Party Likes It's 2009

I don't know if anyone else feels this way, but I've been having a strange feeling of deja vu and I couldn't seem to place it. I was standing there this morning, making some coffee, when it hit me. This is late 2009 all over again. If you were trading and stacking back then, I'm sure you'll recall that painful period. If not, let me give you a little refresher.

Where were you in late 2009? Were you listening to this:

Or in line to see this:

I know where I was...I was making some serious cash. In July of 2009, gold was trading in the low $900s. By Thanksgiving of that year it was near $1200 and Turd was flush (no pun intended). And I will never, ever forget where I was when gold peaked. I was reading ZH and watching Fox Business when I saw gold trade at 1225 and read a headline on ZH that the Bundesbank was going to be announcing a huge gold purchase in the morning. My personal sentiment indicator went to 10+. Unfortunately, that didn't work out so well. Beginning the next day, gold began to roll over, instead, and by the first Friday of December, I was doomed. The BLSBS report came out and was spun into good news. Dreams of "green shoots" and a "recovery summer" soon took over. The POSX shot higher and, over the next 3 months, rallied nearly 10% from 74 to 81.

The resulting decline in gold was brutal. First, it had peaked at $1226 and Santa had promised an "angel" at $1225 for years. The fact that I'd let greed overcome me and consequently didn't sell at $1225 was crushing and when gold rolled back down through $1100 in January, I was seriously depressed. All of the same old AGAs were claiming that $1225 was a blow-off top and that gold was soon going to be trading back below $1000 and was probably headed back toward $800. I was sick, Mister Hyde was furious and it seemed like all was lost.

But we didn't quit, we didn't give up. I knew that the whole "recovery summer" thing was a joke. The U.S. economy wasn't going to recover, the best it could do was stagnate and limp. The MOPE and the SPIN were so thick, I could barely breathe and when gold bottomed at $1052 in February of 2010, there was hardly anyone around who noticed or even cared. And that's the funny thing about bottoms, you rarely, if ever, notice them in the present as they are only visible in hindsight. With hindsight, we now know that the "green shoots" of 2009 became the dead weeds of 2010. All of the breathless proclamations by LIESman et al not withstanding, the facts, the math and reality took hold again by mid-2010 and gold finally surged back to the $1225 level in May and through $1225 in September.

paper_3-21amgold09.jpgpaper_3-21ampig09.jpg

My point is simple: We are currently in an identical situation. Gold surged to $1925 last September and, on 9/6/11, gold was ready to rocket higher on news that the SNB was going to devalue the Swissie by 10%. Again, sentiment was at the 10+ level and, again, we were within a few dollars of a Santa "angel" at $1936. Well, we all know what happened next and now, after six months of this brutal "correction" where gold has again fallen 15% while the POSX has rallied 10%, we are once again staring into the Pit of Despair. LIESman et all are screaming from the rooftops that the economy is improving and The Bernank is desperately implying that QE is over. Well, I call "bullshit" and I'm standing tall against them. Will you join me?

As I type, gold is at $1632 and silver is at $31.43. I've been maintaining all month that gold would likely bottom between 1600 and 1650 and that silver was headed to 31, maybe even 30. Why would anyone panic now when we are so close to the bottom. Always remember and never forget: THE ONLY WAY YOU WILL CONSISTENTLY MAKE MONEY TRADING GOLD AND SILVER IS TO BUY WHEN EVERYONE ELSE IS SELLING AND SELL WHEN EVERYONE ELSE IS BUYING. Period. Why is this true? Because this strategy essentially puts you on the same side of the trade as The Cartels, which as you know post-MFG, are exerting an increasing level of influence on the paper metal markets. It is clear to me that now --right now-- The Cartels are buying and covering not selling and adding. I discussed this yesterday in two, separate comments to the previous thread and they are reprinted below:

Back at the last highs of 2/28, total gold OI was 479,044. As of Monday's close, it had fallen to 434,226 for a drop of 9.35%. The last time gold total OI was at this level was 2/14/12 when price closed at $1718. Additionally, even back in January, we find higher total OI numbers. The week of 1/16 averaged total OI of about 439,000. Gold began 2012 with a price near $1600 and a total OI of 420,000.

