Patiently Waiting

391
Wed, Nov 21, 2012 - 10:27am

I'm expecting a big December and an historic 2013. First things first, though, as we wait out December option expiration and the concurrent "Iron Dome" capping.

So, we sit. And wait. And wait some more. Who knows, maybe your Local Coin Shop will offer some Black Friday premium discounts? If so, take him up on it. Keep stacking and accumulating as much, much fun lies ahead.

For now, it's all about capping and controlling price through December option expiration day next Tuesday. Here are the two, major forces in play:

  1. Open interest in the Dec12 call options is enormous. As "StevenBHorse" kindly pointed out for us yesterday, there are currently 61,523 open contracts between 1735 and 1800. As Ruprecht would say: That's a lot. Of particular interest to The Gold Cartel is the startling 32,537 calls at the $1800 level. I would venture a guess that most of these positions were opened back in late September as nearly everyone (including yours truly) felt assured that, with the onset of QE∞, gold would be somewhere north of $1800 by Thanksgiving. Considering that every dollar above $1800 means $3,250,000 in option payout, the October beatdown from $1795 to $1690 seems rather predictable in hindsight.
  2. Both gold and silver are currently trading above every single one of their moving averages except one...the critical 50-day. The 5-day and 10-day are important, don't get me wrong. And the 200-day will almost always provide predictable support or resistance. The 50-day, however, is the biggie. Having price above or below the 50-day is one of the major determining factors as to whether or not the momo-chasing, HFT algos will be in buy mode or sell mode. At this juncture, a move UP and through the 50-day MAs will provide the final impetus for rallies back to $35-36 in silver and $1800 in gold. As I type, the 50-day MA in the Dec12 gold contract is at $1743.30 and the 50-day in the Dec12 silver is at $33.24.

So, what happens the rest of today and Friday? Probably not much. Just more of the same. HFTs are trolling for stops to harvest on either side so we'll likely continue to see trading in a very tight range.

The only possibility for "fun" might come early next week. Recall how those who are short calls or puts are often manipulated and gamed ahead of option expiry. For next week, the most likely possibility would be a squeeze of those who are short the $1750 calls...if there are a significant amount...and it's impossible to tell. If this happens, though, we'd see a quick spike toward $1750, followed by a further rally through $1750 as those who are short the 1750 calls panic and are forced to buy a futures contract in order to hedge. After a move to $1755 or so, gold would then revert back toward $1740-45 with the sheep having been successfully shorn. The open interest at 1750 may not be sufficient enough for this happen but we'll see. Keep an eye out, anyway.

Here are two current charts. Outside of another "Swiss Stair" accumulation pattern in silver, there's not a lot going on. That will soon change.

And, finally, it's the day before the Thanksgiving holiday here in the U.S. This means it is once again time to reprint one of my favorite posts, "Absolute Advice For Relatives". I wrote this two years ago, right after the onset of QE2. Though we've yet to see the extreme price inflation I was expecting, there can be no argument that the advice is still solid. (I mean, seriously, have you done your Thanksgiving grocery shopping yet? Sheesh!!)

Happy Thanksgiving, everyone. Be sure to check back later today for a very important guest post update.

TF

https://tfmetalsreport.blogspot.com/2010/11/absolute-advice-for-relatives.html

WEDNESDAY, NOVEMBER 24, 2010
Absolute Advice For Relatives
If you're like The Turd, you will most likely get peppered tomorrow with questions from pseudo-intellectual relatives regarding the current world/market environment. Your over-educated yet under-informed cousin or brother-in-law will seek out your current "wisdom" on investing, politics, etc. He or she will then feign interest while you speak but you will feel certain that, in the end, they just don't "get it" as your absolute conviction overwhelms their status quo mindset. You could probably talk for hours about the failure of Keynesianism, Quantitative Easing, the criminal political class, the fallacy of TBTF, POMO and the PDs, the infallibility of gold, etc...but why even try? Your cousin's husband doesn't understand any of this anyway and your show of intellect will only make him feel threatened. He'll quickly tune you out and run off to the family room to watch the Cowboys.

