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: 
Gold, London P.M. Fixed: 

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): 

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.