Cotton Charts

253
Sat, Jan 12, 2013 - 12:36pm

Actually, that's a sort of play on words. We're not going to look at the cotton charts. We're going to look at the CoT and some charts.

First, the CoT. Again, remember that this was an odd CoT week. It was a full five days and it started on 1/2, which had the big rally. It also includes the huge selloff of 1/3 and into 1/4. It then captured the really nice rally on Tuesday. So, for the reporting week, we're left with this dichotomy: Gold was down $14 but its OI was UP over 13,000. Silver was UP 24¢ but its OI was down by over 4,000. Hmmmm. What in the name of Harvey Organ is going on here??

Frankly, the gold CoT was great. For the week, the Large Specs dumped 4,800 longs while adding 900 shorts and the Small Specs dumped 3,700 longs while adding 800 shorts. All totaled, the spec side decreased their net long in gold by about 10,200 contracts. For me, because the week was relatively flat overall for price, this spec dumping is just another sign that the 1/3-1/4 beatdown really was a washout low that culminated at $1626 in the wee hours of 1/4.

Now here's the fun part. Soaking up those 10,200 net contracts could have simply come from Cartel short-covering but it didn't. The Cartel only covered 1,300 shorts. The remaining 8,900 contracts were absorbed by Cartel buying and adding long. What more could you want from a bottom? This is a spec dump and Cartel buy. Very bullish, indeed, and it lowered The Cartel net short ratio to just 2.17:1. Again and for reference, just prior to the last two rallies the Cartel net short ratio fell to near 2:1. On 8/14/12, it was 1.98:1 and on 12/26/11 it fell to 2.01:1. Clearly, anything near 2:1 is bullish. With the action of late this past week, we've likely seen the ratio fall even more but we'll have to wait until next Friday to find out.

The Silver CoT is also interesting but not for the same reasons. Remember, on balance price was rising while OI was falling. For the week, the Large Specs dumped about 1,000 longs but still hold over 37,000 contracts. The Small Specs did a double-cross by dumping 1,500 longs and adding 1,500 shorts. The Silver Cartel used this net selling pressure of 4,000 contracts to reduce their net short position by 4,000.

The only change this week is that the other-than-JPM (OTJPM) crowd essentially "stood down". Instead of adding longs like they've been doing (and keeping JPM from covering), they dumped over 400 contracts. Not much in the grand scheme of things because they still hold long about 45,000. But why the change in trend? Did JPM put the word out that they wanted them to "stand down" so that JPM could cover as many as possible, as quickly as possible? Maybe. Because by not adding longs, the OTJPMs allowed JPM to cover 4,500 shorts. That's the most they've been able to cover in one week since this latest manufactured decline began back in October. Hmmm. Collusion, anyone??

Regardless, this is a bullish CoT, too, simply because of the numbers. The Silver Cartel now has a net short ratio of 1.92:1 and though this is not as bullish as gold, it's not too scary, either. For reference, let's use the 8/16/12 CoT and the 12/26/11 CoT again. On 8/14/12, the Silver Cartel net short ratio was 1.49:1 and on 12/26/11 it was 1.34:1. Again, a Silver Cartel net short ratio of under 2:1 isn't scary but it doesn't mean we're out of the woods yet, either. Caution is still warranted.

And here's something else for you to chew on over the weekend. The latest price peak for the metals was in early October. On 10/2/12, the price of silver was just under $35 and the total OI was 139,117. As of last Tuesday, the price was just above $30 yet the total OI had only fallen to 137,452 for a drop of just 1%. So what's the deal? Where's the rotation? In summary, it looks like this:

  • The Large Specs have dumped 10,000 longs and have had no change in their short position.
  • The Small Specs have dumped 5,000 contracts and added almost 2,000 shorts.
  • The Cartel (namely JPM) has been able to cover just 7,400 shorts.
  • The OTJPM Silver Cartel has added 9,200 longs.

So price is down because the spooked-out, fraidy-cat specs have sold. Into this weakness, the OTJPMs have increased their gross long position by over 25% from 35,788 to 44,977. Your decision is: Whom do you want to follow here? The dumping Specs or the buying Cartel???

To help you with this question, here are two charts. Notice that gold is still consolidating and basing but looks to begin a sustainable rally in the next 2-4 weeks. Silver, on the other hand, is working itself into a corner once again and appears to be ready to break out and UP. Just give it a little more time.

