On Guard Against The Banks

37
Tue, Sep 12, 2017 - 11:41am

Following the events of yesterday, it seems wise this morning to take an in-depth look at the charts in order to discern what moves The Banks may take next in the hope of stemming this rally and reversing the trends.

Let's start with Comex Digital Gold. It has been in an UPtrend since July 10 and this rally has carried it $150 or about 12.5%. In doing so, The Commercials on the CoT have increased their NET short position by 182,000 contracts and, specifically, the 24 Banks of the Bank Participation Report have doubled their NET short position, going from 104,748 contracts NET short in July to 213,746 NET short last week.

This places the CoT in its "worst" position since last September and this BPR reveals the largest NET short position on record. Therefore, you KNOW that The Banks will do just about anything at this point to reverse the trend and begin flushing The Specs back out of paper gold. Though they are clearly capable of pulling this off, it may take them a while to do it. Why, you ask?

For CDG, it's all about the moving averages. We noted early last week that CDG's 50-day had bullishly crossed UP and through both its 10-day and 200-day MAs. This is a very bullish trend indicator and, most importantly, it sets the Spec HFTs into a "buy the dip mode". You can see this playing out already when you look at the daily chart.

Also last week, we began to discuss the significance of the $1331 level as support in any pullback. This was the level of resistance and then support in late August so we hoped/expected that same action on any pullback. And look what has happened thus far this week! Even though the all-important USDJPY is up another 50 pips today and pressing against 110, Comex gold is hanging firm at....$1332! For us, this is clear evidence of the HFTs buying the dip.

And here's the big challenge for The Banks. Check where you can find those MAs. The closest is the 50-day but it's all the way down near 80. The Banks are not going to be able to flip the Spec HFTs until, at a minimum, the 50-day is violated to the downside. So, this is why we can say "it may take a while" for The Banks to really generate the downside momentum that will flush The Specs in the same old, wash-and-rinse pattern.

This doesn't mean that a massive raid can't happen. What it DOES mean, though, is that aggressive traders should have plenty of warning and can use this time to hedge and prepare. Again, use the chart below as a guide and watch that rising 50-day closely.

Now let's look at Comex Digital Silver. It, too, is holding the support area that we identified last week. This support is quite clearly the most recent highs near .90 last June.

Like CDG, Comex Silver has seen its own rally over the past two months, moving up a full or about 13%. Also like CDG, the silver "Commercials" have fought this rally by increasing their NET short position from 21,900 contracts on July 18 to 79,700 contracts last Tuesday. Therefore, you know that JPM et al would just LOVE to smash price and force a Spec exit but they, too, are going to need some downward momentum to get the ball rolling.

As you can see below, the MAs for Comex silver are not in the same bullish configuration as Comex gold. Therefore, the very clear target for The Banks is the 200-day moving average found today near .28. They'll hope to break this level on a closing basis sometime soon.

And the reason for trying to break the 200-day is clear. On the chart below, you can see four instances in just the past twelve months where price was broken at the 200-day and a steep, Spec-rinsing decline followed. This is easy money for the colluding Bank trading desks so you can be certain that they are salivating at the opportunity to pull this same trick again!

OK, as I close, I've still got 31 and .92 so our initial support levels are holding. Let's hope this continues and a rebound follows. However, you must be aware that The Banks are still in charge and nothing in their behavior suggests that they are "on the run" or "losing control". Therefore, plan and trade accordingly.

TF

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  37 Comments

Outback
Sep 12, 2017 - 11:56am

And NEVER END

my opinion.

Sep 12, 2017 - 12:04pm

A full 15 basis points

This is a HUGE move in the 10-year treasury yield over just the past three trading days.

Sep 12, 2017 - 12:12pm

Amazing run

... for the $/Y as gold is kicked down the staircase. But she is hanging on to the handrail, trying to gain her balance and climb back.

I agree with Turd that nothing has really changed, but it seems that gold is getting more stubborn. Of course I thought that last summer also, before they slammed it down $210 in 6 weeks, starting election night.

ArtL
Sep 12, 2017 - 12:20pm

Silver futures even for the day.

gold down.

Is this the beginning of the reset? Or is the algo being lazy and silver will soon be whacked?

4 oz
Sep 12, 2017 - 12:24pm

Silver is my Friend.

Same Silver, different day; My Silver has never been more valuable.

billhilly
Sep 12, 2017 - 12:24pm

The walk-away strategy...

The questions have been asked...why so few comments ? Why dwindling subscriptions ?

I believe it has to do with the wisdom to simply step away from the computer screen and find better/more positive sources of stimulation.

The endless propaganda. The endless melt-ups and beat-downs. The nauseating rejection of any type of fairness or justice by those who are supposed to watch over the markets. These are the things which exact a toll on our mental soundness.
We who are awakened witness these occurrences daily and subject ourselves to their constant wear-and-tear. The abrasions created in our psyche are small yet cumulative. We accept and bear them until we no longer can. Death by a thousand cuts.

Finally we've had enough and decide to walk-away...at least the smart ones.

I ask myself daily, "why do I continue to follow this ridiculous rigged market so closely ?" "Why do I allow myself to be exposed to this type of toxic atmosphere?" "Why am I wasting my life away engaging in this dream-land?"

My answer...I am captured. I watch because I know that at some point things will change, things MUST change. I KNOW this day will come and I hold hope each and every morning that THIS IS THE DAY ! Sad isn't it.

I have slowly begun to pull myself away from the screen for periods of forced reality. I now count my day as "positive" when I actually shut down the computer and do some productive work.

I have slowly come to realize the "real" world is not on a screen. It is not based on conspired numbers and data, nor engagement with a system that has already failed yet not realized it even itself. The real world exists within oneself. It is different for each of us but has the common feature that revolves around the desire to feel and experience self-worth. This cannot come from staring at a computer screen all the day.

So what do the wise ones do ? They walk away, they shut-down, even if only briefly at first. The long journey starts with a single step and today I choose to walk a wakeful path.

Shutting down now.

fluxplus
Sep 12, 2017 - 12:31pm

USD/JPY on the way to 110.65?

Looks like realistic target - 50 DMA and double top. Question what happens next.

ArtL
Sep 12, 2017 - 1:16pm

Art

Again, it is very important to understand that the yen-gold correlation is not all powerful. We try to keep reminding everyone of this. Below is from Friday's morning post:

  1. The yen-gold link is clearly automated through HFT algos. However, as we often discuss, there is still human involvement in these "markets". Last week, price was rising while USDJPY was flat and we ascribed this to increased Spec demand for Comex gold exposure. You could see this in the growing open interest numbers. Well there are also periods where outright selling and manipulation drive prices lower when USDJPY is flat. Think of the "flash crashes" etc. So, don't ever think that this HFT algo correlation is all-controlling. Humans can still influence price.

Price holding firm today above $1331 seems to be a clear case of the Spec HFTs (not the yen-linked Bank HFTs) buying the dip for the reasons laid out in this post.

indiana rod
Sep 12, 2017 - 1:25pm

Goodnight Irene

You remember this golden oldie. Here's the updated version.

Irene goodnight, Irene goodnight

Goodnight Irene, goodnight Irene

I'll see you in my dreams

Sometimes I hit the country

Sometimes I hit the town

Sometimes I have a great notion

To jump in the river and drown

You cause me to weep, you cause me to mourn

You cause me to leave my home

But the very last words I heard her say

Was "I wasn't here very long"

Irene goodnight, Irene goodnight

Goodnight Irene, goodnight Irene

I'll see you in my dreams

kryton619
Sep 12, 2017 - 1:30pm

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