So what do you talk about tomorrow when someone asks? What kind of simple advice can give someone to prepare them for what is certain to be a very challenging year ahead? I plan to dial it back a bit and talk about one thing...inflation. And not just any old, run-of-the mill 3% inflation but serious inflation. I'm talking 20-30% inflation. Milk to $5/gallon kind of stuff. That is what's coming and its a topic most folks can actually get their arms around. Even the fuzzy-headed new boyfriend of your divorcee sister understands inflation and he might even be able to understand why its coming if you explain it well. (This is a chance for you to show off some of your worldly knowledge, too.)

Most folks with a high school-level understanding of economics (this includes your Fed governors) only understand and recognize demand-pull inflation. This is the classic demand side, Phillips Curve inflation that says rising wages, employment and wealth cause economic expansion which leads to more money chasing a static amount of goods. New, excess demand "pulls" prices up and the result is price inflation. Pretty simple stuff. What is coming in 2011, however, is the forgotten beast of cost-push inflation. This type of price inflation is caused by producers and merchants being forced to pass along through higher prices the rising cost of inputs to their products. Consumers, particularly the lower-and-middle income, bear the brunt of the pain. Your income isn't rising to keep pace with rising expenses and you get squeezed. Hard. And its not luxury items that are going up in price, its the staples. Bread, milk, gasoline, clothes, eggs, meat...the basics that no one can realistically live without. It's going to hurt and 2011 is going to be a mean year.

Why will input costs go up? Simple, they are all dollar-dominated and with our Fed now engaging in their final policy option, "QE to Infinity", all dollar-dominated assets are going up in price. Significantly. Your crazy uncle Henry may never take your advice to sell his stocks and buy precious metals but he just might take your advice to stock up now on essentials, before the prices skyrocket. Tell him that if he's going out to buy a new pair of pants, he should buy two. Tell your sister that instead of just buying her kids' winter coats for this year, she should buy coats for next year, too. Tell your cousin that instead of buying groceries every week to, instead, buy a whole dressed-out cow and put it in the freezer along with all the other dried and canned goods she can store.

Still, most crazy relatives won't listen but at least, come next Thanksgiving, they'll remember that you were right. One down side, however. Because you'll end up being the only member of the family that will have prepared and, most likely, the only one with affordable food to eat, you'll probably have to host everyone at your house next Thanksgiving. Oh well, there's a cure for that, too. Wine. Lots and lots of wine. Keep a couple of good Pinots on reserve and you'll be able to handle just about anybody.

About the Author

Founder
turd [at] tfmetalsreport [dot] com ()

  391 Comments

SIlverbee
Nov 23, 2012 - 10:38am

Given the first sentence of this thread

Should you not be at the LCS?

SilverSurfers
Nov 23, 2012 - 10:49am

34

33.20 was a chump

33.50 did not even show up for work

34.00 will act all high and mighty ..... NOT ...

34-35 will do the tango awhile ..... NOT ...

37 is laying in wait

treefrog SilverSurfers
Nov 23, 2012 - 10:52am

silversurfer,

i like the way you think. here's hoping you're right.

mack
Nov 23, 2012 - 10:55am

black friday

looking shiny to me. YES!

Bollocks
Nov 23, 2012 - 11:02am

EU budget summit ends without deal

The Brussels summit on the EU budget has ended without agreement.

EU leaders are taking a short break before returning to draft a statement on when to meet and what to do next. News conferences are expected later on Friday, sources at the summit say.

Hours of talks on the 2014-2020 budget failed to bridge big gaps between the richer countries and those whose economies rely most on EU funding.

