Tuesday, December 7, 2010

Perception & Perspective, Part Deux

OK, I've had a little time to cool off. I promise to keep this summary free of profanity and measured in its discourse. Shall we begin?
No, wait a minute, one more thing... Let me explain what really got my goat today. The EE acts as a sovereign power, untouchable and arrogant. By cowardly raiding gold and silver in the afterhours market, they literally destroyed millions, if not billions, of regular investor dollars. The PMs are no longer owned exclusively by rich speculators and the occasional hedge fund. Today, the primary, long-side investors are millions of "average Joes", desperately trying to shield their remaining wealth from further destruction courtesy of our narcissistically insane politicians and bankers. The regular folk own coins, mining shares, mutual funds and even the fraudulent ETFs. The heartless, brutal Evil Empire summarily blasted them today and confiscated their wealth in a selfish attempt to buy time for the continuance of their fractional reserve bullion empire. The chicanery and outright thievery of our financial system knows no bounds! "To the few, the riches. To the many, the shaft."

<deep breath>

Alright, enough of that. I guess I'm also a little frustrated with myself. I'd been urging caution for about a week. See below:

"Blythe and The Flying Monkeys are definitely going to try to stop gold somewhere between 1412 and 1426. Of that you can be sure. However, you can also be sure that we will move into that zone as early as tomorrow, as late as Friday. Gold is going higher right now." - "Here Comes The Fun", 12/1/10  3:17 pm EST

"On to the PMs. Everything, and I mean everything, looks great for the PMs as we head into this week. From the charts to the fundos to the chatter, it appears to be "all systems go" for liftoff. Therefore, you should be nervous. It is in times like these when the EE often counter attacks. Just look back four weeks ago for your latest example. The Fed announced QE2 on 11/3 and, by 11/9, the dollar was diving and the PMs were soaring with no conceivable end in sight. Well, we all remember what happened next. Out of the blue, we get margin requirement increases and a sharp correction in price. Silver shed $4.30 in a week and gold lost $95! None of the fundos changed, however, and we've since recovered. If you don't think that the EE has more tricks up their collective sleeves, you're living in FantasyLand. They may hit us again this week or they may not but hit us again they most certainly will. Be cautious and you'll make a lot of money in this market. Get greedy and you'll be wiped out faster than the free booze at the company Christmas party." - "Turd's Glossary", 12/5/10  5:12 pm EST

"Lastly, you must always be vigilant on days like this. We've made new highs on both PMs so, if successfully attacked by the EE, they are both subject to the dreaded "outside reversal day". Again and in short, the ORD is a technical warning where you trade above yesterday's highs but close below yesterday's low. The low on Friday in gold was 1385.30, so it would take some work but never underestimate Blythe and Her Monkeys. She may not try it today as 1385 may be too far away but she'll definitely try her tricks again someday soon. Of that you can be certain." - "Early Monday", 12/6/10  8:20 am EST

So, it appears that even a wise, old PM trader such as The Turd can get caught up in the hype and hyperbole every once in a while. It is important to remember, however, that all is not lost tonight. As I type, the Feb11 gold is at $1396 and the March11 silver stands at 28.72. The EE did what they do but even now, all is well in gold until they can close it below 1383. Silver is perfectly fine until/unless it closes below 28 and, even then, there wouldn't be true cause for concern until it closed below 26.50. Keep in mind two things (on opposite ends of the spectrum):
1) Silver just made two, consecutive post-1980 closing highs of 29.27 and 29.74 on Friday and Monday. Two in a row is a very bullish sign. However
2) As noted yesterday, silver is up almost 70% in the past 15 weeks and about 20% in just the past three weeks so it is subject to some very sharp pullbacks within the overall strongly bullish trend.

Lastly, Eric De Groot posted an excellent piece on JSM tonight. It is copied below. Eric does a great job and I would strongly encourage you to visit his website frequently. I also like his "head in a vise" metaphor. Gee, I wonder where he got that one?...