Back at the price highs of 2/28, total silver OI was 115,866. Total OI was actually higher on 2/24 at 118,204. As of Monday's close, it had fallen back to 108,268 but actually bottomed back on 3/15 at 106,723 or a drop of 9.71%. The last time total silver OI was below 107,000 was 2/17/12 when price was $33.28. Total silver OI averaged about 103,000 in January after beginning the year at almost exactly this level, near 106,000.

Clearly, any "excess" open interest brought about by the early year rallies from 1600 to 1800 and 28 to 37 has now been wrung out. Again, this is just another signal that we are very near a bottom.

Crazy silver OI report basis yesterday.

Yesterday, gold was down $20.20 and total OI was down 3,200 contracts. Perfectly normal.

Silver, however, was down $1.12 yet total OI expanded by 3,154 contracts. ​ The July12 alone went from 12,404 to 14,018. The only deduction that can be made is that a significant amount of new shorts entered the silver pit yesterday. What we don't know is whether it was Cartel or spec shorts. The CoT on Friday will provide some clues but it is highly likely that these are spec shorts. Why? Because The Cartel typically only adds shorts to:

  1. Cap price    OR
  2. Attempt to start a waterfall/cascade selling event.

If only now we are seeing a huge run-up in spec shorts then we truly are very close to a bottom as the late-coming spec shorts will soon be fleeced just like the late-coming spec longs were fleeced on 2/29.

Total silver OI is now back to where it was two weeks ago, when silver was almost exactly $1 higher.

Ahead of the CoT on Friday, here is what we know:

Gold for the week 3/13--3/20 saw the total OI fall from 442,319 to 431,039 while price fell by $47 (2.77%).

Silver for the week 3/13--3/20 saw the total OI only fall from 111,730 to 111,422 while price fell $1.75 (5.2%).

Likely Conclusion: This week's CoT will be slightly bullish for gold but will show a significant improvement in the CoT picture for silver.

Anyway, the point is that is is always darkest before dawn and we are very deep into the wee hours. The global economies have not and will not improve to the point where we can "grow our way out from under the debt". No way, no how. In 2010, it took 6-8 months before logic, math and facts finally prevailed over hope, MOPE and SPIN. The truth will win again in 2012, you just have to be patient.

One more thing, I received some communication from "Winston" this morning and he provided some very helpful information. He is of the belief that the down move that began Tuesday evening and continues this morning is almost entirely related to April gold option expiration. Again, the Comex is now almost completely controlled by The Cartel as the only participants left are Cartel monkeys and HFT-WOPR momentum chasers. This allows The Cartel, which has full knowledge of the order books for both futures and options, the ability to swing price at their leisure and position price in such a way as to maximize pain for option holders upon expiration. Winston believes that the current target of their malice are not only the call buyers but also the out-of-the-money put sellers for April. Remember, gold was near $1800 just 4 weeks before expiration of the April options. A lot of traders believed that there was easy money to be made by selling out-of-the-money puts, the April 1650s and the April 1600s. Those that did are getting seriously squeezed right now and they are being forced to short actual gold contracts to hedge themselves. Winston thinks that the 22,000+ contracts between 1600 and 1650 are the true target of The Cartel here and that their ultimate intent may be to drop gold as close to 1600 as possible before expiration at the close of business next Tuesday.

