Friday, December 17, 2010

Two Charts and A Warning

As regular readers know, The Turd is extremely bullish on the long and intermediate term trends in the PMs. I do not make counter-trend bets. I stay long; only looking to swap or add positions in weakness. For fun, I like to test my predictive powers by putting in print my short-term thoughts. I'm constantly looking for clues that might indicate short-term direction and I'm afraid I may have stumbled onto something for next week.

This has, obviously, been a very challenging week. Like last week, everything looked rosy on Monday only to have Blythe and her minions relentlessly attack for the remaining balance of the week. The question becomes, will this continue into next week. I fear that it may, if only because of these two charts:
Note that the USDX is breaking out of a two-week consolidation between about 80.80 and 79.50. Just like last week's breakdown was a fakeout, this week's breakup may be, too. Time will tell. It certainly needs to be watched.

Next, check out crude:
This isn't helping matters, either. A move down through $87 and we may see $85 pretty quick.
For proper perspective, here's a daily chart. Still not great but not as bad, either.

I point these two out because, clearly, a rising dollar coupled with falling crude will almost certainly impact the PM trade next week, and not in a good way. I'm quite pleased with the way the metals have traded today. They're both hanging in there quite well given the dollar rally and silver almost certainly will make a new, post-1980 weekly high today. Also, gold clawing back and closing above 1372 is a very good sign. Let's just be cautious as we head into early next week. Gold could still slide back to 1365 or 1360 and silver could approach 28 again. I certainly hope not but, in the face of a rising $ and sinking crude, don't be surprised if it does.

I must add this, as well, from my friend Trader Dan:

I may add more later today. If not, look for another update tomorrow morning. Thanks!


  1. I feel for you Turd, but I'm in aquisition mode so any drop in price is very welcome to me.

    Time to grab more shiny stuff.

  2. On second thought, I will bow to your powers of prognostication and delay purchases until next week to allow a larger (heavier) purchase. A strong dollar and weak crude will put more of it within reach, I will have to thank the EE for the Christmas present.

  3. Silver is really cooking into the close! Can we get 12 more cents in the final four minutes??

  4. So you're telling me that gas will be cheaper, meaning I can save more money to buy silver, which will also be cheaper?

    "I don't keer w'at you do wid me, Brer Fox, so you don't fling me in dat brier-patch. Roas' me, Brer Fox, 'but don't fling me in dat brier-patch..."

    "Drown me des ez deep es you please, Brer Fox, but do don't fling me in dat brier-patch..."

    "Skin me, Brer Fox, 'snatch out my eyeballs, t'ar out my yeras by de roots, en cut off my legs, but do please, Brer Fox, don't fling me in dat brier-patch!"

    It looks like the BoS is trying to paint the tape right at the close.
    Silver 29.20 and gold 1379!

  6. Nuts. Too many MOC orders to overcome. Looks like we settle at 29.15 or so. Still...VERY IMPRESSIVE late Friday action. VERY IMPRESSIVE!

  7. Yea, I saw that to Turd. I refreshed my little chart twice just to make sure I was seeing that correctly.

  8. Mr T.

    I can't thanks you enough for your analysis.
    Folk people pay hundreds of dollars a year for what Mr T gives us for Free!

    Please support the sponsors, click the ads
    Like for that Asshole from Jim Cream-in your pants from the The
    Make him pay for our PM.
    And buy from the good ones.

    I too am long PM stocks. I trade technically, buying of support and studying resistance levels for clues for entry points.

    Guys and gals this is a mental game.
    Remember to keep in focus Californication is coming. Illinois is broke. Detroit is a wasteland. Munis are falling off a cliff.
    Need I say more?

    Jim Sinclair (Santa) has a great piece of information on Califorication where he quotes Gov. Moonbeam (Jerry Brown).
    Here is a gem of a quote.


    Jerry Brown: California Budget Is "Much Worse Than I Thought — We’ve Been Living In Fantasy Land"
    CIGA Eric
    Europe has exclusive rights to ‘living in a fantasy land’ economics according the unrelenting news flow – apparently not. And, so goes the selective amnesia of the headline feed. I’m sure this news will find adequate coverage in California’s cooking sections of the printed media.
    California’s troubles represent yet another reason why the "Formulas" are beginning to roll over and Fed initiated QE2. Please review The Timing of QE Was No Accident for further discussion on this topic.

