Shake A Stick At This

Wed, Sep 26, 2012 - 12:31pm

Here you go. More charts than you can shake a stick at. (Whatever that means.)

Let's start today with crude because I just think it's messed up. Price rallies from late June to mid-September with never once seeing more than 3 days in a row of declines. In fact, it barely did that earlier in September. You could just as easily say that it never had more than two, straight down days. And then, just as QE∞ was announced AND tensions ramped even higher in the MENA, price collapses? And it's now down for 7 of the past 8 days? We'll talk in a minute about how much of this corresponds with the surprise POSX rally over the past week but come on...7 of 8 days down for a cumulative 10+% move?? This seems very fishy, particularly when gasoline was just reaching $4/gallon in the U.S. and the presidential election is just 6 weeks away. Very fishy, indeed.

But getting back to The Pig...The question is: What the heck is going on here? Why on earth would The Pig rally immediately following the announcement of QE∞? I've spent some time thinking about this and this is the best answer I can come up with:

Remember that the POSX is an index against all other, major fiat currency. Even though it is quite clear that unlimited QE will eventually make The Pig relatively worthless versus hard assets, in the short term, the global flow of funds is actually toward the dollar and treasuries as The Bernank has effectively assured perennially-nervous international investors that there will be no default, at least not in non-inflation adjusted dollars. Against this backdrop and in the very short term, QE∞ is judged to be dollar positive. Seriously. I know that sounds crazy...and it is...but that seems to be what has happened over the past two weeks. The good news is that the POSX is finally reaching the end of the raid for this bounce as the area around 80 will once again serve as resistance. I would now expect a few weeks of volatile, sideways action before The Pig resumes its downtrend.

So, in the context of The Pig apparently being the driver of short-term events in the commodities sector (where gold and silver are incorrectly relegated for now), any gyration by The Pig seems to flow immediately into buy or sell orders for the metals. We saw an exaggeration of this earlier today. The POSX began to rally at 5:35 EDT this morning and immediately the metals began to roll over. WOPRs, programmed for profit by actual human beings, began to build up sell orders for the Comex open and....WHAMMO!....the open is ugly and short-term technical damage ensues.

So, now that both metals appear to be in short-term corrective phases, where do they go from here and where might they bottom? Before we go there I want to reiterate again: QE∞ ASSURES THAT METALS ARE GOING MUCH, MUCH HIGHER. THERE WILL ALWAYS BE, HOWEVER, BRIEF PROFIT-TAKING CORRECTIONS WITHIN THE PRIMARY TREND.

The charts below spell it out quite plainly. Let's look at gold first. Tremendous physical demand makes further downward action unlikely but I can't help but think a weak-hand clearing plunge toward $1725 is coming. Note that this type of move would also have a very pleasant impact on the short term RSI.

Silver is clearly in a corrective phase, too. Though it is holding in there quite nicely today and though it, too, is seeing considerable physical demand, the 12-hour chart sure looks like a brief drop below $33 is in the cards. I'd love to see it as I'm sitting on a little cash that is burning a hole in my pocket as I type.

Just a couple of other items to consider today. First, there's this article I found linked at the GATA site. Nothing earth-shattering, but it's a reasonably competent summary of how things may eventually play out.

And I have another book recommendation for you. You've likely seen me mention before that "The Big Short" by Michael Lewis is a real eye-opener. Lewis puts the entire "2008 Financial Crisis" in easy-to-understand terms and everyone here should read it.

Lewis' new book is a follow-up called Boomerang. It's not as good as "The Big Short" but very, very interesting nonetheless. Please read it. One of the chapters describes California as Italy or Spain as they relate to The Pig and The Euro, respectively. Along those lines, look at his headline from ZH.

OK, that's all for now. It has taken me quite a while to type this up and now I see that the metals have rallied smartly during the interim. That's great. Glad to see it. This does not, necessarily, make this post obsolete, however. Stay on guard and look for another dip.


About the Author

turd [at] tfmetalsreport [dot] com ()


Sep 27, 2012 - 10:39am

Spain perspective

I think Americans need to think of Southern Europe as if it were an opportunity to see which way the ball is going to break on a putt in a "best ball" golf outing. You know, where 4 people play one ball. You get to see exactly what the ball is going to do before you putt. The Spanish and Greeks putted first...(oh, look over there- Iceland sunk their putt!!)

Spain and Greece are literally on fire. Folks with 700 euro a month pensions are getting cut. That is not a large pension...Businesses are shutting down because the austerity is killing their business revenue and the government is demanding higher taxes. Folks are now literally burning the place down because the banksta controlled Troika is demanding more cuts in spending. Spain thinks they should cut their deficit from 9 to 4.5%...Consider that. The US last year ran a deficit over 10% of GDP and this year is projected to drop to somewhere north of 9%....those are Spain numbers....we just have the luxury of printing money for free, they have to pay through the nose for it....

