Friday, November 19, 2010

Anatomy of an EE Attack

This morning saw another, typical EE attack. As mentioned yesterday, the Evil Empire likes to stage their raids when no one is around to stop them. Typically, the raids come between 6:00 and 8:00 am New York time. Why then? Simple. Asian and European traders are done for the day. New York traders are not yet at their desks. As you begin to watch for these raids, you'll notice that the EE stages them as often as three times per week. Here is a chart of today's:
Again, how do they do it? The EE compiles a bunch of new, paper short orders and then they wait. They watch the order flow. They see an opportunity when there is a momentary lapse of bids to buy. They seize this moment to overwhelm those bids and the market is quickly driven lower as it seeks buyers to fill all the sells. Very simple and very fast.

Now, check this out. Do you recall the price action back on QE2 Day, November 3? There was much angst and wringing of hands by gold holders as the gold market was crushed pre-announcement. At one point, gold was down nearly $30 intraday. What was happening? Did "insiders" know the Fed would disappoint and were selling early? "NO" I cautioned. The Evil Empire knew that QE2 was massive and they knew that gold would rally post-announcement so they had to bash back its starting point. Here is  a copy of a ZH post I made that morning:


by Turd Ferguson
on Wed, 11/03/2010 - 10:43
#695968

Obviously, Blythe decided to act early. The question is, what does this mean?
To me, the only reason for smashing gold now is this: The EE either knows or suspects that the QE2 announcement is going to be larger than anticipated and, therefore, PMs are going to rally sharply. So, crush the PMs now in order to cover shorts at lower prices before the blastoff.
Again, if anyone doubt the existence of the EE and their influence on today's action, simply look at a one-minute chart of todays' action. Violent one-minute downdrafts galore. Only the EE has the power to overwhelm the bid like that. They are clearly trying and succeeding in dropping price before the announcement. Again, why before? They are clearly afraid of getting their collective nuts and ovaries in a vise this afternoon.
I am very confident of a big price move UP later today.

Here's an exchange I had with the one and only "harry wanger" later that morning:



by HarryWanger
on Wed, 11/03/2010 - 11:24
#696117

You think gold is getting hit now, just wait until 2:30. I hold lots of precious metals long term but am expecting a big sell off.

by Turd Ferguson
on Wed, 11/03/2010 - 11:28
#696125

Yes, Harry, but you may have already seen the majority of it. Don't look for gold to drop much below 1325 before the usual buyer(s) of size step in.
If Blythe had allowed gold to rally this morning up to 1385-90, I would be extremely nervous about what lies in store for us this afternoon. The fact that she chose to crush it before the announcement clearly means that the QE will be more significant than expected and that the PMs are going much higher.

So, Harry and many others were wrong and I was right. How did I know? Was Turd's Crystal Ball particularly clear that day? Not really. All I needed to see was this:
Violent, one-minute drops are the specialty of Blythe and her monkeys. Only she has the size and scale to be able to simply overwhelm the gold market in this fashion. Notice, too, that each one-minute move takes the exact same $7 out of the price. Methodical selloffs are one thing, taking $21 out of the international price of gold in three, one-minute increments is something entirely different.
Save this chart. If you, or anyone you know, ever come to question the existence of The Evil Empire, pull it back out. It is truly all the proof you need.

Finally, regarding today's price action...pretty much as expected yesterday. This morning's EE beatdown was a little more extensive than expected so we'll probably close a little lower than forecast yesterday. Lets look for 1345-50 in gold and 26.25-50 in silver. Next week, even including expiry, promises to be a week of range-bound consolidation before the big POMO week of 11/30. Have a great day! TF

40 comments:

  1. yeah i was watching my charts and laughing every time i saw a vertical sell off for no reason whatsoever...

    here it is 10 minutes after the 3 i witnessed and the market has seemingly already purchased what they sold...

    my question is, when does the exchanged call time out to actually quantify the volume of what they are trading to make sure they have what they say they have? or do they have to since its just paper ETF's anyways?

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  2. The Flying Monkey Brigade is in attack and retreat mode. We need to bust through their line of defense, then rape and pillage the bastards!

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  3. Todays more than expected move in PMs came due to the chinese "tightening" move. That was in fact a reason to immediately sell everything. For a few hours.

    Something else: today were several margin increases in softs - that was a reason for me to buy some.

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  4. Jim Sinclair ... 11/18th:

    With gold heading higher today, King World News interviewed legendary trader Jim Sinclair. When asked about the action in gold Sinclair stated, “We have to be right in front of a major move in gold. Today the gold market had all of the indications of what would be considered by the old-time traders (Bert Seligman & Jesse Livermore) as a major turn. This would be a sign to them that the bulls are gaining strength in the market, and given any excuse it will rise violently.”

    Sinclair continues:
    “The strategy now would not be to run after spikes and strength, but to begin to take in those periods which will certainly come, of weakness that exist during the day. This is really the first time since we came off of the high, that it’s starting to show a character of wanting to make a new high.