The UK said current EU spending levels must be frozen.

https://www.bbc.co.uk/news/world-europe-20465189

Cononish1314 Bollocks
Nov 23, 2012 - 11:07am

La falais

Not doing the metals any harm so far.


Nov 23, 2012 - 11:10am

Given the big OI numbers

...especially for silver, I wondered if someone who has been accumulating longs might not try to take a run at higher numbers with the monkeys out of the NY office for the holiday. Tuesday is first notice day, right? So if we can hold or move up, is it not possible that a bunch of 'in the money' calls could stand ?

Fr. Bill
Nov 23, 2012 - 11:12am

Wow! How much fun was THAT?

Ain't technology grand!

With a passable wireless broadband connection, a spreadsheet, a dual-22-inch-monitor display, and browser windows open to the BV trading window and Netdania's 5 minute silver chart, I actually got to sell that rally at the top!

Well, maybe not. We'll see. My usual trick is to leave several $/kg lying on the table 'cause I sold too quickly. But, "Grab the money and run" is what Mama always said, and that girl grew up impoverished during The Great Depression and went on to glory very well off indeed. "You never go broke selling at a profit" is another one of her saws.

So, with her trading values and the technology she never had, I've had a bit 0' fun this morning.

Sisyphus
Nov 23, 2012 - 11:15am

@ivars

You're a star!

Well, either that or you give 'beginners luck' a whole new meaning.

No, I think you're a star.

Bollocks
Nov 23, 2012 - 11:23am

Look away NOW!

Agh, too late.

ivars
Nov 23, 2012 - 11:24am

Closed at 33,82+predictions

Will get in long before/at expiry on 27th, believe for a nice ride from 33-34 to 35-36 from 27th to November Payrolls on December 7.

Actually, it can even go up a bit to 34 today, but I have to go to gym, and action was too fast to let it to the chance.

@RRJJ- no adjusting.. My old red gold prediction predicts 1900 by and of this year. Lets take it as an absolute bottom.

@Sisyphus- Money supply that appears to be dictating price of gold since 2001 is pure USG debt, which is the base of all USD money supply there is bar FRNs. So, market expects the conversion of this money supply to gold some day, and follows it closely under managed ascent or just because it can not be otherwise if investors are not stupid collectively. Perhaps the inflation is also here already, hidden in financial assets. I do not know, have not read about such calculations. Sure do not show up in CPI or even Shadowstats. One has to include financial assets, houses etc. Everything that has a price .

@Excalibur- I am sure Your head is cool, but Willie' s is not. The BLOWS that are suggested to happen are just one too many. From all sides. That is folklore, not true apprehension of something that might really BLOW. I mean, anything can, if we think so freely that we do not know anything, why bother then? Somehow insurance companies have survived even in such world.

As to gold BLOWS to sky- it can happen if Iran war is started, as than USG debt will BLOW. Or there is recession. Or, again, gold gets attention as real alternative to safe havens-because something else blows.

Japanese Yen is losing some luster as safe heaven.

After those correct long term predictions I think I have to reassess the situation, recalibrate. 1,5 years is long enough for any forecast, can not ask for more. When I feel I get something, I will make a new one. So far, log-periodic shorter term prognostication helps me to trade. 220% return in 5 months, and I am a real real beginner. Started in May.

I use log periodics also for GSR, and hope today will put it another notch lower. Now its 51,63, so on its way to 51, but not as fast as expected- wishful thinking factor not added- but it will get there, next week.

ivars
Nov 23, 2012 - 11:33am

@Sysiphus- star vs. communication with experts

There are people with serious experience that for some reason help me out, but I never follow trades automatically ( at least on my platform, it has too wide spreads) , and not always agree with them as they use different argumentation. I always want to have my own reasons why to do this or that, preferably such that no one else I know uses. Its just that chatting over what goes on in the market helps You to accumulate information much faster, and builds Your trading confidence up. Invaluable.

So many thanks to them, in the first place. Would not have been able to execute own predictions without them for sure, nor get some confirmations so needed when You have no one to rely on.