You can see how this plays out. It was not long ago when both the Spanish and Greek stock markets were doing just fine..(2007, they bounce off the 2008 lows, but never saw recovery.....and then got pounded $ATG and $IBEX on stockcharts)

Iceland did just fine by doing a massive power on reset. Default on all debts, tell the bankstas to FO, tell the fraudulent pensions (just another debt folks, it was not fully funded, ever, in most cases) and re-start. Am I suggesting that folks lose their pensions? No. I think they should get a check cut for the actual fair value of their contribution plus whatever gains were earned. Everything else is a lie and a fraud. Sorry, but it is not moral to rob from your kids.

Will this happen? Never. Watch the upcoming debates....Obama will talk about giving the unfunded liabilities MORE money making bad, worse, and Romney will talk about funding medicare (the most egregious offender of unfunded debt - $105 TRILLION !!) There are no solutions....just "lets try the Grecian formula and hope our putt breaks differently.....right......Best to avoid the riots in a couple of years and paint your house with fire retardant paint!! But the truth is in front of us, and we will likely go down the Spanish or Greece rathole. We lack the wisdom and the will to avoid this.

Watch Spain. Its your future USA.

Short Stack
Sep 27, 2012 - 10:42am

@katie Rose
If a hunter can't solve your deer problem, maybe what's standing back in the bushes can.

This hunter was alone with a camera set on a tripod, taking the picture via time delay and did not even know the mountain lion was there. Said he would never go hunting in that neck of the woods again.

And we thought living in the city was dangerous.

Fr. Bill George Clooney
Sep 27, 2012 - 10:45am

Regarding Bacon Whiskey Jam ...

When I first read this recipe, my mouth got to watering so hard I had to reach for a hand towel to get things back in order.

The recipe appears to make far more of this stuff than I should eat. So, I think I'll try half a recipe instead. If it's as good as it looks, I'll make a double recipe and serve it on toast points in the parish hall after Midnight Mass this year.

Meanwhile, on what do I smear this stuff? Burgers? Breakfast toast? Char-broiled steak?

Or, do I simply eat it out of the jar with a spoon?

realitybiter Short Stack
Sep 27, 2012 - 11:06am

Katie Rose

I was hunting Wild Turkeys a couple of years ago in the foothills just outside of Sunol, CA...just a couple of miles from millions of people in the Bay area....I was camo'd out, hidden ...a Tom was gobbling and coming through the grass, but I could no see him, yet....then 2 large female adult cougers and their cub strutted no more than 10 yards in front of me...had no idea I was there.

They are everywhere.....oh, believe me, I was ready for t SHTF....but alas, they just cruised to feed on bambi...

Sep 27, 2012 - 12:05pm

34.50 NO MAS?

Silver catching a bid? hit upper range, 34.50

TraderDan said the small spec's got flushed.

Time to flush some hedgies?


Breakout 34.57 !!!

Getting close for the 2% algo kick in's. Good action.

Bingo, 2%, 34.67 ....

Sep 27, 2012 - 4:55pm

So much for a cartel takedown for options expiry

Must be some Gold shorts hurting at the moment... lets hope some of those contracts settled in phys :)

Sep 27, 2012 - 10:48pm

U Turds


Submitted by SilverSurfers on September 26, 2012 - 8:04pm. Hat Tip! 3

go to kitco, last 72 hours, 34$ up and down 50ct, and

that is a de facto stalemate, Madrid/Athens burns, manipulation hard on,

and flatsville, man, flatsville. Feels like a struggle in process, the vice clamppin hard,

and its gonna pop, this weekend might be time to add to your positions .....

34.50 NO MAS?

Submitted by SilverSurfers on September 27, 2012 - 8:48am. Hat Tip! 0

Silver catching a bid? hit upper range, 34.50

TraderDan said the small spec's got flushed.

Time to flush some hedgies?


Breakout 34.57 !!!

Getting close for the 2% algo kick in's. Good action.

Bingo, 2%, 34.67 ....


Gut check comes in, and CRIMEX pops UP Cartel Limit 2%.

And all I got was 3 losy hat tips. YOU GUY ARE TURDS!


I should have gotten more hat tips than you can shake a stick at!


brainwave, Title: 24kt RMNixon

stay tuned, totalitarian democracy, Nixon capitulates to the Left, but really to their demise, re, the ULTIMATE EXTINGUISHER OF DEBT, in view of eliminating the national debt overnight, re 1B$/oz. :)

Oct 1, 2012 - 9:51am


and its gonna pop, this WEEKEND might be time to add to your positions .....


I should have more hat tips than you can shake a stick at .....


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