Read This Now

620
184
Tue, Aug 30, 2011 - 4:21pm

No catchy title to this update. I just want you to read and ponder this post. Then, plan your trades accordingly.

Let's start with silver where the technical picture is more clear, at least in the traditional sense. Take a look at the chart below:

I've shown this chart several times in the past week so it should look familiar. Something new caught my eye today. Have you seen the new OI numbers? Our friend, "Tesla" has taken it upon himself to update the comments section with the latest numbers each afternoon. (Thanks, Tesla!) Keep in mind that the OI numbers are always basis the close yesterday. So, today's numbers show us the OI from Monday. That said, the number is once again amazingly low at 112,795 contracts. Again, as a reference, the OI in late April was approaching 150,000. Fully 20-25% more! Now stick with me on this. Maybe I should lay this out chronologically to make it easy to follow? OK, here goes:

1) Since silver bottomed around $34 in early July, the channel I've drawn has contained price.

2) Note that on two occasions, 7/13 and 8/19 (points 1 and 2 on the chart), silver decisively broke through the mid-line and proceeded to move sharply toward the top line.

3) Total OI on 7/13 was about 113,000 contracts. By the peak on 8/5, it had risen to about 119,000.

4) Total OI on 8/19 was nearly 116,000 contracts. At least week's peak, it had risen to nearly 122,000.

5) Today's OI is all the way back down below 113,000.

6) Look closely. Price once again sits poised to burst through the mid-line, which is near $42.

Conclusion: Watch price and OI very closely for the next 48 hours. IF silver accelerates through $42 on rising open interest, there is a very high likelihood that it is once again making a move toward the top of the channel. A move that corresponds in magnitude to the previous two would take silver to 45.50-46.00, perhaps as early as next week.

Now let's move on to gold. When I say it's not as "traditional" technically, it's because I'm using this crazy, reverse pennant as a forecasting tool. I'm not sure you're going to find the "reverse pennant" in any books about TA but I'm quite sure that none of those books ever anticipated the end of the dollar, either.

Similar to silver, gold currently sits very close to the midline of the pattern. Note that the previous two occasions when gold broke through the midline (mid July and early August), gold proceeded to ride the upper trendline for about two weeks before falling back. IF gold can once again break through the midline, it will likely charge toward the top line again. This would take the price to near $2000. The OI numbers in gold are similar to silver, too. After peaking at 532,000 last Monday, total OI as of yesterday is all the way back to 501,000. A drop of almost 6% in one week!

Conclusion: We may be on on the verge of another massive rally in gold. Your signal will first be a move through yesterday's high of 1841.50 and then a burst through the midline, currently in the area around 1850. Should gold move conclusively through 1850, it should move to new highs in relatively short order and then continue to make new highs through mid-September.

WARNING: Don't go getting overly excited and carried away at this moment. Nothing is pending until the metals break through those midlines. The open interest numbers suggest that the breakthroughs will come in the next 24-48 hours. They may not. If they don't, I will continue to monitor these charts until they do.

I feel that this is pretty important info so I plan to leave it up all night as the lead, above-the-fold story. I will probably leave it up tomorrow, too. Be sure to refresh the homepage from time to time if you're looking for updates as they will be attached as addenda to this post. TF

9:15 EDT UPDATE:

Sort of a bland trade this morning. The metals tried to rally overnight but they were beaten back at the regular, appointed hour of 3:00 am EDT. It appears, at this moment, that the metals will struggle to trade higher today. 1841.50 is still acting as a resistance point for gold and silver has yet to reach 42, yet alone 42.30. Let's just sit back and watch and see what the day brings us.

A couple of other things...First, this silver update from GoldCore via ZH is worth your time:

https://www.zerohedge.com/news/silver-ready-breakout-technicals-and-fundamentals-suggest-50oz-early-autumn

Second, a friendly reader sent me this chart of the open interest in silver since March. I have neither the time, inclination or technical know-how to superimpose the actual price of silver onto this chart. However, it would probably be a rather insightful thing to do. Anyone want to take a stab at it?

That's all for now. TF

10:50 EDT UPDATE:

This is certainly something to watch over the next hour or so.

About the Author

Founder
turd [at] tfmetalsreport [dot] com ()

  620 Comments

Shill
Aug 31, 2011 - 10:06am

10:01aJune factory orders

  1. 10:01a

    June factory orders revised down to 0.4% decline

  2. 10:00a

    U.S. factory orders in July climb 2.4%

June revised down yet July is up ha ha ha ha ha these guys are pulling out all stops.