What's interesting about this is how it fits right in line with all of the other "bottom signals" we've been discussing here as of late. A low near $1600 tomorrow or early next week would:

  1. Complete the drop to stout support at 1600
  2. Complete the right shoulder of a massive reverse head-and-shoulder bottom
  3. Bring silver down to 30-31, just like we'd envisioned
  4. Drop gold open interest levels all the back to early January levels
  5. Put the RSI and MACD indicators into deeply oversold territory
  6. Drive sentiment and our new TITS indicator to record low levels. Even Mister Hyde is once again suicidal and ready to simply cash out his IRA before it goes to zero. He'd like to take it in cash and go to Vegas where he can blow the rest on blackjack, Jack Daniel's and hookers.

And don't forget that lease rates have clearly bottomed and have significantly reversed. In September and December of last year, lease rates reversed about two weeks before price.

So, in the end, hang in there. I know it's tough and painful to watch everything go down when you know you are on the right side long-term. But let me assure you: This, too, shall pass. Soon...very soon...the metals will bottom and resume their inexorible march higher. Of this, you can be certain.

TF

267 Comments

Turd Ferguson's picture

Everyone please hang in there

MODERATOR

I just traded emails with Winston and I've come to the conclusion that this event is similar to the action at the end of December. Price puked into the end of the month and then rallied sharply, thus beginning the huge move of January and February. 

You should be buying here, not selling. I firmly believe that those buying here will be richly rewarded over the next few months.

Tecumseh's picture

$5000/$100

Unless you are into the risk and profit/loss realities of trading, simply buy as much physical gold (and silver) periodically as you are comfortable buying.  This will pretty much work out to a reasonable, prudent, dollar-cost-average portfolio.  Add some top quality numismatic coins for balance and upside.  Whether you buy at $1400/$23, $1650/$31, or at $2000/$50, you will be fine because gold is going to $5000 and silver to $100, almost certainly, and almost certainly by the end of 2015.  The biggest threat to that near-absolute is government confiscation of one kind or another. 

Of course, as has so often been asked here, what do $5000 gold and $100 silver mean in world of Monoply money?

Pining 4 the Fjords's picture

Hyde and Turd back in Vegas? Oh Noooes...

"Even Mister Hyde is once again suicidal and ready to simply cash out his IRA before it goes to zero. He'd like to take it in cash and go to Vegas where he can blow the rest on blackjack, Jack Daniel's and hookers."

Easy TF.  You know what happened last time you guys did that...

letey petey's picture

The Pit of Despair

Hey Turd -

Yes, I have found myself in the Pit of Despair.  But know this:  Im only mostly dead.

Turd Ferguson's picture

And another sign that we are very near

MODERATOR

the bottom. The shorts have over-played their hand and are about to get zapped.

http://www.zerohedge.com/news/guest-post-temporary-backwardation-path-forward-2008

Dr G's picture

Geez, I would love to buy

Geez, I would love to buy some metals this week but TAXES are due. sad

Turd Ferguson's picture

Yes and

MODERATOR

a very good acronym in that movie, too.

Rodents

Of

Unusual

Size

Response to: The Pit of Despair
paulindoon's picture

Bugsy Re:I must be going nuts or something

Bugsy: In the ZH link, I also saw the same (Mel Gibson) rousing speech to his Scotsman prior to the attack as you did yesterday. It was about FREEDOM.

tmosley's picture

Who is selling?  I haven't

Who is selling?  I haven't seen anyone talking about selling.  I'm certainly not.  

realitybiter's picture

Banging the close

Whats all this talk about banging the clothes?

I thought that was called dry humping?

-Roseanne Rosannadanna

Turd Ferguson's picture

and what the heck is this?

MODERATOR
Lumpy's picture

Weekly Chart for Silver

http://stockcharts.com/h-sc/ui?s=$SILVER&p=W&b=5&g=0&id=p99831164142

Reverse head and shoulder pattern.

Left shoulder had 4 down weeks with a spike/capitulation lower to mark the low for the left shoulder.

Head had down weeks with a spike/capitulation lower to mark the low for the head.

Right shoulder has 4 down weeks now.  We may see a strong beat down and capitulation tomorrow to complete the right shoulder.   Silver would rally into the close.

