Read This Now

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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

margaritatime
Aug 31, 2011 - 11:27am

@Pining

Which is why I look a discussion outside the academic realm. I really appreciate the discussion with you, Cleburne, and several others on here. It's a worthwhile discussion, and one that is completely ignored in the norm. I completely understand what you are saying about economic cycles, and I concur you both are absolutely correct. Fundamentally, I also think we are all making the exact same argument - in different worm holes. I wish I could write a response that was worthwhile to both of your inputs, because trying to squeeze it in on a tight time before I run out the door would do no justice to the thoughts you both have provided (yeah, I am running out the door).

I appreciate the discussion. It offers other insights which makes us all better.

Monkeybewy
Aug 31, 2011 - 11:28am

Smart

Thanks for the last update...although it doesn't look like it's going to happen (if it does I'm going to rip this chart a new one haha), that is the kind of trading advice that I can actually use. I really really appreciate your efforts. Seeing your updates on Sat and Sunday is so comforting. I often face the new week with a "what the hell amd I going to do" feeling, but you really help put things in perspective. Like many here I feel like I'm part of a team...US against THEM. Which now means I can stop talking to my computer, and the dog. Although the dog is often amazingly insightful. And right.

PatrickBateman
Aug 31, 2011 - 11:36am

My Gold, Silver and S&P Retracement Read...

I tend to make use of fib retracements quite a lot in my trading. I don't think Silver can rally convincingly to close above 42 unless Gold convincingly closes above the 1833 area (61.8% Fib retracement of of the 22 Aug intra-day high to the recent low on 25 Aug). This has proved to be formidable resistance so far. It may be that the breach for gold only happens when the S&P500 hits 1236 and reverses. So my trigger for buying silver depends on these two markets right now... or, of course, if Silver decides to unilaterally make a move up and closes above 42.

Thanks to all here!

¤
Aug 31, 2011 - 11:38am

Another SVM repurchase/part of earlier 9.6 million buyback

press release

Aug. 31, 2011, 8:02 a.m. EDT

Silvercorp Repurchases in Excess of 2 Million Shares Under Normal Course Issuer Bid

VANCOUVER, BRITISH COLUMBIA, Aug 31, 2011 (MARKETWIRE via COMTEX) -- Silvercorp Metals Inc. ("Silvercorp" or the "Company") /quotes/zigman/33670 CA:SVM +2.18% /quotes/zigman/33653/quotes/nls/svm SVM +1.22% announces that to date, pursuant to its normal course issuer bid ("NCIB") announced on June 17, 2011, it has acquired a total of 2,027,167 of its common shares at an average price of CDN$8.112.

TruBlu11
Aug 31, 2011 - 11:38am

4th attempt by gold to hurdle over 1832 since the market opened

If it goes over 1832, expect 1841 to be taken out in due time today and perhaps 1855 and then on to infinity. Perhaps this occurs around Turd's magical Noon time call.

P.S. The old saying is 3 taps and out. Hope so.

Dr G
Aug 31, 2011 - 11:39am

Total blah feeling for me

Total blah feeling for me today. Maybe it's the less than peaceful nights with the new baby, but it stinks to go to bed and then wake up, and have silver trading for the past 8 hours only to find that it is within pennies of where it was when you went to bed. Seems to be happening like that more often now. I wonder how the Sydney market feels about offering no help to silver. Asia hasn't been doing much of anything lately, or at least not enough of anything to overcome the forces of the EE.

It seems that it used to be silver would rally hard on the other exchanges, only to be smacked down by London/Crimex. But it was still 2 steps forward and 1 step back.

Now it just sits idle in the other exchanges for the most part and then gets smacked down by the London fix or Crimex. 1 step foward and 1 step backward is often the case now.

Silver, we hear of low OI, fundamentals stronger than ever, and the POSX falling off a cliff. Will you please get your act together and do some movement?!

Shill
Aug 31, 2011 - 11:42am

18% of all personal income is

18% of all personal income is derived from Government transfer payments.

Life is good on the roll

https://www.bea.gov/newsreleases/national/pi/2011/pdf/pi0711.pdf

cpnscarlet raulv
Aug 31, 2011 - 11:43am

@raulv - Celente

Anyone can predict two years out and be lucky IMHO. Whenever he is asked a "When" question, he either dodges it by ranting past the interviewer's attention span or gives you a "sometime in the far future" (like Star Trek) answer.

