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

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turd [at] tfmetalsreport [dot] com ()

  620 Comments

Tom L
Aug 31, 2011 - 10:46am

@OC15

I got 10 last week at $0.50. I may roll out more into those if we get a break of the $9.25 area today. The implied volatility on SVM is so high that the premiums are crazy. I've got 10 $12 and 30 $14's at this point. I'd like to see what they look like after the worst of the short squeeze is over, ie. after OE in Sept.

I'm really torn about wanting to buy more but feeling the prices are too high and they may collapse after the fireworks are over. Of course, the fireworks may not end for weeks... so...

Oooooooooh, the Pressure!

That said, as a short-term trading vehicle, those Dec$12's should be a really good buy.

Ta,

margaritatime
Aug 31, 2011 - 10:49am

@Cleburne

Cleburne;

I like your approach, and respect the points you are giving. But I disagree. You are basing the argument against a currency that is backed by debt, and against a market that is suppressed to hide the real debt. Your analogy assumes there has been a free market price discovery for both metals, which there has not. It also assumes a constant on the USD.. Which we all know is not the case. Logically it is a false premise.

I can make the same argument for a Big Mac, in the 1950’s being $.25, and in the early 1970’S gas was $.27 gal. – those inflationary means are reflected as consistent with the metal prices at that time. But to use the analogy in an inflated environment where the dollar is debased, and PMs suppressed is inaccurate at best.

The point you make about Ag becoming more rare [USGS analysis] is absolutely correct. Silver unlike gold is consumed, therefore is becoming more rare. As the ratio slides from 16:1 to 10:1 and so one – WILL increase the value of Ag. This is a completely different subject though.

If my grandparents had stashed away 100 ounces of gold 75 years ago is would have cost them $2000. However by contrast if they were alive today, it does not increase their overall wealth. This is the paradigm of assigning an asset [frn’s] to Au/Ag .. We compare and correlate it to the USD [or whichever currency] as value. The amount of gold it took to buy an average house 50 years ago, will still be the same amount of gold it takes to buy an average house today, and will be the same amount of gold 10 years from now.

Most anyone with an analytical point of view hold Ag/Au as a way to preserve what they do have. You can certainly increase that pile rapidly (paper markets aside) and buy on a low, sell on a high, play the GSR and trade when reversals happen back and forth… I should know, because I have tripled my Ag just by playing the GSR.

But if one were to take the metal, and stash it away in a safe for 20 years.. it does not increase in value. Anyone that believes accumulating gold and silver will increase in value [thereby making them more prosperous] is mistaken. In contrast what will likely happen, is those that do not hold Ag/Au will likely decrease in prosperity (and yes on a macro global level we are likely talking about an entire economic class). On a macro level in the U.S., this means that a dollar debased / inflationary environment we could see an entire economic class wiped out (the middle class). Essentially you will preserve what you do have, and your buying power will remain the same.

This is of course my point of view, I realize people can agree or disagree. I am not saying I am right, and that you are wrong.

Tom L
Aug 31, 2011 - 10:49am

@Death Ceiling

For those of extremely volatile neatures, there is a need to vent which actually allows for clearer thinking afterwards. I have to say, though, keeping the blood sugar low and the ancilliary stress low helps a lot.

But, sometimes there really is nothing better than a good primal "WTF!" to clear out some built up adrenaline.

Ta,

argent rampant
Aug 31, 2011 - 10:49am

@silverbill

Welcome! Top of the page: TURDISMS :)

Beez
Aug 31, 2011 - 10:50am

Well, I subscribe to Celente...

It's not a PM letter, it's a Trends Journal - political, social, cultural etc. which fascinates me. Back in the 70's and 80's I followed "Faith Popcorn" because trends = stock picks back then. He also offers solutions.

Yes, he interviews bore me - rants. But he wants to shake and wake the public up cause as we all know here, they are still sleeping.


