Sunday Charts

Sun, Oct 28, 2012 - 4:20pm

Just a few things before we begin a stormy week.

First of all, this week's CoT was really, really least in silver. Where gold is acting "normal", whereby the spec longs are selling and the Cartel shorts are covering, silver is an entirely different animal. If you missed my comments on Friday, here's a reprint:

Submitted by Turd Ferguson on October 26, 2012 - 3:05pm.
With price down nearly $40 on the reporting week, the CoT was predictable. The large and small specs dumped 11,ooo gross longs and The Cartel covered 11,000 gross shorts. The Cartel also added some longs so the net short position declined by almost 15,000. The Cartel net short ratio is now 2.75:1. For perspective, three weeks ago on 10/2, the net short ratio was 2.98:1.

Here's where it gets really interesting. For the week, price declined well over $1 and the total OI fell by just 762 contracts. JPM et al covered 2000 naked shorts and also sold 400 longs.
But check this out. The common theme in predicting another "collapse" in silver (and gold, too) was that the specs had overbought and were going to be chased out by an attacking Cartel. New spec short money would speed the collapse and allow the Cartel to cover. Even I subscribed to this a bit as I figured that the spec position was turning over as longs were sold and shorts were added. The data, though, doesn't bear this out!

10/2/12 Large Spec Long Large Spec Short Small Spec Long Small Spec Short

$35+ price 47,236 9,118 30066 10344

10/23/12 47,463 10344 27437 10074

$31.60 price

Note that the Large Spec Long position is virtually unchanged! Price has fallen over $3 only because the Small Specs have sold 2,600 of their longs. By no coincidence, the Silver Cartel gross short position has, over the same time period, fallen from 93,628 to 91,285...a drop of 2,343.
Very important conclusion: The price of silver has fallen over 10% simply because a few small players decided to dump some longs. The Big Money...hedge funds, managed money, etc...has not budged. They are still core long and holding.

Now, as price begins to rebound, let's see what happens next. If I were Blythe, I'd be very frustrated and pissed off...and a bit nervous, too.

On the charts below, you can clearly see that we are forming out bottoms so I went back to the CoTs of January 2011 to look for clues and things we should be monitoring today. Though January 2011 saw the typical spec long liquidation and Cartel buying in both metals, the bottom materialized in late January when a short-covering bounce provided the spark. And from whom did the bounce originate? The large spec shorts. On the 1/25/11 CoT, the large specs in silver had a gross short position of 10,473. The very next week, that level fell to 7,203 for a reduction of over 10%! During and shortly after this "event", silver rallied from a low of $26.51 to $27.94 and the bottom was in. Will we see that type of action again this week or next??

Let's start with the Finviz hourly charts where both metals look like they have found bottoms.

Now, take a look at the daily charts. What I like here are the multiple days of full-range trading. Yes, the metals haven't yet broken UP and out of these ranges (bottoms) but they haven't broken down, either, and the onus is now on the shorts to sustain momentum by driving price ever lower. Failing momentum will eventually lead to a self-fulfilling cycle of covering shorts and higher highs off of these lows.

The 8-hour charts are insightful as they show the trendlines from the highs of early October. Note that silver is leading the way in breaking UP and through its trendline. Gold appears to be a day or two behind. Also note the deliberate manipulation on the gold chart. Gold was sold and smashed for three consecutive Friday/Sunday/Monday periods but, when they tried to start it again this past Friday, they were rebuffed. This is obviously a very good sign though they may try again overnight tonight and into tomorrow. If they do, I'm quite sure they'll fail as the support levels from last week look pretty solid.

And, speaking of support levels, you can clearly see them on these 2-hour charts. Not only support but you can also see our targets for breakout. Initially, those levels are $32.50 in silver and $1720 in gold.

OK, that's it for now. Trading kicks off in 100 minutes so be ready. Maybe the evacuations in NY for the next couple of days will cause the JPM metals desk to be undermonkeyed and a rally will result? We'll see...


10:15 am EDT UPDATE:

With "holiday" trading today and likely tomorrow, I would expect a quiet and rangebound trade. Maybe, since so much of the selling has been Comex-based over the past three weeks, we'll get a break and see a gradual rally in price but don't count on it. For now, support held at higher levels this morning after the usual 3:00 am NY time selldown. Let's see if this trend can continue. Hang on. Hunker down and stay safe. TF


Just another quick update as, once again, the equity markets are closed and volume is extremely light in very thin conditions. Regardless, the basing trend spotted yesterday on the charts above is even more evident today. Let's look for resolution of this basing/consolidation pattern by mid to late week as things begin to get back to some kind of "normal".

I'll have a full, new post later today so please be sure to check back. TF

About the Author

turd [at] tfmetalsreport [dot] com ()


Oct 28, 2012 - 4:21pm



Oct 28, 2012 - 4:23pm

i'm confused

second, third??

El Gordo
Oct 28, 2012 - 4:27pm


let's get on with it. I've still got a little fiat that's just itching to turn itself into real money, so let's see what happens.

Oct 28, 2012 - 4:30pm

The election is a new factor, isn't it?

As someone from England, I don't have much of a feel as to how you guys will react to a Romney victory, and how likely that is. Seems to me it will create problems for the QE to Infinity bid on PMs since he wants to dump Bernanke. Welcome thoughts.

Oct 28, 2012 - 4:38pm

Stocks open tomorrow

But algo trading only. So what else is new? Isn't 80-90% of the daily NYSE volume algo-related anyway?

Oct 28, 2012 - 4:39pm
El Gordo
Oct 28, 2012 - 4:40pm


If Romney wins the election, the best he can hope for is to get taxes under control, create a little certainty in the business market, and allow the economy to unleash itself from the government and start growing again. Stopping or slowing government spending is politically impossible and tax increases merely slow private sector growth, so our only chance is to grow our way out of this problem, and it won't happen overnight, if it can happen at all. Getting rid of the Bernake is a good idea, but we will still have to print or default - those are our only short term options. I don't care if its Superman, he will not allow a default, so there you have it. Over a longer period of time, and with a proper foundation of tax and energy policy, we have a chance. With Zero, we have no chance. Either way, PM's look good to me for a while yet until some issues get settled.

The Watchman
Oct 28, 2012 - 4:43pm


QE must continue-otherwise "The House of Cards" WILL collapse.

Oct 28, 2012 - 4:45pm

Terror in the whitehouse

I have little regard for Obama. His track record is awful and he signed and defended signing, the NDAA.

I have however, recently read a book called "Without Conscience" by Dr. Robert D. Hare. This is a definitive study of psychopathy (the study of psychopaths) and I am very concerned that Romney may be a diagnosable psychopath. If so, America and world is in for a major shit storm. Psychopathy is not a mental illness per se but a mental condition that deprives one of any sense of empathy. His stare, his ability to change positions and strategy practically from one minute to the next without so much as a twitch, and the ability to present and deliver those changes with total confidence causes me great concern. At least I know what to expect from Obama. I don't think anyone really knows anything about Romney. It may be that the only truly patriotic thing to do is to write in your choice for president.

The Watchman
Oct 28, 2012 - 4:50pm

RE:Benghazi Attack

"A Liberal is a person who will give away everything he doesn't own."

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