But to get there that someone notices You and is so kind as to show the kitchen.. that is not so easy. Been trying for 2 years.

tmosley
Nov 23, 2012 - 11:33am

I strongly disagree regarding

I strongly disagree regarding sudden up moves in silver. There are many factors pushing the price of silver up, and only one keeping it down. Once the downward pressure is removed, the game is on. This is similar to "big shorts" of the past, where people saw big problems coming down the line with this or that company/sector, and went short before some big scandal broke and the company went bankrupt or the sector crashed. By buying physical gold and silver, we are shorting the bullion banks and the Fed, but without carrying costs.

Those institutions WILL go bankrupt, and it is quite likely to happen very, very quickly. They will lie and cheat right up until the end, then they won't be able to any more. Other sovereigns will call them out, and that will be that. Barring that, the markets would call out the sovereigns with global hyperinflation. But that isn't likely to be the case, as the governments can see that this is a situation where the first to defect wins, and as such, once there is a big defection, EVERYONE will follow.

StevenBHorse
Nov 23, 2012 - 11:35am

Margins

Are calculated using the SPAN software. I have used this software in a previous life to calculate margins on a portfolio.

https://www.cmegroup.com/clearing/risk-management/span-overview.html

SPAN Parameters

Exchanges and clearing organizations using SPAN will determine for themselves the following SPAN parameters, reflecting their desired degree of risk coverage:

  • Price scan ranges – in effect, the maximum price movement reasonably likely to occur, for each instrument or, for options, their underlying instrument
  • Volatility scan ranges – the maximum change reasonably likely to occur for the volatility of each option's underlying price
  • Intracommodity spreading parameters – rates and rules for evaluating risk among portfolios of closely related products, for example products with particular patterns of calendar spreads
  • Intercommodity spreading parameters – rates and rules for evaluating risk offsets between related products
  • Delivery (spot) risk parameters – for evaluating the increased risk of positions in physically-deliverable products as they approach or enter their delivery period
  • Short option minimum parameters – rates and rules to provide coverage for the the special situations associated with portfolios of deep out-of-the-money short option positions
  • At least once every business day, each SPAN-using exchange or clearing organization calculates risk arrays for all of its products, and prepares a SPAN risk parameter file (also called a SPAN array file), containing all of the above data. These files are then published to clearing firms and other market participants. Using these freely-available files, and inexpensive software such as PC-SPAN, calculating performance bond requirements for particular portfolios is quick and easy.

Now is it possible to have the "code" to SPAN to know when and by how much margin requirements will change, and position accordingly? Could some group of traders that have an oversized position in these markets have well placed sources within the bowels of this black box?

There is no ulterior motive here. The software is running as usual.

Time for Colt and I to hang the Christmas lights.

Neigh

silver66
Nov 23, 2012 - 11:38am

Marc Faber presentation

just read on ZH this article, here is link to the pdf and a video

https://www.calibratedconfidence.com/2012/11/marc-fabers-economic-charts...

Silver66

hitting LCS at lunch, those Kooks were inspiring

Cononish1314
Nov 23, 2012 - 12:05pm

London closing [on the faraway towns]

Silver at £21.15 - £21.19.

Makes me feel so smart for buying a pathetically small amount at £17.70 back in January.

VAT's not to like?

Groaner
Nov 23, 2012 - 12:09pm

It looks like the Cartel is puling a Gandalf

You shall not pass,, 1750 and 34

Cononish1314 Groaner
Nov 23, 2012 - 12:14pm

Blythe goes to Hollywood

Relax!. We got past 1746, which could have been the nemesis for the romantic and idealistic army of Bonnie Prince Fergie.

achmachat
Nov 23, 2012 - 12:15pm

party time!

34!!

remember silverfuturist's old youtube videos every time silver passed an integer?