TruBlu11
Aug 31, 2011 - 11:44am
Shill
Aug 31, 2011 - 11:44am

Nice DPH, I wish all miners

Nice DPH, I wish all miners would do the same.

OC15
Aug 31, 2011 - 11:46am

@ Scott J

To that last post I would ask, how often is gold and silver raided before a jobs report? Always, mostly, sometimes, once in awhile?

ScottJ Shill
Aug 31, 2011 - 11:48am

Fantastic News Shill!

Would you like a side of Police-State with your dependency on the government?

Video unavailable

(8:00 is when things are taken to the next "exciting" level)

cpnscarlet Tom L
Aug 31, 2011 - 11:49am

Infrastrusture Spending

If you can't just stop the gov't from spending, than a road/rail/bridge project is better than paying anyone (able bodied or not) to do NOTHING. However, this is what O'bottoms has been on about since he was running in '08. He gets the money, and not one "shovel ready" job gets funded. The money just goes into keeping municipal and state employment roles full with bureaucraps (and the cops and firemen are looking more like them everyday).

Physical_only
Aug 31, 2011 - 11:50am

@ Tom L.

I thought 27.00 was expensive in 2007, bought some anyway, I have done obviously better with my straight bullion purchases.

The thing I find most interesting "I have lowered my purchase to 10" on the 2011's; even though I think at least initially these are NOT going to sell to quickly, it really depends on how silver prices fair toward the end of the year.

All the proofs have gone up in value with the 2011 price increase. I'm a bullion guy first by a long shot, but I do find this interesting & did think $27.00 was high in 2007 compared to bullion....... A couple years from now $60 will probably look like a good deal & will probably keep the mintage low as people a reluctant to buy at a $60 price level when they can buy bullion for a bit over $40

It will push prices up on 06,07,& 08 w's as a collectable, if you want to play that game. Which might not be a bad game to play while prices on these have not appreciated as well as bullion or other collector coins & these are fairly cheap considering mintages until people figure out the 2011's are going to cost them $60+

¤
Aug 31, 2011 - 11:53am

Head Fake?

Is this PM rise right now a head fake for a sudden plunge at noon?

Looks like it.

Tom L
Aug 31, 2011 - 11:53am

@Physical

I'm not saying they aren't worth it. I'm saying that's a crazy premium over spot. Erog, the spot price is flat-out freaking wrong.

Here's to upside potential and making those things seem cheap in 6 months. Cheers on your purchases, mate.

Ta,

silver foil hat
Aug 31, 2011 - 11:54am

just posted from wb... fyi

Re: If silver doesn't dip below $36 in september 5 minutes ago

Our main purpose is to defend $36 and detonate the derivative bomb that will send silver well over $80 by the end of the year. Perhaps even to $120 before all is said and done.

And just to make sure silver doesnt go below $36, we will be holding contracts for delivery throughout september and will hold these contracts as hostages in case The Morgue decides to get cute with the price.

I.e., if silver is under $40 then we will demand physical delivery and not take the cash premiums that is so generously offered. If silver is above $50, then of course we would be happy to sell these same contracts for a hefty profit (plus those hefty premiums as a cherry on top). It's your call, Blythe, but either way....

You're going home in a body bag, do da, do da......
TruBlu11 ¤
Aug 31, 2011 - 11:58am

@DarkPurpleHaze re: Head Fake?

It's the real deal. Look for it to clear 1841 next and then it will stop around 1855 and see if it can push through. These are just previous chart resistance/congestion levels gold needs to clear in its strong push up today. Silver is following behind today but should take on a life of its own if it can take out 41.80 again. At 42, Zoom!

raulv cpnscarlet
Aug 31, 2011 - 11:58am

@cpnscarlet - Celente

I believe it was on an Alex Jones interview where he was asked when would that happen (in 09) and he said that he was foreseeing this to start happen by the end of 2010, 2011 and then spread all over by 2012.

So far, so good (or bad?)

However, he is not Nostradamus (like the turd), so his timing might be off (as often might be), however how things start to develop are spot on (IMHO)

Ninja Report
Aug 31, 2011 - 11:58am

Danger - Front delivery month shifts to Dec today

Today is the day Silver futures traders have to either put up the full price of their contract and stand for delivery, close the position, or roll forward to December. This shifts nearly all of the volume from an about-to-be-delivered contract (Sept) to a contract that is a couple of months out which is far easier to manipulate. It is a lot easier to flood the market with shorts that have a couple months to cover before delivery than ones that have to be covered within a couple days.