Posted: Dec 07 2010     By: Eric De Groot      Post Edited: December 7, 2010 at 6:00 pm

Filed under: General Editorial
As expected, the run in silver (and gold) to its upper trading channel has brought forth numerous ‘experts’ providing (dis)information for both sides of the trade. The nearly spiritual rhetoric, largely intended to fleece the public from their funds, can only be compared to the bucket shops in which Jesse Livermore, one of the world’s master traders, learned to read the tape.
Livermore beat them because he had no personal feelings for “the game.” Don’t forget that.
They might be crooks or they might not be as black as they were painted. I did not propose to let them do any trading for me, or follow their tips or believe their lies.” Reminiscences of a Stock Operator.
The number of ‘experts’ talking about silver (and gold) is increasing by the day with one headline example stating: “The Silver Market Is Becoming More Volatile — Could This Be a Bubble?”
The game has changed. Smart money knows it. The COT silver (and gold) shorts, similar to 2005-2006, have their heads squeezed in a vice. This is revealed by unusual changes in leveraged money flows for the gold and silver market. The reason behind the redirection of money flows, while likely debated endlessly on the Internet, will be largely immaterial to profits.
The fact is that silver is trading – better depicted as fighting – within an immensely critical (to the shorts) resistance zone of the upper trading channel. If this resistance is broken and tested as support, it suggests that silver will enter a more aggressive, higher-order advance. This advance will be difficult to control.
Silver, London P.M. Fixed: clip_image002[4]
Gold, London P.M. Fixed: clip_image003[4]
Why focus on silver? Silver, as expected during hyperinflation, is leading gold. The gold and silver ratio, approaching the target box, is probing levels not seen since 2007. The accelerating decline reflects the growing divergence between perception and reality as it pertains to currency valuation. It represents the evolution of the Weimar experience in America.
Gold to Silver Ratio (GSR): clip_image004[4]
Those seeking to play “the game” going forward must develop confidence in their investment ‘voice’ – and, fast. Have no doubt that rhetoric will swipe at the voice box in an attempt to render it useless.

Be strong. Keep the faith. We are right. More tomorrow. Turd out.


  1. Silver bid price on BullionVault was $30.01 just now:


    There has been buying at $29.70 and above for the past few hours.

    BullionVault is a physical market, usually is close to the futures price. Maybe a few cents difference. But not $1 like today in Silver.

  2. Well said Turd,

    I wrote a note of support to Bart Chilton.

    Bart Chilton/Turd Ferguson 2012!

  3. Well said Turd.

    Let's just keep our eyes on EUR/USD and USDX, though, as EUR/USD has just dropped below 1.325 and USDX has risen through 80. These are key levels that analysts have been looking for to show that EUR is going to further weaken against USD. USD strengthe will be a headwing for the PMs, even if the old 1:1 inverse relationship seems less clear.

    Update as I write this: EUR is now dropping more, taking spot gold and silver down with it.

  4. This comment has been removed by the author.

  5. I hold physical and I'm in for the long run. There is nothing telling me that we will be in better shape 1 or 2 years down the road. Fundamentally, nothing has changed. In fact, every day there are new signs that we might be in worse shape that we ever thought. In this scenario, holding physical gives me peace of mind.

  6. Thanks for your input, Turd.

    I think I am one of those average Joes you spoke of. One thing I don't quite understand. You said the EE has stolen lots of wealth from the average Joe. Yet, if the average Joe doesn't sell, then it seems to me he only has unrealized losses, just a drawdown. Is the EE somehow able to directly take his wealth, or do they do it indirectly by inducing average Joes to sell through fear/intimidation?

  7. Roger, assuming that Turd has signed off for the night, let me try to answer for him (I'm sure he will correct me if I misspeak)
    Turd is a trader. So am I. We are used to "marking-to-market". This means we value our investments/trading positions at the current market value. Please do not take any solace in the notion that you have lost nothing if you are still holding. The true value of anything you own is the value that someone else will pay for it now. Yes, you should feel richer when the market price of something you own rises (but don't go spending that increase in wealth!). But the flip-side is that you must also feel poorer when the market price falls.