Grublux
Nov 23, 2012 - 12:17pm
Bollocks
Nov 23, 2012 - 12:25pm

It looks like the Cartel is f'cked

You shall pass 1750 and 34 .

thatguy007
Nov 23, 2012 - 12:28pm

Wow Ag up over 2% and still going

This is insane, where will it close??

Mickey
Nov 23, 2012 - 12:28pm

Next weeks option expiry

is gonna be breathtaking one way or another

Sisyphus
Nov 23, 2012 - 12:30pm

Where's Turd?

He should be celebrating with us!

Possibly he over-indulged yesterday and is sleeping it off?

tyberious
Nov 23, 2012 - 12:31pm

Is this

what a freely traded market looks like?

Basil
Nov 23, 2012 - 12:35pm

Calm down please - it's the best way

Far too easy to get over-excited on a strong day like today, resulting in the "to-da-moon" brigade making ridiculous predictions, not helped by the likes of Jim Willie and all his "BLOWS". It may make some folks feel good on a very temporary basis, but it's much more important to focus on the Big Picture, rather than day-to-day moves.

Much more sensible NOT to over react on days like today, and also NOT to over-react on big down days either. This particularly applies to stackers, who of all people, should only focus on the longer term picture.

For those interested in the shorter term, although today has been great for the longs, it's very important to get the Tuesday expiry out of the way, which is surely a high risk event, especially at the current high levels of open interest.

zerocd
Nov 23, 2012 - 12:35pm

Some sunshine on an awful

Some sunshine on an awful black friday. Off today myself, wife working at JPM with pure dread I might add as she has been laid off and has two weeks to try and find another position. One uphill battle after another all morning and this is the first thing good, perhaps the tides will change!

Fun to watch some green.

Best!

OCD

ggnewmex
Nov 23, 2012 - 12:37pm

Turd

Can understand you taking a break from all this, and a well-deserved one mind you, but, I hope you are seeing this too!! Exciting.

Gotta wonder about those reduced margins. Obviously it is creating interest in the PM's, but I am nervous that "they" are leading traders to the slaughter. I hope that those who trade are sufficiently covered monetarily for the eventual smackdown. PLEASE be wise if you are trading and be properly hedged or get out now!! ( IMO only)

But, isn't it nice to see!!!

GG

ratioarbitrage
Nov 23, 2012 - 12:44pm

Fundamental pattern of this year's big move? XAG ellipse-spike

Today we are seeing a new pattern emerging in the one minute chart - ellipse->spike. I know this pattern from forex trading of old and on those occasions it was crazily bullish. It is now repeating in XAG for the second time in one day. The height of the first spike was about 2 x that of the ellipse, in 0.25x the time. That is why it is a spike. I am watching the second one since the standard shape for the whole move may be close to the average of the two.

A medium term ellipse which may have started 1 November would be about $2.80 tall - $30.70 to $33.50. A spike doubling this from the ellipse failure at $33.50 today would completely obliterate $35 and top at around $39 in early December.

Also, IF what started at $27.50 on August 15th were a symmetrical ellipse, it by coincidence would be $11 or $12 high and would end at about the same price and time points.

So the current spike could, it seems, finish off the ellipse from August 15th with a spike to the very high $30s in the next couple of weeks. If that were followed by its own spike (this time over perhaps a month) the target would be $38.50 +($11 x 1.75), a number which I dare not even write at present. Time frame: just in time for the year end statements.

I imagine any such action would require some news, which I am not seeing, but I believe Turd has mentioned that there may be some. It also implies a failure of repression, which is tough to imagine.

But it is still nice. I haven't seen an ellipse-spike for a long time and once accidentally made a lot of money from one (I was waiting for the ellipse to complete, missed it and got the spike for free).

Cononish1314
Nov 23, 2012 - 12:44pm

Where's Turd?

He died a hero in a burning tank. His last action in life was to turn back the forces of the Evil Empire.

Blub, blub...

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