Wednesday, January 19, 2011

Moving In

Well, I've seen enough and greed is finally taking over.

The overnight action has led me to this point where I feel that last week's EE-coerced "correction" is over.
The USDX looks awful.
Crude looks ready to move and close through $93.
Copper, though suffering a minor setback, looks ready to challenge its old high of 12/31/10.
The grains are kicking ass.
And this, from Alf, drove me over the edge:

Consequently, I've been a buyer this morning of some April11 gold calls. I'm buying more silver calls next but I can't decide whether or not to roll the bones on March. I may pay up and go out to May. I'm taking a long hard look at April crude, too. I'll let you know later today what I decide.

Lastly, I found this little gem earlier. Frankly, I'm surprised that "Tyler" hasn't linked it yet. I suppose its because there's nothing earth-shattering here but, nonetheless, the wisdom of Hugh Hendry should always be heeded when he shares it. In this interview, I certainly don't agree with all of his statements. I get the feeling he's trying a bit too hard to be contrarian, which is easy to do when you've built your reputation upon being contrarian. Its a bit of a catch-22.
"Treason doth never prosper. Why? If it does, none dare call it treason."
OK, I supposed I butchered that some but you get the idea. A contrarian rarely prospers long-term. If a contrarian becomes consistently correct, like Hendry has been, his views soon become "mainstream" as the sheep flock to the contrarians ideas. The contrarian, being the visionary/radical that he is, then must look further and further away from the norm to find new views that are once again considered "contrarian". Eventually, he gets so far away from the norm, by orders of standard deviation, it becomes highly unlikely that he can maintain his performance. Does that make sense?
At any rate, I present to you Hugh Hendry, in all his glory:

More later after I get off the phone with L-W. TF

Unfortunately, today we've already seen a continuation of the pattern from late last week and early this week. Namely, a pop on the open and then all bumps and rallies are sold into by the EE and whomever. Gold is already $8 off its high achieved just 90 minutes ago.
OK, if we're going to see a FUBM form on the chart today, it should do it from right about here. 1369 in gold and 29.15-20 in silver. Keep you fingers crossed. A reversal of this recent "sell-the-rally" pattern would be quite positive for us.

And this must be read immediately:–-short-squeeze-imminent-or-position-limit-ruling-fall


  1. does that mean hugh hendry will soon become a contrarian to hugh hendry's views?

  2. Tom DeMark: A 11% Drop In The Market Is Imminent (1-2 weeks)....

    Kind of ties in with out PM breakout timeline...

  3. As per usual, I start buying and the EE starts selling.

  4. Its too quiet, price action doesnt feel right.

    Also, cant ignore a possible equity correction taking down PMs in a big way.

    Lots riding on the first FOMC of the year, remains to be seen whether the new inductees will toe the company line.

    Also, the Lunar new year is early this year in early feb matching up nicely with the usual post earnings season takedown.

    I wouldnt bet the farm now.

  5. OK, if we're going to paint a FUBM on the silver chart, it should bottom right about here at 29.15

  6. I wondered about the sudden I know it's the PMs entering the Turd Zone.

    But I feel your pain....I got out of PMs and into an Apple heavy mutual fund the day before Jobs made his announcement.....ouch!

    That's a really succinct explaination of why contrarians (or really, any kind of innovator) always seem so wacky, because in the process of breaking new ground they eventually end up in lala land and are wrong 100% from then on.

    Me, I'm simply trying to make sense of things so that I can make some intelligent decisions about when to jump back in. Why the beat down today? Because Won HungLow is still in town? The COTs numbers are out? Inquiring minds!

  7. What I noticed and I believe there was a chart posted here the other day is that from 10 AM Eastern to about 10:30 the PM's make a big move which is usually down.

    This is attributed to the PM London fix. The time isnt set in stone so that is why I usually wait for the big down move and then enter after that for a short term trade.

    Just an observation that has worked for me many times in the past.

  8. WTF happened to that oil chart... jeeez blythe GTFO

  9. Greed got the best of me as well this AM Turd. I've got some April calls.

  10. This whole market gives me the willies. This morning at the open I sold the last of what I consider "conventional" stocks in my accounts. All I have left at this point is PMs, oils, TIPs, and cash. Maybe the Bernank can keep on ramping up the S & P, but he can go ahead and do it without me.


  11. WOW...they just kicked the chit outta the PMs n miners....ouch

  12. Can't be forgetting about the 10 o'clock takedown... Silver Cell, As far as I can tell the range is 9:30-10 am est. It does go over that sometimes, but the London fix is 10:30, 3 pm London time, which is 10 am est. It's not a Tuesday, and metals were up.

  13. watch 28... level. she is all over us.

  14. Death throes of the EE...Buy with confidence. I commented yesterday that 29.50 was a critical level to break out of and we will. Hang tight.

  15. it seems the big secret is to know when and to what extent these raids will be.
    i'm sorry but it seems like the answer is whenever and with however much it is going to take.
    who is to say it can't go on indefinitely, or at least until the rules are changed?
    i don't know, but i don't like having my money stolen from me out in the open on a regular basis and having the "cops" just sit by and smile.

  16. The gold/silver fix just seems like such an anti-free market thing. So many shenanigans it's difficult to keep track of them all.

  17. $29 may be forming the new $28.

  18. Copper and crude are killin us but keep the faith.

  19. flaunt: Which is why I always use quotation marks whenever I type the gold and silver "markets".