  8. I like how you tell it how it is Turd! Keep it up man!!! You don't have to worry about issuing statements explaining yourself that's for sure. Madder than hell, lay it out there. The reason I say that is that everyone knows your a logical fella and you aren't prone to letting your emotions get the best of you. We all know if your miffed about something there is a damn good reason.

    I really hope those bastards at the CFTC do something about this cr@p this week.

    The must have spent the last three weeks cramming all that stuff in the system just to get it drop like it today. I see it like volley ball, they may have spiked it but we got someone right by the net on the other side getting slap that puppy back.

    I know it has to be tough on the folks trading. I know we will win in the long run, I hope you can take some of your profits from trading and grab some physical. It has really made it easier for me to handle the ups and downs. I know they haven't taken anything from me, they just postponed the day that I will cash in part of my stash to pay off most my debts with their worthless fiat.

    Anyway, I'll get off my silver soap box. I hope you and everyone else out there has a good night.

    Tomorrow will be interesting.

  9. A double bottom at 28.48? Let's see if she holds up as well as it did last time we put a solid double bottom at 25.

  10. According to Jim Sinclair's analysis, it appears that the market has attracted a new batch of shorts at these price levels....small time speculators most likely and will be the first ones to bail on a push higher.

  11. Hey Roger,

    Just thought I would point out the psychological effect of what JPMorgue and friends are doing. Average Joe's like me and you, we go to silver because we know it is a way to protect our wealth. They drop the price like they do to scare folks out of the market, so they can turn around, buy more shares so they can manipulate even bigger sell offs. Just to give it that "Fleeing of Wealth Effect". All the while the Bernanke is working on the "Creating a Wealth Effect" on the stock market. At least, that is the way I look at things. They scare you in one to try to push you into another. That's why I just buy and hold physical, I think I would go nuts trading and I just don't think I got the cahones to watch it bounce around every day. Just a newbies two cents worth.

    Just curious, but anyone got the names of the JPMorgue guys that pull the lever on this crap all the time? I would like to sign them up for e-mails regarding "enhancement" type products.... :)

  12. Turd, you have nothing to apologize for. We are dealing with rogues and a modern version of organized criminals. They'll get their heads handed to them soon enough.

    Stay Long and Strong guys.

  13. Martha Stewart trades a nickle bag worth of shares on "insider information" and look at the circus they put her through...these F#$kers rape and pillage the marketplace for a living with total government backing. It's a very sad world we all inhabit at this moment.

  14. I think a while ago Jim Sinclair was saying that expecting 100 swing in either direction in gold so stuff like Tuesday was not that out of the line as he predicted.

    To me it's OK. Despite such desperate taking down, silver still has not touched 20DMA. I'll order a few more coins if it gets to that zone. Hopefully there are still some silver left at APMEX.

  15. dd,
    if you ran the US govt and you therefore had the monopoly on printing USD, would you stand by idly and watch the USD being supplanted by real money? JPM follows the orders of its master.

    I'm not American, but may I humbly suggest that what Americans need is true political change. I'm not holding my breath, so I will try to survive in the rigged markets. When I feel that I can no longer compete, I will withdraw.

  16. GG: dd is from Canada...just outside of Montreal to be exact and I very much agree with your suggestion of much needed political change. I've always had great affection and great friends south of the border and its depressing watching this train wreck in slow motion.

  17. I sent a short polite email to Mr. Chilton referencing the chart in your previous post that clearly illustrated what happened. I would urge others to do the same with the meeting coming up this Thursday. bchilton@cftc.gov

    Thanks Turd.

  18. Thanks GG and Nathan for your input. I've known about the bankster hits and I'm interested in learning about how they work. I'm learning a lot from this blog. The blog also has a "team" feel amongst the posters. I suppose Turd would be our starting Quarterback.

  19. The way I see it, the the EE attack was consistent in the greater narrative that we nearly all subscribe to, let us think this through.

