Smells Like Capitulation

At least for now.

I like it when I'm right about the UPside. Unfortunately, I seem to be able to predict the downside, too.

"In silver, I think its pretty clear now that a test of the Sunday evening panic lows of 42.20 is coming. Maybe as soon as later today. I expect a bounce there and that may be it but I doubt it. Momentum now is to the downside in silver so it looks like even further weakness is coming. Combine that with the short-term dollar strength that I expect later this week and I think we're going to get a look at 40. If you miss it, don't dismay. Next week, we'll probably get a re-test of whatever the bottom ends up being before basing and heading higher into the end of the month and early June."


I hope that you are surviving this freefall and have not found yourself in a position where you have been forced to liquidate. Santa has cautioned for years against using any kind of margin and I must concur. The long-term trend for the PMs remains intact. The fundamentals have not changed. The only way you will consistently lose money in the PMs or any market is if you let your emotions (and margins) get the better of you and force you to buy high and/or sell low. The last month, particularly in silver, has been nothing but a gravy train ride higher and, in markets like that, its very easy to get complacent. Over the long run, the key to making money in the PMs is to sell when everyone else in buying and buy when everyone else is selling.

To that end, though we are about 10% lower (and two weeks earlier) than I thought we would get in silver, pattern still suggests that lows will be found soon and silver will reverse. I am currently waiting with orders for July $45 silver calls that should get filled if/when we get to $40 or slightly below. I'm also trying to buy some August $1550 gold calls that should fill if/when gold reaches $1525.

Remember this one very important point that we discussed last week. Highs are not made and "bubbles" are not "popped" when everyone is telling you to sell and the risk seems to outweigh the reward. Peaks come when everyone is telling you to buy and no one sees any risk at all. Think Nasdaq in early 2000 or real estate in 2007.

Hang in there this afternoon and tonight. These endless margin hikes are certainly aggravating and, based on today's action, it looks like another one is on the way.

I'll have more later when I have a few minutes to calmly contemplate all of this week's events. TF


8:45 pm EDT UPDATE:
Two quick things.
First, I fully expect silver to test the lows from earlier today, perhaps as soon as later this evening. That level may hold but I still expect a final dip toward $40 or slightly below. When I buy, I will also be buying time. The July calls won't expire until late June. August gold calls won't expire until late July. Lots of time built in to make up for timing inaccuracy in my purchase.

Second, you absolutely must read this. If you don't fully grasp it the first time, go back and read it again.
http://www.zerohedge.com/article/another-decline-registered-silver-brings-total-comex-physical-multi-year-lows
33,000,000 ounces means the Comex only has enough silver to settle just 6,600 contracts. That, my friends, is the financial equivalent of blood in the water.
Please understand, all of the recent Cartel-inspired bloodletting is directly related to this issue. They needed to scare sufficient quantities of specs out as well as remind potential "sharks" that they still make the rules and won't go down easily. They also desperately need to buy time, too. It's worked.
But the sharks are still there, watching and waiting. If you observed the action Sunday night, you saw that the steep drop was not so much an EE beatdown as it was a total absence of bids (buyers). This trend has continued yesterday and today. Our BoS seem to be regrouping and planning their next move, all the while the price continues to come in and offer even more attractive entry points for them.
After successfully buying the time needed to escape May, The Cartel will have a few weeks now to round up more silver for July. They're going to need it.
TF