In hindsight, I'm mad at myself for not seeing this coming. Though I'd been telling you all week to expect weakness as The Cartel attempts to dissuade Dec12 contract holders from taking delivery, I didn't anticipate the severity of this morning's action.
Monday, I tried to warn you by using The Godfather as a reference. Yesterday, we discussed the possibility again. I didn't expect a huge selloff so I only gave you preliminary support levels. Boy, was I wrong. They came after it hard this morning with the deliberate intention of smashing price. Here are your 1-minute charts. Note that the sole focus, at least initially, was gold. It was hit right at the Comex open. Silver, which doesn't open until 8:25 just saw some spillover selling, initially. Silver then became the target later once The Forces of Evil saw the opportunity to attack it and drop price below the 50-DMA.
To save time, below is a C&P of a comment that I posted to the previous thread. This is the most likely explanation of the mechanics behind the attack:
Submitted by Turd Ferguson on November 28, 2012 - 8:50am.
This is all just manipulative bullshit. The likely cause of the drop was the deliberate and manipulative unwinding of a Dec position, probably a spread trade. The manipulator takes the long side off all at once and then looks to cover the short side at a later time after price has been driven $20+ lower. In this case, the manipulator gets the added benefit of the momo-HFTs chasing price lower because of the breach of the 50-DMA (near $1740). Now down $30, the manipulator can begin to cover the short side for considerably less money than it would have cost if he had done the whole thing instantaneously.
Soon (later today or tomorrow) we'll get an FUBM where actual buyers pick up the discount and price rallies further on the back of the physical orders that were filled on the drop.
The goal now is to recover the damage. Gold is, unfortunately, back under "The Iron Dome" and it will have to fight again to break through. The goal for silver is easier. Get back above the 50-day, near $33.20, and the short-term technical picture will remain unchanged. I suspect this will happen later today but I also expect more raid attempts before FND on Friday.
Again, given what appears to be an extremely tight physical situation and the escalating open interest, I should have expected a raid of this magnitude today in order to frighten the remaining Dec12 longs. Live and learn, I guess, and we'll have to plan better in late January when the Feb13s go off. Until then, watch for more raids today and continued volatility through the remainder of the week. I am still expecting a very strong UPtrend in December that will carry over into 2013. Be patient. Hang in there and keep the faith. BTFD and take delivery.
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