    We believe that JPM is cornered; not just by its short position, but by its master's mandate, i.e. 'You WILL short silver.' So, this short has the full backing of the Fed. So, this is a cornered beast, but with ammo. What did we think, that a cornered beast with ammo was going to do? It is going to play double or quits every time; oh, it loses again, then it will double again.

    Could we be nearing end game? What would an end-game look like? We know that EE cannot deliver the physical silver that they have sold. We ought to be smart enough to know that they will not even try to do so. Economically, it will always pay them to increase their short ounces, and reduce the liability per ounce. They will keep firing ammo, cranking up the Fed's potential liability, until the game is up.

    The game up being....?

    - separation of physical prices from paper price?
    - suspended market?
    - finally, imposition of law and integrity by the CTFC (ha-ha, don't hold your breath)
    - Refusal of Fed to support further, the short position, and allowing the true price to surface?

    If silver is going to $200, then it might get there in a day. Just not yet.

    That day will come when the Fed is fighting fires on every front, and some greater event stops them.

    I the meantime, silver is where the war on the price of gold is being fought, and the entire fiat system is being defended. Silver is also being attacked by the buyers of size. It appears that if they wanted to crash the Comex that they would, but they have chosen not to. Either they are happy to to extort a 25% premium every options expiry, else, they are just waiting to pick their moment.

    The Fofoa type event of a PM market that will do a once in a lifetime moonshot, is a real possibility. The EE is actively endeavouring to ensure that it never happens. When we buy or sell PMs, we are placing our bets.

  20. There was a recent "Econtalk" podcast about the great depression and the gold standard

    Very enlightening. .. I highly suggest you listen.


  21. I'm one of today's losers...when it blew past 28.5...my stop kicked in...$28.48, JUST long enough to sell my shares...and then back up!


    Should I buy more today? Wait?

  22. You're probably not the only one Joe. Bought SilverCorp yesterday, and then waking up today at a $2 massacre I was shocked. Nevertheless, reading this blog calmed me down, and saying to myself 10 times: "nothing has changed, fundamentals are the same" helped. Lets see what they have in store for us today.

  23. Hey Joe,

    Don't shoot your old lady...

    Only you can answer how you feel about risk, and your tolerance for pain. I was in your position so many times trying to hold long silver/gold at near 200:1 leverage via spread betting. I had so much trouble getting stopped out ended up I didn't use them (!). Up 600% one week, down 94% another...the leverage is the killer and silver is volatile.

    My suggestion, buy physical and be prepared for it to go against you for a while. Maybe, buy some each week, or two, average your costs. Then study the long term (10 yr at least) charts and look for entry/exit points if you want to trade, but just a small portion of your funds, for you will see that 30-50% moves have happened many times before. Above all, keep going and follow the Turd.

    Good luck.

  24. I have a small trading position in AGQ, but most of my Silver in bullion (bars). AGQ is wild enough for me, can't imagine what it would be like trading Silver futures contract. I'm thinking of buying 10 or 20 1oz silver coins and using them as future Xmas presents, and checking garage sales for any old silverware. Hmm, I think I've turned into a Silver bug.

  25. Hi,

    Well as I posted a while back in the comments ( http://tfmetalsreport.blogspot.com/2010/11/re-visiting-november-16.html#comments ). You need to understand that Silver was showing some fine profits, and traders like myself are in this to make money and we will not ignore those profits. It doesnt mean we are not interested in a further move north, just that right around $30 Silver was a blow out short term top, the markets participants were getting ahead of themselves and a weak push up left an easy target for the EE to paint a good book profits window. I dont think were done with the fall in price yet as I see price needs to fall some more around $27.50 area before I see it again as fair value and where I would be interested in getting long again. I definately dont want to miss the rocket launch but I think Jim says it best : ( http://jsmineset.com/2010/12/07/is-there-a-short-squeeze-in-the-silver-market/ ) in that he and I dont think the squeeze is on yet, but when it is Silver will get real interesting.

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