WOPR in Charge

451
Fri, Jun 7, 2013 - 10:40am

It's the one, overriding thought I've had since having to endure 30 minutes of CNBS this morning.

First, let's recap. I've been predicting for over a week that today's NFP-BLSBS would be "disappointing". By late yesterday, so many folks had jumped on that bandwagon that, in hindsight, the PMs were set for an opposite reaction. And that's exactly what we've gotten.

Think about it...A little less than 24 hors ago, The POSX was down OVER A FULL POINT. In currency terms, this was a monumental, if not historic, move. Currencies aren't supposed to move that much in a single day. It used to be a big day was 10 or 20 basis points. Now, The Pig can fall over 100 basis points and it's just another day in the market. This is all about WOPRs, too, but more on that in a minute.

Back to The POSX. After today's paltry 175,000 payroll number and UPTICK in the unemployment rate, the POSX is rallying. How much? Is it back UP 100 bps? No. It has barely retraced half of the elevator shaft it fell down yesterday. But that hardly matters. Though the POSX is still 50 bps LOWER than yesterday at this time, gold is $15 lower and silver is 50¢ lower. In our human world, this seems illogical but in the WOPR world, all is well.

And you see this on CNBS, too, if you look closely. Back in the day...actually WAY back in the day...I had the privilege of visiting the floor of the NYSE on two occasions. It was a crazy, bustling place. There were specialists manning their posts like watchmen and traders maniacally criss-crossing the floor with orders. It was a human process. By no means perfect but at least it had some semblance of reality, a connection to fundamentals and actual intelligence.

Today, the floor of the NYSE is a veritable ghost town. A majority of the trading action now takes place on computers based in places as close as Hoboken and as far away as Kansas City. Gone are the days of actual liquidity provided by real human beings with rational intentions, replaced by computers trading for pennies in a rapid fire shell game that would make even the most accomplished 3-card Monte dealer wince.

The same is true for the metals trade. Physical fundamentals are completely trumped by the contract-flipping computers. Oh sure, from a distance, there appears to be a functioning "market", replete with liquidity, but it's all a ruse. Total open interest in gold is now at a multi-year low of 375,000. For perspective, this is down over 40% from a peak above 600,000 back in 2010. Sure, the CME can print daily volume of 150,000 or 180,000 contracts but don't confuse that with liquidity. Most of this volume is simply WOPRs swapping the same contracts back and forth for dimes at a time.

The result is a gold (and silver) market that is completely divorced from fundamentals. Consider just this example: Back in December of last year, when he confirmed QE∞, The Bernank gave two conditions for slowing or ending the $85B/month money-printing plan.

  1. Inflation, as measured by the CPI, would have to exceed 2.5%.
  2. The unemployment rate would have to fall below 6.5%.

The Bernank clearly stated that he did not see either of these events occurring before mid-2015.

And what did we see today? Because of a seasonal adjustment of "people entering the workforce", the participation rate ticked up and the stated unemployment rate actually ROSE from 7.5% to 7.6%. This means that, if you simply go by The Bernank's own words, we are now even farther away from a "taper" of QE than we were yesterday. Try telling that to the WOPRs, though. They create their own momentum and have smashed price by $25 as I type. It's silly. It's nonsense. It has no basis in reality. And it has zero connection to the actual supply/demand fundamentals.

For now, however, paper price as set by The Comex still rules the day. But prices cannot remain permanently disconnected from reality any more than water can run up hill. Eventually, certain laws of nature (and economics) take over and a natural equilibrium is reestablished. This day is coming.

Anecdotal signs of this event are everywhere. Here are just a few:

In the end, the WOPRs trade amongst themselves and the Bullion Banks quietly position themselves against them. Last week's CoT report showed a record low level of Cartel net shorts. Given that today's report will be based upon another 38,000 contract drop in open interest, the level of Cartel shorts will likely fall even more, ensuring not just a turnaround in price but a significant trend change in the weeks ahead.

So, hang in there and understand today's price action for what it is...a simple, computer-algorithm based game of tic-tac-toe. And please, PLEASE, do not try to play along unless you are doing so under the professional guidance of our pal, Andrew. The WOPR itself gave you the only advice you really need:

"A strange game. The only winning move is NOT to play".