    The chorus of complaints about the Fed and their adoption of QE, I call that the backfire of MOPE. You have so many of the new guys convinced that yes, the economy is recovering but not really that fast, and there is no inflation anywhere. Then why in the world is Bernanke going to a $600 billion project which is a rescue plan that comes up during a period of crisis? They can’t understand it.

    The other thing is the belief that the financial institutions balance sheets have made such great progress. The bottom line is he (Bernanke) sees what they don’t see. The stumped recovery we’ve had is in fact an economy headed down.

    Getting back to gold, this is late 1979. It’s got all of the characteristics of late 1979. If people will go back and look at the long chart they’ll see that there was one violent flip right before it took off and never looked back. And it’s getting very close to that point now. I think what you have seen is a major shake of the tree right before gold takes off.”

    Well there you have it from Jim Sinclair, who’s father was business partners with legendary Jesse Livermore. The green light has been given to the upside by one of the great ones, so sit back and enjoy the show.

    http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2010/11/18_Jim_Sinclair_-_This_is_Late_1979,_Gold_Will_Rise_Violently.html

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  5. Giving that Bernanke was about to deliver a major lipstick speech about QE2 in Europe, the LBMA plunge enabling team had the incentive to a raid on PMs right before that to make Dollar somewhat sound for a moment.

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  6. Silver on a tear. Turd, your call was right on the money.

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  7. Thanks. Should have stuck with the calls from yesterday when I said 1358 and 27.25. Scaled this back this morning a little too much but the strength today definitely portends good things for next week.

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  8. On a side note, I'm really getting interested in wheat. Considering:

    1) very tight global stocks (strong fundos)
    2) likely cold, dry winter in "wheat belt"
    3) further dollar weakness
    4) I like the chart, too

    Not many direct ways to play it besides futures and options but its definitely worth the look.

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  9. Do we hold positions, or go to cash and wait for the next EE attack come Monday?

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  10. Good buying into the close for the major gold stocks. If not misleading - HUI should open higher on Monday in NY.

    A peaceful weekend to all!

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  11. I'm holding my silver and gold miners long. I think we should have a good run next week and for several weeks. But I am just a junior turd so I don't really know. :)
    What should we all do Senior Turd?

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  12. Hi Turd Thanks for all your good advice and education on PM trading - as for wheat do you think options on an agriculture ETF (with a good wheat component) would capture the possible gains? Maybe March - April expiration?

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  13. On a sidenote: where would be the best places to buy silver in the UK? Ive bought my gold at taxfreegold.co.uk..

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  14. Just a note to say hello Turd -- excellent job on the blog, thank you for sharing your insights. While getting the Tylers to respond is not always easy, I think your analysis would be a perfect fit for the Contributor top-bar. Looking forward to your commentary.

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  15. "Typically, the raids come between 6:00 and 8:00 am New York time. Why then? Simple. Asian and European traders are done for the day. New York traders are not yet at their desks. "

    The only problem with this theory is that when it's 6am in NY it is 11am in London. I can tell you that lunch time in London (1-2pm) is 8am in NY and unlike Americans, pretty much everything stops for lunch. In Europe you do not see traders at their desks with a bag lunch, although if the americanization of the planet continues it may eventually come to that.

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  16. http://www.youtube.com/watch?v=J0O-VJFd3gw&feature=related

    Think of going out and buying as much silver coins/ounces as possible coming days ... if everyone buys 100 or more ounces ... that will finally lit a fire ...

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  17. I don't know, Steven, but I think you helped make my point.
    0800 in NY is 1300 in London. Just in time for lunch. Its also well into the evening across Asia.

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  18. Awesome work Turd. It's been a hell of a week. More fun to come next week. Rest well.

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  19. i remember that post QE2 spike that cause me to loose a lot of money. The price was going up then a spike from 1347 to ~1324 in about half a second and then it turned around but just enough to trigger my stop.

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  20. Attaboy, Turd. Thanks for your diligence.

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  21. This comment has been removed by the author.

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  22. Frank, Nov 19 1:37pm,

    buying silver in the UK; I have found the cheapest to be Bullionuk.com. The Britannias are pricey, but the Maples, eagles & philharmonics are good value.

    They charge a 15 gbp delivery fee on all orders, and will charge you 2% extra if you pay by credit card, but bear in mind that CC payments get you consumer protection against any potential supplier insolvency etc; just a point to bear in mind.

    If you find a cheaper UK supplier than them, then spread the news.

    For gold, I prefer bullionbypost.co.uk

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  23. Thanks Byzantium, I am in Germany every few weeks and I know tax there is less on Silver and Gold, I have not checked prices but if anyone knows a good dealer in Germany let me know please!

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  24. TF, I wasn't arguing with your point, just the mathematics.

    I think some of the London traders are in on it as Andrew Maguire has pointed out before his unfortunate "accident".

    Once JP Morgan sends out the word the idea is to get everyone to pile in on the naked short side, blow it to pieces at a thinly traded time and trigger everyone's stops.