  9. Bold bet: if that is a halfway pattern - crude 6-7 bucks higher within 1-2 weeks.

    Note: last time I made a similar call on crude was around November 9th or 10th. That was a similar situation and TA pattern.
    What happend was a BO and everybody jumped on the boat - and out of the blue sky a sharp move south 6 bucks lower within a few days.

    This time different - it seems to be rather cold out there! At least in my country we have record low degrees.


    Regarding the buck - still stick with 81.5 as a maximum high.

    Note: I know folks (I follow) which expect 1.27 EURUSD not far from here.


    Disclaimer: I'm neither in crude nor in a currency-trade.

    Cycle-wise: Next week around Tuesday should be a major turning point. Turning points often work - but sometimes not.


    Suggest to closely follow the HUI into the close - this one is way more predictive than all our wild guesses. And in my book also way more predictive than the buck or crude.
    No pun intended - just the way I see it.

    My bible:
    1. Follow the HUI
    2. Follow Turd
    3. Follow what ever else you like

    Dislaimer2: I don't trade stocks, but I go to bed with the HUI. As for me the HUI is equal to the footprints of the BoS. Equal to a crystalball. I.e. if the HUI would sell off into the close you can bet your shirt that I will close every single long of the trading account.

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  11. I haven't read all of your post, Turd, but you may have discounted the power of the BoS Force which seems to be with us this afternoon. Look at that COMEX close. That is no exuberant novice clowning on the COMEX. Someone waited patiently throughout the COMEX session while some or other not-for-profit seller 'kicked the silver ball around' before having the ball snatched from them! Of course, they may be back during the foreshortened GLOBEX session yet it was instructive to see it whoosh over $29 in the blink of an eye.

    Remember Eric King's 'London Source' from the East.

    Say no more: nudge, nudge, wink, wink!

  12. Heat ,
    Please stop insulting wastelands by comparing them to Detroit! Wastelands are not a drag on the State and Federal budgets!

    Now I will certainly wait to next week to make my buys. Look at that spike at the end. WOW.

  13. GH,

    Has nailed it again HUI has popped up.
    The miners are the value play of century.

    AEM just raised it's dividend 255% and came out with this jewel.

    Toronto-based Agnico-Eagle announced Wednesday they will increase their 2011 cash dividend by 255% or USD 16-cents.

    The company also announced its payable gold production for the next five years, beginning with an 18% increase in payable gold production ranging from 1.13 million to 1.23 million gold ounces for 2011. Total cash costs per ounces in 2011 are expected to be in the range of $420 to $470/oz.

    For the years 2012 through 2015, Agnico-Eagle expects to produce an average of 1.36 million ounces of gold annually at total cash costs averaging $432 per ounce. Payable gold production is expected to increase to 1.5 million ounces by 2014.

    The company has a projected capital budget of $313 million in 2011 which includes a record $145 million exploration budget, up 30% from 2010. The $272 million capex projected for 2011 is up from a previous guidance of $178 million. It includes "significant investments in infrastructure, upgrading operating equipment, and in efficiency improvements at most mines," Agnico-Eagle said in a press release.

    The company expects its Meadowbank operation in the Nunavut Territory to reach design capacity in the third quarter of 2011 after ongoing crushing issues are resulted with the installation of a permanent secondary crushing unit. In 2011 Meadowbank's payable gold production is expected to be 362,000 ounces, while expected average gold production is planned to average 399,000 annually from 2012 and 2015.

    Agnico's Mexican operation, Pinos Altos is now exceeding its throughput target. Payable gold production is expected to be 168,400 ounces in 2011 and average 175,000 gold ounces annually from 2012 through 2015. Silver production is forecast to be 2,175,000 ounces in 2011.

    The company report the Creston Mascota expansion at Pinos Altos is expected to commence production in early 2011.

    The Goldex mine near LaRonde, Quebec, is also operating above design rates and is expected to produce 184,000 gold ounces in 2011 and average gold production of 179,000 annually from 2012 to 2015.

    The company has scheduled a conference call today to provide an update on corporate strategy and future growth plans.

  14. HFT, LMFAO!! Brother you got me there!

    Thanks I needed that!

  15. Chris: I'm with ya. That close had all the markings of a BoS buying spree intended to jam price right up Blythe's a$$.

