

One top biotech engineer from Arizona State recently told NPR algae-oil technology could meet worldwide demand — not just oil, but all fossil fuels — with as much land-area as Texas.

And remember, we don't have to grow algae-oil on land at all. They can make oil for us almost anywhere — out at sea, in skyscraper-like greenhouses, even in wastewater.

And oil-producing algae grows fast too.

You can replace an entire fuel crop of algae in about 10 days. Then you can harvest the oil and start all over again, as often as you like, with the same algae.

Exxon Is Already "In"
for $300 Million

Exxon is already "in" on algae oil for $300 million. That's how much they are giving Synthetic Genomics, just one of dozens of companies working to get this onto the market. You can't buy in alongside Exxon, because Synthetic Genomics is private. But we've got our research team looking into many more of these companies. You'll start hearing a LOT more about this, very soon.

Key Economic Events Week of 5/25

5/26 8:30 ET Chicago Fed
5/26 10:00 ET Consumer Confidence
5/27 2:00 ET Fed Beige Book
5/28 8:30 ET Q2 GDP 2nd guess
5/28 8:30 ET Durable Goods
5/29 8:30 ET Pers Inc and Cons Spend
5/29 8:30 ET Core Inflation
5/29 9:45 ET Chicago PMI

Sep 27, 2012 - 9:55am

strike at AngloGold Ashanti

supporting PMs this morning

plus general up after a down day yesterday.

risk-on is inflationary, afterall

Sep 27, 2012 - 9:50am
Sep 27, 2012 - 9:47am

Explain this action?

NGD usually trades the inverse of the other gold stocks, why? when most of the metals are up, its down, and then the other way around. what kind of games do they have on for it to react like this?

Sep 27, 2012 - 9:47am

Dr and Ferd

Whatever you do, don't google pie in the sky unless the class is over 18 and signs consent and release forms.

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Key Economic Events Week of 5/25

5/26 8:30 ET Chicago Fed
5/26 10:00 ET Consumer Confidence
5/27 2:00 ET Fed Beige Book
5/28 8:30 ET Q2 GDP 2nd guess
5/28 8:30 ET Durable Goods
5/29 8:30 ET Pers Inc and Cons Spend
5/29 8:30 ET Core Inflation
5/29 9:45 ET Chicago PMI

Key Economic Events Week of 5/18

5/18 2:00 ET Goon Bostic speech
5/19 8:30 ET Housing starts
5/19 10:00 ET CGP and Mnuchin US Senate
5/20 10:00 ET Goon Bullard speech
5/20 2:00 ET April FOMC minutes
5/21 8:30 ET Philly Fed
5/21 9:45 ET Markit flash PMIs for May
5/21 10:00 ET Goon Williams speech
5/21 1:00 ET Goon Chlamydia speech
5/21 2:30 ET Chief Goon Powell speech

Key Economic Events Week of 5/11

5/11 12:00 ET Goon Bostic speech
5/11 12:30 ET Goon Evans speech
5/12 8:30 ET CPI
5/12 9:00 ET Goon Kashnkari speech
5/12 10:00 ET Goon Quarles speech
5/12 10:00 ET Goon Harker speech
5/12 5:00 ET Goon Mester speech
5/13 8:30 ET PPI
5/13 9:00 ET Chief Goon Powell speech
5/14 8:30 ET Initial jobless claims and import prices
5/14 1:00 ET Another Goon Kashnkari speech
5/14 6:00 ET Goon Kaplan speech
5/15 8:30 ET Retail Sales and Empire State index
5/15 9:15 ET Cap Ute and Ind Prod
5/15 10:00 ET Business Inventories

Key Economic Events Week of 5/4

5/4 10:00 ET Factory Orders
5/5 8:30 ET US Trade Deficit
5/5 9:45 ET Markit Service PMI
5/5 10:00 ET ISM Sevrice PMI
5/6 8:15 ET ADP jobs report
5/7 8:30 ET Productivity
5/8 8:30 ET BLSBS
5/8 10:00 ET Wholesale Inventories

Key Economic Events Week of 4/27

4/28 8:30 ET Advance trade in goods
4/28 9:00 ET Case-Shiller home prices
4/29 8:30 ET Q1 GDP first guess
4/29 2:00 ET FOMC Fedlines
4/29 2:30 ET CGP presser
4/30 8:30 ET Pers Inc and Cons Spend
4/30 9:45 ET Chicago PMI
5/1 9:45 ET Markit Manu PMI
5/1 10:00 ET ISM Manu PMI

Key Economic Events Week of 4/20

4/20 8:30 ET Chicago Fed
4/21 10:00 ET Existing home sales
4/23 8:30 ET Weekly jobless claims
4/23 9:45 ET Markit flash PMIs
4/24 8:30 ET Durable Goods

Key Economic Events Week of 4/6

4/8 2:00 ET March FOMC minutes
4/9 8:30 ET Producer Price Index
4/10 8:30 ET Consumer Price Index

Key Economic Events Week of 3/30

3/31 9:45 ET Chicago PMI
4/1 8:15 ET ADP Employment
4/1 9:45 ET Markit manu PMI
4/1 10:00 ET ISM manu PMI
4/2 10:00 ET Factory Orders
4/3 8:30 ET BLSBS
4/3 9:45 ET Market service PMI
4/3 10:00 ET ISM service PMI

Key Economic Events Week of 3/23

3/24 9:45 ET Markit flash PMIs
3/25 8:30 ET Durable Goods
3/26 8:30 ET Weekly jobless claims
3/27 8:30 ET Personal Inc and Spending

Key Economic Events Week of 3/9

(as if these actually matter)
3/11 8:30 ET CPI
3/12 8:30 ET weekly jobless claims
3/12 8:30 ET PPI
3/13 8:30 ET Import Price Index

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