    Of course there is government collusion or someone would stop to ask, "JPM why are you shorting massively all at once in the most thinly traded part of the day?"

    The funniest part of the CFTC testimony was when they asked, "what if it doesn't work and things go against you?" To which the JPM minions replied, "we just (naked) short some more at 100 to 1 leverage."

    After all when you are using taxpayer bailout money there are no worries.

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  25. Hey Frank, the best prices will be shown at
    www.silber-investor.de/

    I personally ordered online at
    www.muenzkauf.de and www.anlagegold24.de, and, lucky me, I did it in January =)

    For the taxes, you have 7% VAT on silver coins, 19% on silver bullion and 0 on gold.

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  26. Frank re dealers in germany: proaurum.de, since many years in the market, good reputation. you also can use their "Zollfreilager" in Swiss/Zürich for a work around not to pay VAT on silver (if you don't have the intention to import the coins), at least that's what they offer in Austria, where as in Austria we have 20% on all sorts of Silver. In Austria you have also proaurum.at and schoeller-muenzhandel.at (distributor/"Tochter" of austrian mint) where you get lower spreads/price for greater quantities (i.e. > 50 xau phillies.)
    So far I have only used schöller as I prefer to be closiest to the mint. But I strongly consider to use that Zollfreilager. Possibly I even will order next week.

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  27. Thanks guys!!! Have a nice weekend all.

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  28. I just read Harvey Organ (mouth agape)

    First, from Harvey in 2009: - his November 28th, 2009 blog about December silver delivery:

    """"Looks to me like there will be around 12,000 contracts for silver or 60 million oz. The comex claims that it has 102 million oz. This one will be close.""""

    And now, 2010, today:

    """The front December month is scary as it shows only a drop of only 3,000 contracts to 48,991 from 51,905. It seems our silver longs are resolute and are willing to take on the bankers."""

    In other words, right now, 245 million ounces of silver or 4 times the amount last year are standing for December delivery. Comex "claims" to have 108 million ounces, somehow 6 million more than last year (which I don't believe).

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  29. The fact December gold was able to scratch out a close over $1,350 is a positive sign going into next week, said Bob Haberkorn, senior market strategist, Lind-Waldock, and gold could try to go back and retest the $1,400 area.

    Haberkorn also said he noticed buyers at the Comex were placing bullish position in the options market, with purchasing far out of the money calls, such as July silver $40 calls and the $1,600 February gold calls.

    That could be a tall order for next week, however, as the U.S. markets head into the big Thanksgiving holiday on Thursday. Markets are closed that day and the Nymex metals contracts have shortened trading hours Friday. Many traders opt to extend the holiday by one extra day, so trading volume could be light, but could also be volatile.

    http://www.kitco.com/reports/KitcoNews20101119DeC_mtlsoutlook.html

    -----------

    Question remains when will they increase margin again?
    Interesting the calls - as the Stalker projected 1600 for end of march and Cyclist Silver to double into June when silver was around 24

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  30. When I first stumbled across some character calling himself "Turd" on the ZH website, I just rolled my eyes and said "uh, huh...whatever". Really, who could take such a self-named poster seriously? And what's with that 10 gallon hat? But, I came to see over time that behind the crazy name and goofy picture, there was definitely a pretty sharp cookie at work. Long story short, "Turd Ferguson" and the blog he has launched is now a bookmarked favourite of mine, and he certainly reminds me of the expression of not judging a book by its cover. In time, it's possible that the word "turd" will be resurrected to respectability in the same way that being called an ogre is now a good thing, what with the Shrek movies. Turd, whoever you are, I salute you.

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  31. @Marcus The hat and name come from a Saturday Night Live skit of Celebrity Jeopardy. You knew all this of course I just felt like being helpful.

    http://www.youtube.com/watch?v=aN6rjLcpBnI&feature=related

    The hat appears at 4:40.
    http://www.hulu.com/watch/12203/saturday-night-live-celebrity-jeopardy---stewart-reynolds-and-connery

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  32. Ireland news should give Gold a nice boost!!

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  33. http://www.bloomberg.com/video/64664632/

    Leeb, Lieberman, Lappin Interview on Investment Strategy, mainly on Gold!

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  34. That Lieberman guy just doesn't get it.

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  35. A few days old but worth the quick read:

    http://www.miningweekly.com/article/silver-to-outperform-gold---analyst-2010-11-11

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  36. Always try to listen to Dan Norcini every weekend.
    Fortunately, this has become a regular feature.

    http://kingworldnews.com/kingworldnews/Broadcast/Entries/2010/11/20_KWN_Weekly_Metals_Wrap.html

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  37. "Next week, even including expiry, promises to be a week of range-bound consolidation before the big POMO week of 11/30"

    --> you mean range trade with 1360 upper and 1335 lower limits?

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  38. Frank: I'd say 1345-1375. Lots of tough sledding between 1375 and 1390. It'll take at least a couple of good, high volume days to get through there but once it does, its right back to 1420.

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