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  17. Funny how after creating a huge phony strength in USDX and EE still had their @$$ handed to them in the silver market.

  18. Nice read on the metals by Jim Willie at marketoracle. Basically says what we Turdistas have known or suspected all along.

    Here's the meat of it:

    The Chinese have done something remarkable, only to be done if they know the game is over and the victory over fiat paper money is complete. The Chinese have laid out their game plan, their modus operandi, their tactics if not strategy, through an anonymous London broker. Hats off to the King World News for sharing the invaluable information that should encourage even the most timid and reticent investor. The Anglo bankers are stuck!! They are running out of physical metal to sell in a fractional scheme. They cannot afford to pounce too hard on the price, with either naked shorts or higher margin requirements. Doing so only plays into the Chinese hands, which are grabbing all the bullion available. So the challenge is for the Anglo bankers to control the pace of the demise of the Gold & Silver metal market. This is game over. In these times of monetary hyper-inflation, called euphemistically and absurdly Quantitative Easing by another name, the prospects for a double and triple in the Gold & Silver price is utterly obvious.

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  20. Turd, the only things BM's painting tonight are her toe nails. Doesn't look like she's been able to 'touch up' (in an art sense of the expression) the silver chart.

    We mustn't forget that volumes will get thin in the silver market next week and Dan Norcini's notorious 'locals' will be having a field day. They've always sided with the shorters in years past but Dan's hinted that they may have other plans this year. That would be a nice Christmas present!

  21. I'm quite surprised by the late strength also as seeing as its friday and year end I was expecting some profit booking, but no strong buying, excellent. augers well for asia monday. imo

  22. HRH Turd
    Now that position limits are not being instituted by the statutory deadline (something that JPM would have known al along , but BoS would not have known) might it not be the case that what we saw today was massive LONG Comex buying by BoS?

    If it was, and if it continues, BoS has the power to strip the Comex of all its physical.

    I'm not experienced in al this, so this may just be illogical wishful thinking.

  23. Marcus:
    You have an interesting observation. It would seem that the Asian BoS have already obtained the bulk of their silver at lower prices, and are now puposely "leaking" to encourage the public to come in and finish the job. Not only substantial buying potential, but it keeps the BoS's hands clean.

  24. Turd - FYI (David Franklin of Sprott on silver)

  25. GG & Don: Excellent observations, both!

  26. Testing high of dxy range at 80.5. watching for the bottom to drop out.....

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  28. Strange. Ted Butler suspects that China was behind the mass silver short. What the heck?! How could you be both BOS and a naked rigger? I just noticed that he has had that suspicion for years, and his reasoning doesn't seem very convincing.

  29. I don't know Rui. His reasoning about China being behind JPM as the "big short" seems pretty airtight to me:

    First posited in 2003!:

    then updated here in 2009:

    But like you, I cannot reconcile this hypothesis with the reports from King World News, and their eerily accurate inside source, that China is the primary BoS.

    The deeper you go in the rat hole, the more confusing it gets.

    One way or another though, it seems no one will escape the effects of an oncoming physical shortage.

  30. Cris, it's possible that a few of Chinese state-owned companies got fooled into an OTC silver contract and trapped since there's no sign of them being any smarter than AIG but I just don't think it's their long standing official strategy.

    #1 I don't think it's worth going through such hassle just for a dominant position in the refinery business.

    #2 They have been secretly acquiring gold since 2003/4 so it'd be odd they could also have an ongoing silver rigging plan in parallel.

    #3 Fed/Trea are very sensitive to gold and silver, and unlike the Public, they could see what's going on in the OTC books so it's unlikely they'd allow AIG, Bears and JPM to engage in a business not inline with their perceived best interest.

    #4 Also notice China has been encouraging their citizens to own silver since early 2009 so it doesn't add up they could tell their fellow citizens to pretty much squeeze their naked shorting state owned companies.

  31. Rui,

    All good points, but not sure about #3. Hopefully SOMEONE actually looks at the data and inspects. Up until now, it is not clear that anyone has really inspected the contracts to sort out what is what.

    But a theory posted elsewhere that I thought made sense comes to mind: some had theorized JP Morgan would all of a sudden turn on a dime and "go long". Others said they would lose too much money on their shorts and couldn't do so.

    Here is a way that could actually occur.