Take a look at the chart.

Stockcharts.com,   type in $Silver and change from daily to weekly if the link above doesn't work.

BUDDHA PRINCESS's picture

Silver analyst Ted Butler

Silver analyst Ted Butler

"For more than 30 years, I have noticed that on unique U.S. holidays, when Europe is open for business and the US closed, worldwide trading almost stops altogether in gold and silver. That wouldn’t seem to be the case if the COMEX were [smaller than the LBMA]. Further, the most dominant COMEX traders are also the most dominant traders on the LBMA and the OTC markets...and the allegations of manipulation are principally aimed at these traders anyway."

"If there is such massive trading taking place away from the COMEX in gold and silver, then why are those big dominant players, such as JPMorgan, fighting so bitterly to prevent position limits from coming into law? After all, if there are such big liquid gold and silver markets apart from the COMEX out there, then why don’t these commercial crooks just go trade there and avoid the CFTC and position limits completely? I’ll tell you why – there are no big liquid markets elsewhere that the commercials can run to; they know they can’t just pick up and leave the COMEX or the price of silver would explode. That’s because the long side of COMEX silver is not concentrated and, therefore, not potentially restricted by position limits as the short side is."

"Specifically, the big COMEX silver short, JPMorgan, can’t just move its concentrated and manipulative short position elsewhere...and because of this, it's forced to fight against silver position limits to the bitter end. To abandon the COMEX would create a void on the short side that must be met by short selling by others. If the short side were currently attractive to others (to the extent of JPMorgan’s current position), the other sellers would have already sold short, which has not occurred. The only possible inducement for others to replace JPMorgan on the short side is higher prices. In fact, this is the clearest proof of all that JPMorgan has manipulated the price of silver. In any alleged manipulation, the key question is always what the price would be if the manipulator didn’t hold its concentrated position. If the answer is that the price structure would most likely be radically different without such a concentrated position, then the conclusion must be that the concentrated position is manipulative to the price. In silver, it’s simple; without JPMorgan’s concentrated short position on the COMEX, the price of silver would be sharply higher. Surely, no one would argue that if JPMorgan eliminated its COMEX short position that would cause the price of silver to fall."

Dr G's picture

LOL, that Clintonville news

LOL, that Clintonville news story seems almost fake. Very surreal. WTH?

Turd Ferguson's picture

Just because I suspect that

MODERATOR

Just because I suspect that many feel this way today

Puck T. Smith's picture

What frustrates me is silver

What frustrates me is silver won't go down enough.  If the monkeys are slamming they could at least take it down below 30 so I can pull my DCA down.  My luck it'll shoot up to 35 before I make my regular 1st of the month buy.

Terabyte's picture

Posted in error.

Posted in error.

Terabyte's picture

I'll sell for right price

Loaded up heavily on ASE's over the past year.  Now it's all under water.  That's what always happens to me.  I buy, market goes down.  I sell, market goes up.  

Let's make a deal.  Y'all get together and buy me out at $100 per and I'll sell out.  Won't cost ya each very much.  Then market will certainly go up.  Everyone happy!

Dr Jerome's picture

Backwardation

That ZH article Turd pointed out a few posts above this has an excellent and concise summary of backwardation and why backwardation is significant. Required reading for us newbies.!

" Backwardation means that anyone who has gold or silver could simultaneously sell the metal and buy futures contracts to recover their position, and make a profit. The market is tight. The metal is out there, but obviously those who have it in an unencumbered form are not able (retail) or willing (others?) to take this backwardation bait."

If I am a big time metals holder, should I be tempted to sell and deliver my unencumbered metal and buy paper at a profit? I can't imagine who would want to encourage holder to do that.

BUDDHA PRINCESS's picture

James Turk: Bernanke goes to (my) college

Given that sensational headline, I thought it might be useful to present the other side of the story.  Here are Business Insider’s comments (in italics) meant to disparage gold, followed by my observations.