Buy the dip and take delivery.

TF

About the Author

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turd [at] tfmetalsreport [dot] com ()

  451 Comments

Just A Regular Guy
Jun 7, 2013 - 11:59am

Remember kids Monday...

I believe next Monday = Queen's Birthday Holiday so therefore Australia is down, as is the LMBA. I expect more downside weakness with the paper-traders in charge... ?

Thoughts?

Peace

tyberious
Jun 7, 2013 - 12:02pm

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Willy
Jun 7, 2013 - 12:05pm

Oil

I know I keep beating the same drum but look at it! Up $2.50/barrel off the low it hit after the payrolls were released. Something up this weekend in Turkey?

GDX:GLD still holding strong and still above its 9 dma and it's 9 week moving average. Grasping at straws here but it's still a positive sign.

Willy
Jun 7, 2013 - 12:07pm

US$ Index

Up now only 0.04 for the day. Reinforces Turd's comments about the computers moving the metals here.

Save_America1st
Jun 7, 2013 - 12:10pm

Yawn...

I'm gonna go grab a 10oz bar of silver up the street at my LCS at lunch time...he's got plenty of them still. I'll only get one, because if I buy 2 then Monday will be another beat-down. But if I buy just one then it'll probably go back up to 23.50. And I'll grab another one on Monday no matter what...

Funny thing is...either way, whether it's at 21.50 or 23.50 my LCS will still ask 285.00 right now for his 10oz bars, so it really doesn't make a difference whether I get 1 or 2 today or on Monday.

But, I still like totry and use the reverse psychology on the paper price just to see if it works out or not even though I'll be trading in the same amount of toilet paper for phyzz regardless of what the toilet paper price says the phyzz is supposed to be at.

Dark Matter
Jun 7, 2013 - 12:11pm

Silver is crashing

Silver is crashing. Totally unbelievably.

SIGH

SilverSurfers
Jun 7, 2013 - 12:14pm

NOT!

this aint no worp, the bombed silver, its wip, work in process.

speaking of worp drive, lets do the dance, since thats what it is.

Video unavailable

ANTICIPATE some In house money used for some recovery above 21.75 by close today, timely, for treasonous china dumps, with clients hung out to dry.

Sweet Transvestite - Rocky Horror Picture Show
Prize Fighter
Jun 7, 2013 - 12:15pm

$21.90 gap closed.  Remember

$21.90 gap closed. Remember my post from several weeks ago? Judging from the reactions, I'd say no. Another large gap last week at 22.14 I didn't bother mentioning in the hopes someone else would because I kept thinking, ' the gap signal record has been perfect so it must be my delivery style people are rejecting and not the metric itself. Because we are the honest and realistic bunch right?' And yet, no discussion. I'm not surprised as much as I am disappointed. It's the only pricing or charting metric which has been unfailing and nobody discusses it. Ok.

Is it superstition not to mention them for fear it will be a self-fullfilling prophecy? It should be the opposite because willing the price higher isn't working. I have a feeling if we publicly point out the obvious and call these gap traps to fill, our fortunes may change. Maybe it's just my delivery people take offense to. I don't get it. You all either still don't believe, don't know how to identify them (which I doubt), or you just don't like it coming from me. Deafening silence for something we could truly hang our hats on which Turd could use to whatever end and nothing, nada, zip.

Yall are the best in discussing most everything but when it comes to pricing, ignoring these gaps is ludicrous.

This is my last post about gaps. Done done done. Have a nice weekend.

Down Range
Jun 7, 2013 - 12:17pm

I May Be Wrong

Somehow I think I have been here before.

GROUNDHOG DAY!!!!!!!!!!!!!!!!!!!!!!!!!!!

It gets old, but I don't know of a solution until the END, whatever that will be.

Have a great weekend.

Computer off until next week, my blood pressure is too high.

Monedas
Jun 7, 2013 - 12:17pm

Buy PALLADIUM !!!

It is backed .... by the full faith and threat .... of the former Soviet Union .... Vlad and the boyz ! Monedas 1929 Comedy Jihad The Man From Vlad World Tour

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