Aug 31, 2011 - 10:51am
Tom L
Aug 31, 2011 - 10:51am

HUI Rising Wedge

We're approaching the top line of that pattern on the 1 hour chart, but the BO point has moved up b/c of time to around 605-606. With G&S putting in a FUBM right now, chances are high that we see a challenge/break of that formation.

Ta,

mrgneiss
Aug 31, 2011 - 10:52am

Here are some more silver vs

Here are some more silver vs OI charts, courtesy of the Got Gold Report and it's author Gene Arensberg. Note he often breaks out certain components of OI to plot against silver's price, for example the LCNS OI (Long net commercial short). He offers an explanation in the body of his commentary.

https://www.gotgoldreport.com/2011/08/comex-commercials-and-swap-dealers-put-floor-under-silver.html#more

Shill
Aug 31, 2011 - 10:52am

Crude now green with Brent

Crude now green with Brent leading.

GO HUI!

OC15
Aug 31, 2011 - 10:52am

JPM

There is a position building on the $30 Oct PUTS, lol.

rock collector
Aug 31, 2011 - 10:54am

Gold Standard & Population

Within a new gold standard, I would see Gold as its benchmark & anchor but under gold's umbrella there would be room for other currencies. Silver, Nickel, Copper would easily fit the bill as secondary currencies. And as long as mining was taking place on the planet there would be a stream of additional monetary metals to keep pace with population growth. It's not like newborns are automatically entitled to an equal share of the world's money pot anyway. They necessarily (when they come of age) need to contribute or produce in some way, be it in agriculture, mining, construction, manufacturing, data processing, entertainment or whatever.
It's not like there is more wealth in the world the moment they are born.

The market would self correct by absorbing the population increase along with their production based on the economic conditions of the day.
I see a gold standard (tangible and mostly limited money) as infinitely better for society in the U.S. going forward than the arbitrary printing of money for the benefit of a select few. Not to mention the protective barrier a gold standard would raise against future debt growth, unnecessary wars etc.

Tom L
Aug 31, 2011 - 10:56am

@Ferd

I think AUY is putting together a very nice pattern at aorund $16. I wouldn't buy, though, until it pushes through with the HUI to be sure. If G&S sell off and the HUI goes with it, I can see a $0.70 drop. So, wait for the timing to be on your side. I'm not adding to AUY here, same with KGC. I'm waiting for a break of the $17.65 area before committing more money.

Ta,

Shill
Aug 31, 2011 - 11:00am

Obama to push for spending on


Obama to push for spending on vital infrastructure

Obama urges Congress to maintain highway spending

Quick cover, the infrastructure jobs guy is talking again. If it didn't work the first time around, lets save the bankers again, I mean create jobs.

Ferd Torgerson
Aug 31, 2011 - 11:02am

@ Tom L

Nice to hear you can take walks after the market close. I was doing that until about six weeks ago. With the temperatures in Houston hitting in the high 100's day after day following the market close, I've had to settle for an elliptical trainer in an air conditioned room.

Sold out my GPL yesterday (it's still putzing around in a never-ending channel) and bought some SVM shares late yesterday and again this am. GPL seems to have messed up big time with their bought deal earlier this year. Not sure there is a lot of trust left by some shareholders. Finally got tired of watching it grow hair and got out. I'm likin' SVM thus far.

Now considering selling out my CGR and putting that into more AUY. That would leave me with AUY, SVM and USSIF. AUY and SVM seem to be performing well and were on the Top of the Turd list two weekends ago. To me, USSIF is my one crap shoot. If it zooms, so be it. Can't tank much from $.70.

With regard to posters who object to "First", I think those posters are doing that more so in good fun rather than any desire to put themselves above others. I even asked the moderator to cut and paste my "First" post to beginning of the next new thread the other day - all in fun.