Business Insider: "To have a gold standard, you have to go dig up gold in South Africa and put it in a basement in New York. It's nonsensical."

We do not live in a perfect world. If we did, we would not need police, central bankers would make the right decisions, and politicians would know not to spend and borrow too much money. But thieves, bad decisions and government overspending and excessive borrowing are facts of life. So we need gold as a natural form of money, the supply of which is determined by the economics of mining. Fortunately, a near-perfect geographic dispersion of this mineral through the earth’s crust prevents an excess supply of gold, with only a handful of historic exceptions where a fleeting bonanza temporarily produced a small surfeit. The result is that gold’s 5000-year record as money is far superior to that of the central planners at the Federal Reserve.

Posted at the fgmr.com ..... and the link is here.

abguy4's picture

We are now approaching Turd's bottom.

We are now approaching Turd's bottom.

Who's gonna be the first to jump in?

Turd Ferguson's picture

EVERYONE SHOULD READ THIS

MODERATOR

With silver AND gold now in backwardation, everyone must take the time to read this. (Be sure to note the date it was written.)

http://fofoa.blogspot.com/2010/07/red-alert-gold-backwardation.html

Then, please comment with your interpretation and thoughts. Thanks.

Response to: Backwardation
BUDDHA PRINCESS's picture

We are now approaching Turd's bottom

I don't think we are there yet.

Be patient, don't chase the market, let it come to you!

Just my 5 cents

theclay3's picture

The End of the Road

TechTrade's picture

The Problem Is

The problem with TF's scenario, is that virtually no one here EVER sells when it's at the highs.

They let their gains disappear into the black hole of the next pullback.   I should know.

That being said, 1628 could be a short term bottom - it is the 62% retracement of the move from 1526 to 1793, and is also the bottom of the daily Keltner channel.  IF gold moves up from here, and can close above 1640, we may have a divergent bottom on the daily chart, which would signal a rally.  THE rally?  Not sure - the weekly indicators are still heading down towards oversold, so another new low COULD be in the cards.  The 76% retracement and weekly Support2 is at 1590.

Silver still has downside to go, 62% RT is at 30.600, along with the Keltner, and the weekly is still screaming down.  
There are NO indications of a bottom being near in silver on a 240 minute or daily chart, sorry to say, although like with gold, if silver rejects the 31.1 low fast and hard, it could get divergence at least on the 240M, and that's the start to getting a turnaround going.

There the possiblity of a lot more pain to come - if there is a war with Iran, gold and silver are likely to tank, along with the stock market.  Because we've seen that in "times of trouble", people will put their money in the USD and Treasury bonds.  Yeah, I know, makes no sense, but it is what it is.

Still, I bought gold at 1635 and 1642 today.  Glutton for punishment, I suppose.  I will never never again average down while looking to find a bottom.  It's a fool's game, and I'm sick of sitting through drawdowns during the process.  Once a divergent sell signal is generated, as it was on 2/29, I will only short the market until a divergent buy signal is generated.  I've seen that there's plenty of time to buy near those lows once the signal is generated, without having to sit through weeks of drawdowns.  Giving up $20 on the bottom and buying with the new momentum is much better than sitting through $50 of drawdown as you keep buying into a bottomless pit.

ouchtouch's picture

OK I took a nibble. Still

OK I took a nibble. Still expect further downward movement.

Turd Ferguson's picture

That MAY have been it this morning

MODERATOR

Let's see if we get a double-bottom overnight/early tomorrow.

Xeno's picture

New Call

I am not mad, proud, or tired. I am not going to open a window or stand on a rooftop and yell I'm mad as hell and I'm not going to take it anymore

I am just going to join Turd's new call, and a good one for a new revolution I might add, and just say to the WH and every alphabet agency in the world - Bullshit!

Patrancus's picture

Mortgage rates moving

Mortgage rates moving higher

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