  20. Solid support at 4.35 in copper.

  21. If I were a gambling man I would say the bargin hunters will be stepping in anytime now that the sell off has subsided and the Monkeys are back in their cages.

  22. Taking another look at that letter from Alf Fields that Santa posted, it makes me feel not so bad about the drop this AM. I'm assuming he knows wave theory or else Mr. Sinclair wouldn't have put it out there.

    "Yesterday the PM fix was $1360.50 and the morning fix $1357.50.

    Conclusion: gold has either already finished the correction or requires one minor drop below yesterday’s fixings to finish it."

    That doesn't mean there won't be another raid, just that the technicals are lining up with the fundamentals which is a positive.

  23. Gold acting like a champ so far. Let's see if she can pull the rest for the field higher.

  24. Given the physical shortages, especially in silver, I have to believe that the COMEX delivery cycle is a primary driver for us.

    Last delivery month was December, next is March. Count backward three months to the last cycle and we were in mid-October -- experiencing a nice, steady incline but nothing special. Things really didn't start popping until late October/early November.

    Given the "open letter" to Blythe and the worsening fundamentals with the USD, things could start earlier this round, but I'm guessing we still have a small window to load up for the next round.

    SMALL window.

  25. Dear dear PM holders- the only "number" that matters is how many ounces you hold. I will just continue to trade my fiat every chance I get. I buy locally, and every time I walk out of my coin shop with real money, having exchanged fiat, I am absolutely giddy.
    I feel like a bank robber, in disbelief they actually gave me gold and silver, for my plastic digits or silly green IOU's backed by nada.

  26. CO_Dan: I agree with your assessment. I just have a hard time being patient pulling then trigger and then buying only to see my position go against me. But then I remember it's rare that one pulls the trigger at the precise bottom.

    I know there are many SLV-haters here but for those interested I thought I'd mention the interesting price action today. I think there is some hot money starting to flow back into it. Today it has been up in excess of spot by a good margin. "Normally" the price of spot is in excess of SLV, which one would expect. My feeling is this action will continue and possibly accelerate going forward.

    The hot money flow effect should be magnified on the options.

  27. flaunt: Santa has stated on many occasions that Alf is "the preeminent market timer" and he's been right about gold for years. Heed his advice.

  28. Courtesy of our friends at FMX Connect.

    Silver Contango Crushed – Short Squeeze Imminent or Position Limit Ruling Fall Out?

    In silver, the contango was hit hard about 3 AM this morning with 2 year futures coming in as much as 15 cents relative to spot. The Z11/Z12 futures spread settled 21.40 yesterday and the market today is 13/15. The H/Z futures spread settled 19.2 The market today is 9/11.

    What could cause this?

    Factually speaking, 2 reasons cause contango to collapse. The first is interest rates and interest rates would have to decrease a large amount for this type of move in the spreads. The second is delivery concerns. When a producer, bullion dealer, or speculator is short the front month, come expiration, it has a a choice: make delivery or don’t make delivery. There are 2 ways to avoid making delivery, Reissuing, which is essential covering shorts, and deferment. Deferment involves leasing the metal from someone else or rolling your short to a back month.

    Last time we saw a contango move this significant was in 1997 before Warren Buffet took delivery. While more information is needed, and this could be a fake out we think the spread’s move is important. It happened during Asian hours and the Asian market has shown strong physical demand. If this continues in conjunction with higher lease rates you will more than likely see a short squeeze. There is another less exciting reason it could be happening. Additionally, it could be related to the CFTC position limit ruling. Silver position limits will be implemented in 2 tiers. The first tier is a limit on front month contracts. The 2nd tier limits the aggregate number of contacts for all back months combined. Someone could just be moving their position around to deal with the new regulatory structure. Our conclusion is that we are going to have a short squeeze or increased volatility in the spread market as major players shuffle their open interest around. Stay tuned..

  29. Turd, i read the article but i'm not to sure i understand what it means? is it saying silvers about to shoot up fast over the next few weeks?

  30. I question the part about position limits being the explanation. To my knowledge new limits haven't formally been adopted much less enforced, and it will be a good while before they happen. Did I miss something?

  31. My fault if it tanks now, just bought some pool silver...the price does seem to be bottoming out.

  32. Here's the closing paragraph from Alf's last publicly posted analysis (at least that I'm aware of)....

    "Why quit writing these reports?

    I have noticed from the emails that I receive that many people are using these reports to guide their trading activities in gold. I have had no objection to this in the past, but feel that it would be foolish to trade gold in the circumstances of the Big Kahuna crisis that we are living though at the moment. It has become a question of individual financial survival in an environment where things are happening more rapidly and with increasing violence. I feel very strongly that it is time to quietly hold onto one's gold insurance and not attempt to trade it. I do not wish to provide interim levels that may cause people to be encouraged to trade their gold to skim a few extra fiat dollars or other currencies, but lose their gold as a result.

    So it is Good Bye, Good Luck and God Bless,

    Alf Field
    25 November 2008"


    Refreshing commentary in a sector flush with self-promoting, ego-maniacal, hit & miss market often silent, unrepentant when wrong.


  33. emill: Yes, a "normal" market is in contango, where cash is priced at a discount to premium. What the article discusses is a move to bacwardation, where cash is at a premium to futures. This is indicative of a short-term supply problem and implies a potential for a significant short squeeze.