Edit: Corrected reference from SLM to SVM in paragraph about CGR.

aurum argentum
Aug 31, 2011 - 11:02am

Newbie question

In his recent update, when Turd says "buy on the dip", does he mean go buy physical at the coin store or buy specific options, futures or gold stocks? Sorry if I'm missing the obvious.

Thanks

Cleburne61
Aug 31, 2011 - 11:04am

@ Margarita

Thanks for the thoughtful response. I think the main point we're differing on is that I maintain that it comes down to cycles. 100 years ago, yes gold would've bought roughly the same things as say, 50 years ago. But, I believe an oz of gold in 1974 would've bought much less than the same oz your grandparents would've bought. Early 70's Au, was severely undervalued relative to dollars and debt in existence....1980 Au however, had revalued properly to the mean.

Same principle I apply to now....Au in 2000 was severely undervalued to the mean....we're undervalued even still, and $12,500(if Sinclair is right, to secure all foreign debts), by that time will hopefully have returned more to the mean. So, I think the basic place we may be talking past each other, is that due to the lack of real market price discovery, and the 'catch-up' so to speak, that silver and gold have to do in a fiat world...it results in times of higher and lower valuations on a real basis. The timeline and timing is the thing we seem to differ on. Thanks again for your thoughts, and congrats on playing the GSR so well. I respect it too, as it takes alot of guts to do that. I've considered it, but have concluded that I don't have the stomach to do that, options are instead my personal choice to leverage and gain more silver. :) Have a great day.

argent rampant
Aug 31, 2011 - 11:06am

Ron Paul interview

Apologies for not putting this on the politics forum, but I don't think many would see it there. In case you, like me, missed this Fox News interview Sunday. Some people are saying it is RP's best yet:

https://www.youtube.com/embed/6b5fj0eR3sg

Tom L
Aug 31, 2011 - 11:07am

@Shill: Infrastructure

More Keynesian stimulus on Road and Bridge work with money we don't have to pay contractors who don't work. How about not spending that money and lettin JPM go freaking bankrupt and let the local, fiscally-prudent banks/CUs fund the recovery?

Ta,

Tom L
Aug 31, 2011 - 11:07am

DrC En Fuego

Gonna take oil with it, baby. $4.22

Ta,

Jasper Puddlemaker cpnscarlet
Aug 31, 2011 - 11:08am

@cpnscarlet (Celente)...

I have subscribed to the Trends Journal for many years. I look at the Journal as one more tool in my collection for sorting out where things are headed. Gerald comes at things from one angle, Sinclair from another, Martin Armstrong another, Frank Barbera from another, etc.. I put them all together to help form pictures of likely trends and events on the economic scene (short, medium, long-term).

Specifically on The Trends Journal: It is not an investment letter. It is a a letter focused on developing trends (economic and social). They have been quite accurate over the years. These days a lot of the journal's pages are focused on recapping and explaining past events ("History of the Future"); what has transpired thus far to bring us to where we are. Personally, I am not interested in that, so I skip that and focus in on the Trendpost sections, and on the Trend Alerts they issue. I think it is a good publication so long as one realizes it focuses on trends, not on specific investment recommendations.

SilverBoy
Aug 31, 2011 - 11:12am

Same pattern as yesterday. Someone is very nervous but who?

I'm very afraid of Thursday and Friday. Before silver will skyrocket to 50-60 EE may try to attack once again.

argent rampant
Aug 31, 2011 - 11:12am

The greatest job creation progam ever

wasn't the WPA, CCC, TVA, or DOT highway projects. It was the DHS & TSA! :D

Physical_only
Aug 31, 2011 - 11:15am

CRAZY

Dear United States Mint Customer,

The United States Mint will be processing your subscription order for the 2011 American Eagle Silver Uncirculated Coin in approximately 3 weeks. Our records indicate you have the following subscription(s):

25 American Eagle Silver Uncirculated(s)

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NOTE: As a result of the increase in the cost of silver, the 2011 American Eagle Silver Uncirculated Coin is priced at $60.45.

