Friday, November 12, 2010

Blythe, you naughty girl...

The chart below pretty much says it all. The Evil Empire has tried to capitalize on fear this morning. Fear of the PIIGS and fear of margin requirement increases. Don't let them win.

Days like this are just a reminder of why you never trade PMs on margin and you never own front-month contracts, in either the futures or options. I admit that I broke this rule earlier this week and I am the proud owner of some Dec10 $29 silver calls that are considerably less expensive now than they were on Tuesday when I bought them. Bad Turd.
Again, have any of the fundos changed? Sell PMs because of the PIIGs? Hmmm, let's dissect that:
1) PIIG collapse only means more printing of Euros and European economic weakness.
2) PIIG collapse and European economic weakness means more US economic weakness and more printing of dollars.
3) In the end, PIIG collapse only further ensures QE to infinity in both dollars and euros.
And how is QE to infinity a long-term negative for the PMs?

Again, if you're going to follow/trade PMs and miners, you'd better get used to days like today. They have always happened and they will continue to happen. In fact, days like today are only going to get more frequent and more volatile as the Comex gets closer to collapse...of that you can be assured.
Hang in there. I'll update again later once everything has settled out in NY, sometime after 1:30 EST.


  1. You forgot the threat of china rising rates (including aftermath) ... imho that was the trigger for Blythe, fear otherwise should have supported gold ... in the end it doesn't matter down we - what counts is where to place the soldiers. Drawing the charts should help ... I'm long again with first level stops and 2nd level stops. Suggest to closely follow the DAX, once 6700 goes, it could again get ugly.

  2. Furthermore i think today is/was a take down, possibly even coordinated, ahead of a gold bullish announcement which might happen either Monday or Tuesday. Almost always these sharp selloffs occur 1-3 days before you have a sharp move north. Could be PIIGs related, but that is just a wild guess.

  3. There are no coincidences ... just came across this post:
    All of the selling we are seeing across the entirety of the commodity complex is related to the news that China is hiking rates again. The fear is that this will cause a slowdown in the Chinese economy which will negatively impact demand for commodities across the board.

    I am seeing every single commodity being sold regardless of any current fundamentals. It is even showing up in the soybean and corn markets which have very strong fundamentals. In other words, it is purely a function of hedge fund algorithms being tripped to sell because some downside technical levels have been violated.

    The fact that it is occurring even with the Dollar showing weakness tells me that it is a pure money game right now so fundamentals are taking a back seat to the flow of money out of commodities today.

    Gold would have to get down below $1,345 and stay there to give me any reason for concern on the charts. Even at that, it would still be okay although the chart picture would be a bit less positive. Only two closes below $1,320 would turn the chart bearish.

    Best wishes from your pal,
    Trader Dan

  4. I'm actually glad this happened, as I am planning a trip to my local coin shop this weekend, and buy me some silver rounds. I'll save a couple bucks thanks to this (silver in high 25 range as of me writing this)...

    I'll hopefully catch the silver train to 30+ next week, after stocking up on more rounds this weekend.

  5. This is from JS:

    Dear Virgilio,

    1. Chinese price controls discussion.
    2. Brazilian discussion of currency controls.
    3. The general commodity market is bearish today.
    4. All these items are being taken advantage of by flash commodity trading and gold banks.

    All of this is temporary, but from now on all gold moves will come with unprecedented volatility.

  6. Thanks. Trader Dan is the man. A very nice guy who always returns my emails. He's been instrumental in developing my knowledge of the PM markets.

    This "slowing Chinese economy" stuff is just nonsense. The PMs, and all commodities, are rising because they are denominated in dollars. Period. A slowing Chinese economy would portend less Chinese purchase of treasuries. Less Chinese purchase of treasuries ensures even greater amounts of QE. Which means even more new $ floating around. Which means higher commodity prices. And on and on.

    Buy all dips, including this one.

  7. If you want to know whether we already saw a bottom ... check out AAPL chart with volume. Very useful to allways have AAPL on top of your watchlist!

    Besides that the HUI and BKX recovering nicely.

    That doesn't mean that we could rule out another later wave of selling.

  8. Yes Turd .. of course that was just an excuse for Blythe!

  9. Excellent commentaries gentleman...would love to see this on a continued basis. I agree with the sell off rattles your nerves and makes you second guess yourself...holding my long silver position into next week...the powers that be are really trying to shake this tree hard.

  10. What Jack said. I'll be standing at my friendly local coin shop come Monday morning. Thanks again, Turd - this blog is an invaluable resource.