One Final Washout?
Maybe. At the same time, it looks like we might have finally found a decent floor, too. Could both be true? Definitely.
While I very much like the action since the brutal selloff of Sunday evening, I still feel that there may be one more spike down coming. This post is not intended to be a have-it-both-ways, Maund-esque soliloquy. It is instead a warning, designed not just to mentally prepare you for additional volatility but also to give you confidence that we are finally very near The Bottom. No sense dicking around here. Let's get straight to the point.
The Sunday Night Plunge and Monday Rebound shows us a lot about where we are in the grand scheme of things. As you know, The Cartel Banks have been rigging paper metal price lower since the announcement of QE∞ last September. In doing so, they've been able to reduce their potential Comex liability by about 70%. However, as paper price fell, physical demand increased, to the point where the blatant drop through $1525 had to be initiated in order to create the picture of despair that has led to 127 metric tonnes of gold withdrawal from the GLD since 4/12/13.
But like pressing on a spring gets more challenging with effort, paper price finally appears to have reached a point where further weakness will only create an untenable situation for physical delivery. The daily chart of gold clearly shows tremendous demand for paper and physical each time the price dips below $1350. Therefore, this is likely The Bottom.
However, we're dealing with corrupt, evil and greedy bankers along with soulless and greedy hedge fund/money managers. Having seen how quickly the price of silver fell Sunday evening once it broke the lows of 4/15, these goons must be salivating at the thought of breaking the $1320 gold lows, also set back on April 15. If they can pull this off...and that's a big IF considering the demand apparent at $1350...gold could drop sharply below $1300 and down toward the $1280-90 area I've identified as an important Fib retracement level. And IF they are able to do that, all sorts of secondary technical indicators will once again flash the extreme oversold signals that we saw last month.
Therefore, putting it all together, I truly think we are FINALLY very near The Bottom. Of course, this is from the same guy who thought that $1525 and $26 would hold AND, if those levels failed, the spike lower would only be temporary...not 6 weeks and counting. But I'm begging you to please consider these four items:
- Continued reports of extreme physical demand in size at these "discounted" prices.
- Greatly oversold conditions on the daily and weekly charts (see below).
- An extreme CoT structure that shows The Banks well-positioned to fleece The Spec Shorts.
- Andy's report yesterday that he now believes The Banks are finally NET LONG.
Here are the charts mentioned above. These are daily and weekly charts that also include RSI and MACD measurements. For a quick reminder of what these are, click here: http://www.investopedia.com/terms/r/rsi.asp and here: http://www.investopedia.com/terms/m/macd.asp
OK, I'm going to stop here because it's getting pretty late so I'd better get this posted. As I close, I see that the metals have rebounded nicely from their morning lows and this is very encouraging. However, tomorrow is going to be a MAJOR headline-gaming day with the FOMC minutes and The Bernank in front of Congress. Just be patient and let's see what happens from here before getting too excited.
p.s. Lots of excitement over the Riff-Raffle but there is still plenty of opportunity to win. We've only sold about 300 tickets so far so your odds are still fairly good. Also, we will ship prizes anywhere in the world so don't think your ineligible if you don't live in the U.S.. Turdville is a global village so please feel free to participate from wherever you are on Planet Earth.