Simply unbelievable and amazing in so many ways.
Not really sure where to start this morning. It's a Saturday and I don't really feel like taking two or three hours to type up a long and detailed post but I have to do it anyway. I have some significant issues/ideas for you to ponder.
First up, let's review again the weekly charts. The Outside Reversal Weeks of last week were followed this week by slightly down, red candles. This is no big deal so I don't want you to be concerned. The ORW is simply a sign of overall strength and sentiment and likely shows a general shift in momentum. That shift may have seemed hidden or inconsequential this week but, trust me, you'll notice it with the full benefit of hindsight in the weeks and months to come.
Note the powerful, long-term trends on these charts. The black lines are the primary long and intermediate term trends. The red lines are the BS, nonsense Cartel-induced corrective counter-trends and resistance levels. I am NOT fearful or the least bit nervous here. Any further weakness should be considered a Cartel gift, wrapped up in a big, fat bow, just in time for your holidays. In other words, buy the dips.
And we simply must take some time today to discuss the latest CoT and Open Interest numbers. First, let's talk about gold. This week's CoT period (Tue-Tue) saw gold rise about $10 while total open interest climbed by 12,607. So, what do you think happened? I'll pause here while you contemplate the obvious...
I'm sure these numbers will come as a great shock to virtually everyone:
Large Spec Net Long = +11,400 Evil Cartel Gross Long = -300
Small Spec Net Long = +5,600 Evil Cartel Gross Short = +16,700
TOTAL Spec Net Long Change = +17,000 TOTAL Evil Cartel Net Short Change = +17,000
Isn't that just freaking sickening? What an absolute joke. Managed money, hedge funds and small investors dramatically increased their exposure to gold after the re-election of President O'Bottom. In order to tamp down what should have been a dramatic increase in price, The Forces of Darkness took the sell side of nearly every trade and increased the outstanding inventory of unbacked, leveraged paper gold by 12,000 contracts or, stated another way, 1.2MM ounces or about 37 metric tonnes, roughly the equivalent of the entire alleged physical holdings of South Korea. Just another example of ongoing manipulation and price "management" that continues to be overlooked/endorsed by Cueball and Thunderlips. Way to go, boys!
But the intriguing story continues to emanate from the silver pit where things look quite a bit different from gold. The CoT saw spec positions that were nearly unchanged for the reporting week. While silver rose 46¢, the total Large Spec net long position only grew by 300 and the Small Spec net long position only grew by 100. So, what's the deal??
Do you recall back in mid-August I got all worked up over what I thought was a coming "Civil War" within the Silver Cartel? At the final bottom of the March-August "correction", suddenly the gross long position of The Silver Cartel began to surge. At the same time, the gross short position (JPM) was forced to also grow in order to suppress price and swallow this demand. What happened next did not play out as a "Civil War" (at least not that time) but the huge jump in Cartel gross longs did precede the dramatic, 6-week rally that took silver from $27.50 to $35.50.
On the Tuesday 8/14 CoT survey, the Silver Cartel gross long position surged 3,202 to 47,797 while the gross short position grew 4,752 to 71,199. Now, compare this to the numbers on this week's CoT:
Total Evil Empire Gross Long = +3,071 to 41,797
Total Evil Empire Gross Short = +4,354 to 92,758
Whether or not this is finally the start of my long-awaited Civil War matters little. What does matter is that we are seeing the exact same CoT structure and positioning that we saw in mid-August, right before a 6-week, 30% rally in price. Hmmmm........
And I'll give you a few more nuggets to chew on. Back on Thursday, the price of silver fell about 20¢ on the Comex. Regardless, the total OI continued to grow that day, adding another 1,200 contracts to 145,883. This is extraordinary and astounding! For perspective, take a look at these dates, prices and OI numbers:
DATE OI LEVEL PRICE
11/12/10 147,801 $25.94 QE2
12/31/10 136,275 30.91
2/25/11 136,560 32.90
4/1/11 137,580 37.74
4/29/11 129,712 48.58 Price Peak
8/5/11 119,241 38.20 U.S. Debt Downgrade
10/28/11 110,911 35.28 Demise/Theft of MFG
12/30/11 105,982 27.88
1/27/12 101,885 33.75
2/24/12 118,204 35.33 Price Peak
3/30/12 109,693 32.47
6/1/12 115,991 28.50
8/17/12 125,817 27.99 March-August correction ends
11/16/12 145,833 32.50
So, here are your tasty nuggets:
- First and foremost, why is total silver OI at the highest level in 24 months?
- Price is exactly the same as 3/30/12 but OI is UP 36,000 contracts.
- For 2012, total OI is UP 40,000 contracts or nearly 40%. What percentage likelihood would you have given that type of liquidity growth given that MFG disappeared on 11/1/11?
- Why did total OI decline by nearly 20% in early 2011 while price nearly doubled?
- With OI back to late 2010 levels, will it continue to grow or are we on the verge of another, significant short-covering rally?
Though there are many, possible answers to those bullets above, one thing is certain...The multi-year high in total open interest that we are currently seeing in silver guarantees that some extreme price action and volatility is just around the bend. Consider this your warning. Be prepared for a lot of fun...and angst...in the days and weeks ahead.
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OK, time for me to sign off. I need to get out and cut the grass, put the snowblade on the John Deere, string some outdoor Christmas lights and watch some football. I hope you have a great weekend and then return on Monday, ready for volatility and fun.