OK, that's all for now. Time to go watch some football. For those who wish to profit by fading my bets, I like Denver, SF, Seattle and Houston. Have a great weekend!

TF

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  253 Comments

SV
Jan 12, 2013 - 12:43pm

Did some of the technological advancements of the 19th century..

End up not working?

https://silverliberationarmy.com

Oh, wait...That's the CoT!

I guess the Financials are still dealing with some commitment issues. Perhaps relationship counseling or a firing line will do the trick?

Lightning
Jan 12, 2013 - 12:49pm

2

"Missed it by that much". Maxwell Smart.

So It Goes
Jan 12, 2013 - 12:53pm

Top ten

I've got nothing to say other than keep stacking.

Wish I had more FRN's so I could buy more.

kingboo
Jan 12, 2013 - 1:01pm

Neck n neck.......i just cant get that #1 spot...

Oh well....it is a sleepy saturday morn...

kingboo
Jan 12, 2013 - 1:01pm

Neck n neck.......i just cant get that #1 spot...

Oh well....it is a sleepy saturday morn...

DayStar
Jan 12, 2013 - 1:03pm

RE: Cotton Charts

Cotton has been very volatile over the past year and has been up hugely. I bought some cotton tee shirts, and they were about three times what I paid for them last time.

DayStar

kingboo
Jan 12, 2013 - 1:13pm

Cartel longs.....

The only thing i dont like is the cartel can get long with free money.... That's not my idea of "skin in the game".... So i dont trust the charts too much. Particularly with the HFT's running the show.... gold and silver are Wealth preserving assets that can make you good money when they overshoot on a "fear trade".....but algo's can be irrational... And that's where i think we all get bamboozled.....algorithmic trades dont always seem to follow patterns we would expect...but they're damn good at follow the leader.. I think we all know who the leader's are.... For short term trading, i guess the charts are critical....but for a dumbass like myself looking over the horizon, they're not too useful...

Owtovit
Jan 12, 2013 - 1:18pm

Build a Death Star

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fast mover
Jan 12, 2013 - 1:26pm

Picks

I'll go with Denver, SF, Seattle and I hate myself...Pats.

Xeno
Jan 12, 2013 - 1:50pm

Play On Words

Good one TF... I will never look at cotton shorts the same way again

and like Santa says... don't believe everything you see;

Federally Assistance Or Just A Hedge Fund?

January 11, 2013, at 11:12 am My Dear Friends,

The early morning operation took place today taking gold off the $1704 level. Many of us are convinced that what we are seeing has Federal assistance. That means to us that the Fed is lending gold to the gold banks to facilitate the operation. Because of that there is a fear of taking on the operation.

I got a call last evening from a friend in the huge private hedge managed money telling me that we have all been bamboozled. The size of hedge funds today can easily mimic what would be considered Federally sponsored. The Fed is quite pleased, but is not the infinite power behind the bear operation that started at $1800.

It is a wild man/women with very big, but not infinite funds that is operating the gold market. That which the longs fear is air, and nothing more than a major huge hedge fund operation.

It is certainly is worth considering. Apple is not off from $750 on its own power. Herbalife did not drop off its recent high without significant help.

In another life at 35 years old I did similar things on the long side. I used banks common then to the Middle East to run gold hard on the upside. I even hired an actor to dress up like a Saudi Sheik. I hired armed private guards. I hired a stretch limo. Nobody knew it was a spoof except the actor, myself and my partner . We arranged with the Comex to permit the armed guards on the floor. His instructions were to go to Mintz Marcus in the pit and in Arabic ask him how to turn this paper in for real gold. Then ask again in really bad english how do I turn my paper gold into real gold. You see, if anything was possible then, now it must be a circus in the use of beards (fake identity covers in buying and selling to influence the market).

This is business now where you must not believe your eyes. This is just something that should be considered as possible. It would be a genus move on the part of anyone wanting the gold market off from $1800. Plant the story in financial MSM that it is Federally backed selling, then do what major hedge funds do today – bet the ranch on infinite margin, and go for broke.

Part of me respects anyone with that much courage to do so.

Respectfully,
Jim

https://www.jsmineset.com/2013/01/11/federally-assistance-or-just-a-hedg...

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