    Lets say China was in effect the "big short", using JP Morgan as dupes -- ie JPM being short on the COMEX but being offset by long positions in OTC swaps, of which China was the counter party short position.

    Then China "goes long", walks away from their shorts, and leaves JPM, and the US in effect, holding the bag.

    China laid the groundwork for defaulting on select derivatives:

    "The report that the State Assets Supervision and Administration Commission (SASAC) would allow Chinese state-owned enterprises (SOEs) to default on derivative deals was misinterpreted, Reuters reported, citing a government source. The source said the warning was only meant to address specific contracts and SASAC was targeting specific deals that may have been too complex for the SOEs to understand. The specific deals or the banks involved have not been named."

    I like that line "too complex for the SOEs to understand" -- sounds like JPM, no?

    Far fetched. Perhaps. But after the mortgage scandal, and the lack of regulatory oversight there, and in the oil spill etc, nothing would surprise me anymore.

    The whole system is corrupt, just in search of money and profit. And it IS CLEAR that no one on this side has been providing appropriate oversight. Hopefully that will change. We shall see. Won't hold my breath.

  32. Cris, very good find on that default link.

    The story I heard from two sources about Chinese SOEs is this: Back in 2008 during that mad oil run to 150$/barrel, their state run airline companies and some other firms were fooled into a oil derivative contract w/ Goldman (surprise, surprise it's Goldman again) at the strike price around 90/barrel or sth.

    These SOEs were stupid (think Chinese Fannie & Freddie) and thought they had got a cannot-lose free profit deal only to be crushed when oil came down to 40s. The loss was so huge it got their central government mad and they came out flushing the derivative deals down the toilet. Goldman still came away w/ lots of money tho.

  33. Ya know Rui, the thing that stinks here is that we have seen OVER and OVER that the banks would sell theur youngest child AND their wife for a buck.

    NINJA loans during the subprime scandal just to get commissions; regulatorswriting over in pen the forms filled out in pencil by oil companies.

    The whole thing is disgusting.

    And if I'm China, and I'm a Commie and hate capitalism to begin with, why not go for something like this.

    They say to themselves, those capitalist pig dogs sell us their debt, and then monetize it when we stop buying it. Fine. Lets screw them and then point out to a world that is sympathetic to our view anyway that their business practices are at best unethical. We'll trade our soon to be worthless $$ for gold and silver, and then walk away from unfair derivatives.

    Hell, that should work NOW for people getting screwed in mortgages. But as Matt Taibbi points out regularly, the whole system is rigged.

    But China is NOT in our jurisdiction if you will.

    I wish Taibbi or even better Ron or Rand Paul would take up this silver cause. I read that Ron Paul has over 50% of his net worth in metals. Bet Rand does too. This would be right up their alley. Anyone a constituent of one of them??

    This may rock your world quite a bit. Long read but excellent and what it says about silver vs. gold should be studied carefully.

  35. Sorry that there has not been a weekend update yet. The Turd is currently busy working the concession stand at a 5th grade girls basketball game. Please check back in a couple hours.

  36. I'm fascinated by FOFOA's freegold take, but I'm not sure why it leaves no room for silver as a monetary metal. Does he envision a wider silver:gold ratio than today? If so, how much higher?

    In a global economy without an undisputed reserve currency, I think both silver and gold will go up. And the physical demand squeeze on silver in a world of too many billions of people desperate to maintain wealth, and unable to afford gold, will be a bigger factor than ever before.

    What do you folks think? Will the silver:gold ratio return to its historic average, or will freegold emerge leaving silver behind?

  37. It was a take I had never considered before for sure, and I respect FOFOA, FOA, and Another like no others. My takeaway was gold was the only true money, but that doesn't diminish silver, platinum, and other commodities values as hard assets. Any hard asset is better than freakin fiat, to what extent versus other hard assets is more difficult to quantify.
    I have gold, TRE, and silver, so I guess I've bet most of my lot with gold ( and Jim Sinclair! ).

  38. Regarding that Another/FOA series, what they said was almost too outrageous to believe that Western world had been so grossly mismanaged gold that they traded it for Saudi's crude oil at too low a price that it allowed Saudi to corner the gold market. They were saying Saudi actually had 5000+ tons of gold on book despite their official report of 300 tons. That's incredible.

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