Mudsharkbytes
Aug 31, 2011 - 10:06am

Time to check my clock

10:00 AM central - my clock just rang.

Time to check it's accuracy.

Looking at the charts - yup - gold and silver are falling.

My clock is accurate.

Tom L
Aug 31, 2011 - 10:06am

@Shill

<sarcasm> It's mine as well </sarcasm>

That's what this board is for, to help keep each other from letting our limbic systems control us in the moment. It is tough. Sometimes I do scream at my monitors, but they don't care.

Yes, remember that if you are positioned properly, then all of this short-term noise becomes entertainment.

I was able to relieve some stress yesterday by selling 20 of my Sept $11 SVM calls that I bought before the takedown down for a $0.12/contract loss. I'm ecstatic this morning. I'd given them up for dead. If I can get the others out for a smaller loss or, dare I jinx it, profit, I would break out into a Hornpipe FFS![1] If the $9.26 line fails today, that possibility exists.

Ta,

[1] No, I don't have a webcam, so there will be no video honoring that event if it happens.

BillAuAg Mudsharkbytes
Aug 31, 2011 - 10:06am

Expanding the currency

With a gold backed currency the government must continually buy gold to back any currency expansion. Alternatively, the government could buy gold mines and hire private management and employees.

Politicians will constantly maneuver to debase the currency in order to expand the money supply. Attempts at debasement of the currency MUST be a capital offense and must include counterfeit printers.

Shill
Aug 31, 2011 - 10:09am

Real gross domestic product

Real gross domestic product (GDP) declined 0.1% in the second quarter, following a 0.9% increase the previous quarter.

(Export volume declined 2.1% after two quarters of gains. Energy exports contributed the most to this second quarter decline, down 6.7%. Oil and gas extraction decreased 3.6% in the second quarter. Wildfires in Northern Alberta as well as maintenance shutdowns reduced petroleum production.)

https://www.statcan.gc.ca/daily-quotidien/110831/dq110831a-eng.htm

TurdBurglar spotgoldprice
Aug 31, 2011 - 10:11am

*FIRST* Who cares!

I could not agree more spotgold

Who gives a sh*t if you're *First*

Looks more like you need to get a *LIFE*

Post something of value, I'll be way more impressed than you being 1st.

Cleburne61
Aug 31, 2011 - 10:13am

@ Margarita Regarding Gold and Silver gains

Hey Margarita, I know this discussion happened last night, but I'm always fascinated with the topic of gold and silver gains. Some say the gains are real gains, and others say that no, they're simply nominal after inflation.

It sounds as if you're taking the nominal position, correct me if I'm wrong. But, you seemed to say that holding gold and silver doesn't make you richer, and that in the end, after inflation, the gold and silver you held is worth the same amount.

Myself, I come down on the real gains side. I think there is an element of truth to what you're saying, in that in 2015, when silver is say, $600 an oz...a person who bought for $40, shouldn't count all 560 of the gains as real, that's true, and I agree with that. But...I think it's a mistake to say that all $560 of gains are merely inflationary ones.

Consider the damage done thus far to our dollar. Silver has gone from $4 to $40 since 2002, right? Well, lemme ask you a question, has a McDonald's double cheeseburger gone from $1.00 to $10 in that time? No, it's about $1.50. Has a gallon of gas gone from $1.50 a gallon, to $15 a gallon? In 2002, you could buy about 2.5 gallons of gas with a silver oz. Now...if your car is small enough, you can fill your entire gas tank with one. What about stocks? The Dow, at the height of its bull market was worth about 3,500 oz of silver....now it's worth only 280 oz. If you'd sold all your stocks 10 years ago, and bought silver...you could now afford to buy twelve times the number of stocks you owned previously. How about real estate? The average median family home in 2000 was about $175,000 to $200,000...depending on where you lived. So, in gold ounces, the home would've cost you between 700 and 800 ounces of gold. Now....you can buy that same house for about 90 to 100 ounces(or 8 times as many homes). In a meltdown scenario as you've mentioned, gold and silver actually fare against most asset classes in ways that give the owner tremendous real gains. At the pinnacle of the Weimar inflationary epidemic....a 2 storey building in pristine downtown Berlin(remember the allies never got into Berlin in WWI)....could be bought for just 1 oz of gold. Imagine going to downtown Frisco, or NYC and getting a luxury flat for one oz of gold. Do I think things will get that bad here? No, but who knows, right? The point is though, it could be just 50 oz, or 20 in a real inflationary terror. The gains would be real, and unmistakably life-changing.