In the past, the start of a delivery month has been marked by heavy takedowns in the price of Silver especially. This is when they struck at the start of the year (Jan 2-Jan 7) and of course the "Black Sunday" on May 1-May 5.

Silver may get used as a sledge hammer in the next couple of days to try to beat down Gold, which is the real concern, and going into a delivery month of October.

nathan1234 Shill
Aug 31, 2011 - 11:59am

Obama to push for spending

Obama to push for spending on

Submitted by Shill on August 31, 2011 - 11:00am.

Infrastructure like roads is meant for movement of goods besides cars. If there is no manufacturing base to move American produced goods together with mineral resources to be exported for these roads there is not much use for these new roads.

It will be just an expense without rewards

¤
Aug 31, 2011 - 12:03pm

The WB thing

Very intriguing and I'm not sure what to make of it. Thanks for providing it Silver Foil Hat

I do think it would be a mistake on that persons part to keep referencing a body bag for whatever reason. It obviously insinuates dying/killing even if they don't mean it literally.

Kind of foolish and immature to almost threaten and taunt very publicly like that and I'm not sure it's the same person who wrote earlier in February. The wording/phrasing seems off a bit.

It is interesting to a point albeit a distraction to even consider. So I don't. But I will read it.

MIDDIE Tom L
Aug 31, 2011 - 12:04pm

Roger That TOM L

Roger that, I'm with you in spirit. Not only do I yell/scream, a swear word or two makes it into the rant, as well. So, I too walk or jog to get my blood pressure back under control. It's all good.....

¤
Aug 31, 2011 - 12:05pm

TruBlu11

I hope you are very right.

I can't wait to see that breathtaking moment to the upside that's bound to happen at some point.

Hard Rain
Aug 31, 2011 - 12:05pm

@physical_only

Newbie stacker question:

Why pay $60 for an uncirculated ASE from the mint when one can get one from APMEX/Gainsville for about $46?

Is there a difference in what you will be buying? If so, how is it different?

Just curious.

Rain

Shill
Aug 31, 2011 - 12:06pm

LISBON, Portugal (AP) --

LISBON, Portugal (AP) -- Portugal's government plans "unprecedented" spending cuts next year to meet debt-reduction targets agreed in return for a euro78 billion ($112.7 billion) bailout, the country's finance minister said Wednesday.

Portugal has to abide by debt targets to qualify for bailout loans from its European partners and the International Monetary Fund, which are conducting quarterly reviews of the country's progress before disbursing the money in portions.

The rescue package spared debt-heavy Portugal from bankruptcy, and aimed to ease Europe's sovereign debt crisis, but Lisbon has struggled to keep its fiscal recovery plan on track.

It previously announced it is levying a one-off tax, taking 50 percent of workers' Christmas bonus, to help reach the 5.9 percent target for the budget deficit this year. The bonus is equivalent to a month's pay.

Portugal gov't cranks up debt reduction effort - Yahoo! Finance

Hard Rain
Aug 31, 2011 - 12:09pm

Taxes

Someone posted above that there is a 28% tax rate on selling bullion.

Is there a dollar amount you have to exceed?

What about exchanging au for ag and vice versa?

How would/does the IRS track these purchases and sales?

Rain

OC15
Aug 31, 2011 - 12:09pm

If

Silver stays over $40 and JPM stock starts to ease down toward $30 during September, I will dump a pile of fiat into some JPM Oct puts.

Looks like they have gold just locked under $1,835.

ScottJ
Aug 31, 2011 - 12:11pm

1841

If gold cannot break 1841 today, we are going down tomorrow (just my opinion). Lower lows achieved in gold today act as a neutralizer and a set-up for a smack-down tomorrow if we do not break out to the upside. On the contrary, silver has been looking nice, but it will follow gold if gold was to fall. I don't think the fall will be all that bad, and if it does indeed occur, will certainly prove to be a moment in time where buying the dip may prove to be quite a fiat maker.

Wild two months in front of us. Get ready for show-time. Open your mind, open your heart, release the corruption-based life that has been embedded upon us from birth. We as human beings have so much more potential than we are currently achieving. It is up to us to find a new way, as we are the ones who will shape the future.

I think I just went off in a completely different tangent....

Hard Rain
Aug 31, 2011 - 12:12pm

margarita/cleburne/pining

Very interesting your discussion on relative valuation of au/ag over time. You guys all made excellent points...I am trying to digest it all. Just one of the reasons this site is so awesome!!!!!!!!!!!

Margarita, could you explain in maybe a little more detail how you play the GSR?

Rain

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