There are no household order limits for the 2011 American Eagle Silver Uncirculated Coin. Due to the high volatility in the market price of silver, this price may be subject to change. We will notify you of a price change before processing your credit card. You may cancel your order at any time prior to processing. We encourage you to keep your subscription accounts updated. Should you need to update your billing and shipping information, please sign in at:

tyberious
Aug 31, 2011 - 11:15am

aurum argentum BTFD

If your not buying stocks, or playing options or futures, which as a newbie I doubt that you are!

You should be buying physical metal!

margaritatime
Aug 31, 2011 - 11:17am

@ Margarita, Cleburne

First, let me say I appreciate the thoughtful posts and your respectful disagreement- well done, and informative to read. I would add a component that I think is missing in your analysis Margarita, that I believe bolsters Cleburne's claim that gold and silver will have increased purchasing power, above and beyond nominal gains from dollar devaluation:

1. If everyone's savings, pension, paycheck, etc. is devalued through a dying dollar/massive inflation, then that means by definition they can afford to buy fewer real goods- it will mean you have just seen the real purchasing power of EVERYONE decline. Margarita, your Grandparent comparison is true over a long time frame but fails to account for a rate of decline in the value of the dollar that is greater than increases in pensions, paychecks, etc. For your grandparents, the slow decline of the dollar over 80 years could be offset by regular increases in pay, pension, etc. But when the speed of decline picks up precipitously, as in a currency collapse or severe inflation, pay and pensions will not keep pace- And when this happens, gold and silver will be able to purchase MORE comparatively then they can now- If people are having to pay 20$ for a gallon of milk and just surviving daily life is eating all of their money, who can afford to buy a 500k farm? The answer is that for things being sold, the market will start drying up, leading to lower REAL prices (not nominal, as these will obviously rise with the decaying dollar). So by merely "staying in place", gold and silver will be able to purchase MORE in terms of real goods and assets, as fewer and fewer people can afford to buy those things... price compared to gold and silver will drop.

2. Additionally, if the dollar is dying DEMAND for gold and silver will skyrocket- people will be desperate for something they can store the value of their labor in- the crucial "store of value" role of money that a dying dollar will not be able to provide. This massively increased demand will lead to higher metals prices compared to virtually all other assets- they WILL rise in real value, compared to virtually anything else you would want to buy because people will be clamoring for something to store value in that is not disappearing.

I appreciate the discussion and 'back and forth', and would welcome any critique you have of the above reasoning! Best regards, Pining

Tom L
Aug 31, 2011 - 11:17am

$60 for ASE's?

That's insane.

Ta,

johnboatcat
Aug 31, 2011 - 11:19am

Margarita - There was no Big Mac

in the 1950's. First served 1967. Try Krystal Burger at $0.10 for 1950's. I know. You weren't there and I was. Fair enough!

Marblesonac aurum argentum
Aug 31, 2011 - 11:20am

Newbie Question

Turd is a "trader". He generally trades options on GLD (or SLV)

He stacks coins, but does not trade them...and while I shouldn't assume, I assume he means options.

Marblesonac
Aug 31, 2011 - 11:24am

Gold Standard...

I don't think there will be a Gold standard for the New Dollar.

The powers that be act way too much like the powers that were in the Weimar Republic.

They backed the New Deutche Mark (Rentenmark?) with real estate.

I see the Government/TBTF's accumulating >90% of all mortgages in the USA. I therefore think the New Dollar will be backed with Real Estate.

ScottJ
Aug 31, 2011 - 11:27am

Just be careful short term

Just be careful. This could be the headline on Harvey's blog tomorrow... especially if the jobs number is a stinker like it looks it may be like (per zerohedge).

--

On a side note....

Gold dropping $20 used to be a big deal.... only 3 months ago. Remember that when we have 100$ volatility 3 months from now!

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