The Iron Dome, part 2
The Cartel-built Iron Dome continues to hold but it may not last much longer.
Just like The Iron Dome in Israel, occasionally a missile (candle wick) sneaks through but almost every attempt to pierce the dome is rebuffed. This is a clear attempt to cap and control price, at least through option expiration next week. Will they fail before then? That is the most pressing question.
Time is short again this morning as I have much to do before Thanksgiving and I have a very important post to prepare for tomorrow. Perhaps an industrious Turdite can do us all a favor and add up the total open interest of the Dec12 call options at 1735 and above. I would suspect that we'll find beaucoup calls at 1750 and at nearly every $10 increment leading up to a gigantic wad of (currently) worthless $1800s. This is the most-likely reason for The Iron Dome. Those calls must be kept out of the money. Once, the Dec12 options expire at the close on Tuesday, The Iron Dome will likely begin to break down.
As an example, we saw this play out in corn yesterday. The Dec12 corn options expired last Friday (the 3rd Friday of the month preceding). After being pressured for a number of reasons from Labor Day on, lo and behold look what happened as soon as the Dec12 options expired:
Dec gold is, by far, the most active traded and delivered month of the year. With QE∞ being announced in mid-September, the open interest in the futures and the options has been even stronger than usual. The "Iron Dome" strategy is, no doubt, linked to a plan to suppress and cap price until option expiry and First Notice Day next week. If I'm right (and I'd like to think that I am), the Iron Dome will break next week, the month of December will see a significant continuation of the rally and we will have the metals set up for an extraordinary and huge 2013.
Silver is dealing with capping pressure, too, and it is certainly tied to option expiration, as well. However, silver is also being slowed by chart pressure, which we know from the CoTs is being openly and aggressively supplied by JPM. $33.20-33.25 is our current resistance mainly because the 50-day moving average for the Dec12 contract is at $33.24. A close above the 50-day would put silver above every single one of its MAs and this would undoubtedly lead to short-covering and momo-HFT buying. JPM is trying to forestall this but they are failing. Look for them to retreat to higher ground soon, somewhere near $33.60. That will be a critical line of defense for them as, once above there, silver will be set for a run back to critical resistance between $35 and $36.
And just a word here about crude and the MENA. The headlines would suggest that tensions have been slightly dialed back today and this is reflected in the current price of crude. However, if news reports/rumors turn out to be correct regarding Iranian missile replenishment shipments on the way, it would safe to assume that the conflict is far from over. Watch the price of crude very closely. It will be your "tell" as to whether the situation is cooling off or about to boil over. For today, it's neutral. Later this week...???
That's it for now. Have a great day!