Some, like Peter Schiff say(and I think he's probably right), that the USD index will drop to at least .4, maybe even as low as .2 from here. That would mean the dollar losing at least half its value, and perhaps 3/4. So, if we got $10,000 gold....in our dollars that would be $5,000 to $2,500. Since gold is roughly 1,800...that still represents real gains of as much as 200%. Honestly, if all we were doing was simply maintaining purchasing power by holding gold or silver...I'd never even consider doing it, because after the 28% tax on precious metal gains(because they're unfairly taxed as 'collectibles')....we wouldn't actually even succeed in keeping our purchasing power. We'd actually come away with huge losses.

So, though I think your point of gold and silver being stable in keeping their purchasing power ir partially true...I believe the missing piece to the puzzle is that...gold and silver normally keep their value as an average over long periods of time. The key is to spot it at the low end of the valuation cycle, and sell it at its higher end....Also, for silver, consider that we are in peak silver. Everyone talks about peak oil, but peak silver is much worse. The U.S. Geological Survey estimates that within 9 years, all known silver deposits will be gone. As Chris Duane has said, 8 years is less than one 9/11 ago....By the time we're done in silver...I expect to be able to fill up my car with a silver dime, or acquire a rental property for 100 oz or less. I expect you'll be able to empty an entire CVS or Walgreens of canned hams with just a fraction of a silver oz too, whether they're on sale or not. :)

I really respect the opinions of those who hold more the views of nominal gains, so please understand...this is written not to 'score a point' but to truly exchange ideas with the intent of more mutual understanding. Sorry for being long-winded.

MIDDIE
Aug 31, 2011 - 10:14am

@ TOM L

I am relieved to know that I am not the only one screaming at monitors. Truth be known, I also yell at traffic; it also doesn't care. Carry on....

Mudsharkbytes TurdBurglar
Aug 31, 2011 - 10:15am

I don't care, but

If they took the time to post something of value, they wouldn't get to be first - somebody else would beat 'em to the punch!

Maybe an automatic turd-bot that always creates a post titled "First" when there's a new thread would put a stop to this.

¤
Aug 31, 2011 - 10:18am

Seems like a no-brainer they should do so

Market Pulse Archives

Aug. 31, 2011, 10:07 a.m. EDT

SEC weighs rules on funds' derivatives use

By Steve Goldstein

WASHINGTON (MarketWatch) -- The Securities and Exchange Commission said Wednesday it's asking for comment on whether it needs to draw up rules on the use of derivatives by mutual funds, ETFs and closed-end funds. In particular, it's looking at areas including whether restrictions on leverage and rules on valuing a derivative are needed.

DPH: (sarc/on) Sure, why make any rules and not just let everyone leverage everything as much as possible? (sarc/off)

Do they really need to wonder if restrictions would be thye prudent thing to do/ They wouldn't enforce any violations anyway so they're pretty much going through the motions by displaying some interest on the publics behalf by asking for any comment. Yeah, right.

How about looking at a gold or silver trading chart any day of the week and enforcing that criminal activity?

TomL...I pretty much just yelled at my monitor. You're not alone.

Anyone else ever yell at your monitor about whatever? Thought so.

silverbill
Aug 31, 2011 - 10:19am

1st post

Hi all. I've been reading here for awhile & finally signed up. I got what FU BM stands for (I think it = FU blythe masters), but what does EE mean? Thanks in advance & good fortune to all you option hunters! bill

raulv
Aug 31, 2011 - 10:19am

Silver is flatlining....

Silver is flatlining....

Shill
Aug 31, 2011 - 10:20am

Hedge funds are getting

Hedge funds are getting skewered here. They're gonna have to flip long soon.

Otherwise kaboom

Hey bill, EE = Evil Empire.

Bull
Aug 31, 2011 - 10:21am

Last

Last.

OC15
Aug 31, 2011 - 10:22am

No reason

For them to bash silver right now. People are tentative about getting in right now. It has moved down from it's recent run to 43 and change. Once it does it's $3-4 move in a few days then they'll pile in and get whacked. Patience.

TruBlu11
Aug 31, 2011 - 10:24am

FWIW

Anyone noticed that the momentum in silver has switched today from the EE waterfalling it down (with decreasing success in the past 48 or so hours) to simply trying to contain the upward pops? Good sign.

SilverWealth
Aug 31, 2011 - 10:25am

Granny on the Sell

Granny is unimpressed with the volume of buying in the S%Pee. After so many days of John Holmes and his affections in GDX and GDXJ she is now asked to accept this kind of limp and diminutive action? No thanks says Granny.

