Sentient Sentiment

What an interesting day this has been...actually what an interesting week. We ended last week (and last year) on a terrific high, a full superfecta, but as we know by now, when all systems are go for launch, the Evil Empire sees no other choice but to attack. I wrote about this phenomenon a month ago:

   "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."


So, here we sit. Gold pulled back nearly $60 in about 36 hours and silver plummeted nearly 10%! Yikes! Precious metal watching/trading certainly isn't for the faint of heart. I'm reminded as I type of this post from back in November, written at the bottom of a similar correction. At times like these, I find it reassuring to review notes from past challenges:
http://tfmetalsreport.blogspot.com/2010/11/was-it-really-just-week-ago.html


As you are well aware, we finally found some support today near the critical 1365 and 28.50 areas. Recall these charts I posted about 10 days ago. I expected a breakout this week but Blythe had other plans and she has considerably deeper pockets. However, note that no real damage has been done these last two days. We are still well within the "consolidation area" and it looks like the next UP leg is still imminent. Here's the weekly gold I posted:

And here's the weekly silver:

Reviewing this silver chart, you could just as easily make the case that the "consolidations" are 4 or 5 weeks in duration, not 3, so let's see what the next 5-7 days hold.


I'm very much looking forward to reading Harvey tonight as his wrap-up of yesterday's action should make for interesting reading. He usually posts around 8:30 EST so I'll try to check in again later this evening. TF




9:15 UPDATE
Harvey posted some very, very interesting open interest numbers from yesterday. Both gold and silver OI rose significantly during the decline which indicates two things:
1) The EE supplied a huge amount of new, bs paper metal
2) Non-spooked buyers btfd. HAHAHA, Blythe! More and more folks are onto your little game. The end is near!
Also, Eric King interviewed the great John Embry today. The full interview will be posted on Eric's site soon and it will be a must read. Be sure to check his site tomorrow for the link. In the meantime, here's a link to the summary/excerpt:
http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2011/1/5_John_Embry_-_Gold_Over_$2,000,_Silver_Above_$50_in_2011.html
Lastly, read this from Gonzalo Lira. The idea, for a while today, was that the improving economy lessened the need for QE, which rallied the $. What abject nonsense! Gonzalo nails it:
http://gonzalolira.blogspot.com/2011/01/is-federal-reserve-really-purchasing.html