Shakeout

283
Wed, Nov 28, 2012 - 10:32am

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.
MODERATOR
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.

TF

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  283 Comments

Anonymous
Nov 28, 2012 - 1:22pm

Removed comment

Removed comment.

FleetFeet
Nov 28, 2012 - 1:27pm

Gold Flow: National Defense

From Resource Intelligence, Nov. 27, 2012:

"Currency wars are set to intensify as the US Senate is considering new sanctions against Iran that would prevent Iran getting paid for its natural resource exports in gold bullion.

The new sanctions aimed at reducing global trade with Iran in the energy, shipping and precious metals sectors may soon be considered by the U.S. Senate as part of an annual defense policy bill, senators and aides said on Tuesday, according to Reuters.

The sanctions would end “Turkey’s game of gold for natural gas,” Reuters reported a senior Senate aide as saying, referring to reports that Turkey has been paying for natural gas with gold due to sanctions rules.

The legislation “would bring economic sanctions on Iran near de facto trade embargo levels with the hope of speeding up the date by which Iran’s economy will collapse,” the aide said.

Last week Turkish Deputy Prime Minister Ali Babacan has revealed a critical detail about a widely discussed Turkey-Iran gold trade boom, disclosing that the Islamic republic was exporting gas to Turkey in exchange for payment in gold bullion.

It is also reported that Iranians are buying Turkish gold with the Turkish Lira, which is deposited into their bank accounts in exchange for Turkey’s natural gas purchases, the deputy prime minister said at midnight Nov. 22 during a parliamentary session.

. . . . .

The law of unintended consequences may apply here and should the Iranian currency and economy collapse there is likely to be a war with Israel and turbulence in the Middle East akin to, if not worse, than that seen in the 1970’s."

The Watchman
Nov 28, 2012 - 1:38pm

Shorting SLV and GLD=Bankster Games

From Ed Steer:

"There are now 13,139,800 shares/ounces sold short in SLV...or 412.8 tonnes. That represents 4.2% of the SLV ETF.

But the short position in GLD jumped up 17.79% from the last report. GLD is now short 22,060,800 shares...or 2.21 million ounces of gold...68.6 tonnes. That's 5.1% of the GLD ETF sold short.

One can only imagine how high the price of silver and gold might be if this amount of physical metal was purchased to cover these shorted shares that have no precious metals backing them."

Keg
Nov 28, 2012 - 1:43pm

Sure do like these holiday sales

Like black Friday the best deals on silver Wednesday only lasted an hour or so. At least you did not have to stand outside in the cold waiting for the doors to open.

Nov 28, 2012 - 1:46pm

@ Ancientmoney- yeah, this is getting REALLY interesting

You noted that " the FUBM indicates the longs are absorbing most of the naked shorts being dumped into market. Tells me, at this late date, we may see a record number of silver longs stand!" This is exactly what I was thinking about in making that photoshop... wondering if what I was seeing on the charts was an indication that all those naked shorts were being snapped up by serious longs, particularly inconvenient for the cartel with Friday's first notice approaching. I know the Netdania's volume is merely representative and doesn't show the real # of contracts changing hands, but dang- check out that snapback and serious volume:

Basically, the moment the NYSE opened at 9:30 people were buying this thing with both hands. You have to wonder if this "business as usual" raid didn't bite them in the hindquarters more than they expected.

This failed raid means that for the rest of the week, they only have 2 choices as far as I can see: They can retrench in the face of this unexpected demand, just let this thing play out and accept a bit of a higher price (and hence more declaring their intention to stand on Friday) OR they can roll the dice and follow this up with another, deeper raid in hopes of breaking the back of this resistance before Friday, and ultimately discourage more longs from taking delivery.

A real gambler's dilemma, it seems. If they try this again, and demand is like it was today, they might get their faces burned off. That would be a damn shame. (cough)

ancientmoney The Watchman
Nov 28, 2012 - 1:49pm

@The Watchman re: bankster games

To the extent that the bankers sold their shorted shares (which have no physical to back them) to non-APs (Joe Lunchbuckets), they have no fear. Only APs who own 100,000 share baskets can redeem for physical.

So, they can play Rock/paper/scissors and know they win every time. The banker paper trumps the rock (physical) because there is no rock!

Every dollar investors put into SLV or GLD helps the bankers keep gold and silver prices suppressed. If there was no such thing as these ETFs, people would have had to buy physical, stocks, etc. and therefore demand would have been properly expressed in the underlying price.

The bankers use ETF investors money against them. They are the worst place anyone can put their PM allocations.

ancientmoney Pining 4 the Fjords
Nov 28, 2012 - 1:53pm

@Pining

Yeah, it appears that when they lower the price, silver longs snap up the new contracts. Looks like a ton of silver longs intend to pay up, and take the physical. This would be some slam-bang action come Friday into Monday, and all of December!

The Watchman
Nov 28, 2012 - 1:59pm

CFTC Delay For JPM-Shocking

CFTC Said to Grant Swaps Clearing Delay to JPMorgan, Barclays

By Matthew Leising - Nov 28, 2012 12:33 PM ET

The Commodity Futures Trading Commission granted JPMorgan Chase & Co. (JPM), Barclays Plc (BARC) and six other lenders a three-month delay to meet swaps-clearing rules, according to a person with knowledge of the decision.

The delay is intended to help banks struggling to comply with time limits that would require them to accept trades in less than two minutes, said the person, who asked not to be identified because the discussions are private. Citigroup Inc. (C),Credit Suisse Group AG (CSGN), Deutsche Bank AG (DBK), Goldman Sachs Group Inc. (GS), Morgan Stanley (MS) and UBS AG (UBSN) also asked for and received the extension from the original Oct. 1 deadline, the person said.

LCH.Clearnet Group Ltd. was granted a six-month delay to upgrade its systems to accept trades into its clearinghouse in less than a minute, Bloomberg News reported earlier today.

Steve Adamske, a CFTC spokesman, said he couldn’t immediately comment.

Scott Helfman, a spokesman for Citigroup, and Katherine Herring of Credit Suisse, declined to comment. Representatives of the other banks said they were unable to immediate comment.

The Watchman
Nov 28, 2012 - 2:07pm
Be Prepared
Nov 28, 2012 - 2:20pm

Gyrations...

I think we will continue to see choppy waters ahead as the fall out from all the games that are played have an increasingly volatile effect on the price of PMs. The machine will become more unstable trying to right itself, but the weight of all the paper will overwhelm the fixed system.... eventually. I will never forget how the CME changed all the rules to screw the Hunt Brothers. I am not saying that the Hunt Brothers were altruistic, as they certainly were not, but the rules of the game were changed on the fly to ensure that they were the losers. The rules of this game will be changed again dramatically as the CME, TPTB, etc. see that they can't win with their old techniques. The bottom support level for gold and silver will continue its march higher until every fiat dollar chasing value has found a real asset home. I am not sure that standing for delivery would break the CME because they will call a "force majeure" to protect their fat a$$es.

Congrats to HeNateMe on the upcoming March birth of your daughter! Selling silver now so that you can be debt free and in a better place sounds very smart to me. I can lend you me Scuba gear if you need it to find your lost silver at the Neptune's bottom. :=)

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