The miners will correlate with any big hit the low volume rise in SPX makes into the Holiday. Lookout below come next week when the sociopaths return from chasing Ukrainian hookers all summer out in the Hamptons. They will be angry that they got no action in Gold, no action in Miners. What will they do. Sell. More than likely. Too many on the seasonal buy side amongst hungry retail Granny thinks.

She would rather lay back now and dream of the Johnny Wad and the good times they just had than settle for something alot less substantial in the days ahead.

Just Grannie's opinion. Selling GDX and GDXJ into strength after about 10% rise. Waiting for a possible deluge next week. Who knows? Who really knows? Only Ms Kardasianoff the fortune teller down the street but she is on vacation now with all of her winnings to Khazikstan. Something about an Opium deal or whatever.

MrSteed
Aug 31, 2011 - 10:27am

Celente

I enjoy his interviews, but they tend to get the same and repetitive. Generally, he starts out fairly calm, and gradually winds up into a full blown rant. That's how his interviews proceed.

My guess is that his Trends Journal would be a poor predictor of PMs (but might be an entertaining and decent enough macro read on upcoming events).

BillAuAg
Aug 31, 2011 - 10:27am

Silver today looks to be

Silver today looks to be acting much as it did yesterday. Take it down and someone gets the idea it's a good buy. Silver shoots right back up to where it was. Head'n to 42

Tom L MIDDIE
Aug 31, 2011 - 10:28am

@CIRRUS

I yell at everything, unfortunately. I've taken to going for a 40 minute walk after the markets close to mutter to myself and digest the crazy shit I've seen all day. It's better than venting my spleen in public though, that's just rude and I don't want to be Karl Denninger.

Ta,

Shill
Aug 31, 2011 - 10:29am

Granny better have another

Granny better have another look, were just about to bust through. :)

2.25 million shares traded in the GDX in 1 hour. awesome.

Tom L
Aug 31, 2011 - 10:31am

@Celente

He has a product to promote and he's a very popular guest. Watching all of his interviews during a particular cycle is silly. He has a script just like anyone else who's on a publicity tour and he doesn't really deviate from that.

Would you turn down interviews if you were him? No. I don't watch them all anymore, but I do watch/listen regularly, which is really the way it should be, IMO.

He's an anxiety pimp who's on our side. Better than the ones at CNN PMSNBC FOX etc.

Ta,

raulv
Aug 31, 2011 - 10:31am

Celente is SPOT ON

He was claiming in 09 that we would be seeing riots in london and the us, and apart from the hackney one, I read today in RT news that there are various pretty heavy riots in wisconsin, plus some KKK action in the south (believe it or not).

Much4Him
Aug 31, 2011 - 10:33am

Wynter Benton posts

then the stock price of JPM will be below $30 by the time it reports its earnings. And after The Morgue reports its derivative losses in October, will The Morgue even be in the 20s anymore? Hang tight, it doesnt seem like we will ever see a silver price below $36 again which means The Morgue is "deaded".

Deaded-as in past tense of dead.

What are you gonna do, Jes? Now we want your head too.

You're going home in a body bag, do da, do da.....

Kinda creepy but interesting :).

Nick Elway
Aug 31, 2011 - 10:33am

RE: FCX for Copper, Au Ag in account

I've taken a position in FCX as a proxy for copper, it seems to track pretty well.

Most(80 per cent) of my account is equal FRN$ amounts of CEF and PHYS

That makes me a 75% Au 25% Ag

Shill
Aug 31, 2011 - 10:36am
OC15
Aug 31, 2011 - 10:38am

@ Tom L

I hopped on the SVM Dec $12 calls at $1.15

piranha82 Dark Matter
Aug 31, 2011 - 10:39am

@Dark Matter

I am in the same situation.

HB Kumanari
Aug 31, 2011 - 10:39am

South Swell

Kumanari

Sailed La Perouse once in the mid 1980's, with local permission of course.Bright blue water and 8-10' faces. Most excellent. We head for Hollister Ranch this evening by boat to catch your south swell.

Did you check that tow sesh in Tahiti the other day on Surfline? Sick.

Enjoy your posts, thanks.

The Death Ceiling
Aug 31, 2011 - 10:43am

Emotion

The most important lesson I have ever learnt is to enjoy my emotions but not be controlled by them, years of practice, and I'm still working on it.

I began by becoming an emotionless driver, why be upset by the actions of others? You only hurt yourself in the process.

To those that yell at things, you are not in control of yourself and your decision making may well suffer because of it.

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