http://www.traderdannorcini.blogspot.com.au/
trader Dan Norcini
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http://www.traderdannorcini.blogspot.com.au/
trader Dan Norcini
Please Read This Extremely Important Post
Saturday, February 25, 2012 at 3:57 pm
I hope you're ready. Everything that has transpired since May in silver and September in gold has led us to this moment. The next five to seven trading days will tell us everything. Either the metals will win their individual Battles Royale or they won't. If they win, price will accelerate to the upside. If they fail, the metals will likely settle into another sideways consolidation that lasts well into spring. I, for one, can't wait to find out!
So, let's get started. First, in case you missed it, here's a re-print of a comment I posted yesterday afternoon about the continuing increase of open interest in the metals:
"For yesterday, gold rose $15 and the April12 contract rose by 6,500 contracts to 264,250. Here's something interesting: The June12 OI fell by 1800 to 62,263. Hmmm. Total OI rose by over 4000 to 470,255.
You'll recall that yesterday was a big day for silver and also the day that the March options expired. First day notice is just 4 days away but March12 OI fell by just 3,600 contracts to 21,393. The May12 picked up a lot of rollovers and new money and grew by nearly 8,000 contracts to 49,471, a 20% increase in one day! Total silver OI is now 115,874 and that level is the highest its been since August of last year."
A short time later, I posted this comment, right after this week's CoT was released:
"Remember that massive OI jump during the rally on Tuesday? It was +17,000 contracts Tuesday alone and for the reporting period, the total OI rose a massive 25,000.
Well, we just found out how. Total spec long grew by 14,000 but the Cartel net short grew by 20,000! They are about to drop the hammer or get their nuts squeezed off.
Considering that OI has expanded by over 14,000 contracts in the two sessions since, you can imagine that the spec net long has continued to increase while The Cartel net short has done the same.
Silver, too. OI rose by 6000 contracts as the EE net short rose by 1900 and spec longs rose by 2100.
At first glance, this all just confirms that the stage for The Battle Royale has been set. We are up against it technically and the CoT shows that The Cartels are getting up against it from a net short perspective. Next week promises to be wild. Get ready."
Before we get to the charts and discuss the technical importance of this upcoming week, let's dive into that CoT a bit and look at some history for perspective. First, gold.
The CoT does indeed show a massive expansion of spec longs. 14,000 contracts! That's a lot of new money. It also shows that The Cartel supplied the new paper to those spec longs as The Cartel added 20,000 new shorts. The question is, as always, why do The Forces of Darkness do this? Are they:
- Flooding the market with fresh, unbacked paper gold because they are trying to cap price, suck in weak-handed longs and preparing for a massive raid through which they will profit? OR
- Is the bullion bank cartel simply performing their duty as a market maker? The specs demanded 14,000 contracts this week. Without a brand new, unbacked Cartel short on the other side of the trade, price would have had to have risen to the point where a current long was ready to sell. What would that price have be to in order to pair 14,000 contracts?
Have the bullion banks profited for years by naked shorting the PM "markets" and then initiating waterfall declines into which they can cover and profit. ABSOLUTELY! Is that what they're doing here. I don't think so. As I've repeatedly stated, I believe that The Cartels were completely freaked out and frightened by the events of 2011 and they have spent the last 10 months manipulating PM prices in an attempt to minimize and/or extricate themselves from their perennial short positions. What they didn't expect was $2T in fresh global liquidity in the past 90 days. As I laid out yesterday, everything is going higher, just like during overt QE2. Throw $2T around and it spills everywhere. Crude, gold, beans, cattle, copper...everywhere! The race higher is unfolding so quickly that The Cartels have been left with no other choice but to maintain their roles as market maker. Like the Specialists of old on the NYSE, The Cartels must take the "offer" side of the trade when things get disorderly to the upside, just like they must supply a bid when things are disorderly to the downside. (Though, during coordinated raids, The Cartels have obviously been reluctant to aggressively supply that bid.)
So, here we are. $2T with more to come are flooding the markets with liquidity and The Cartels are getting painted into the same corner they found themselves in last year. What will they do? Attack, of course! That's what they have always done and so you can imagine that an attack will be their first course of action here, too. But can they? Seriously...can they? Take a moment and consider the global investment landscape at this exact moment. Even if you had unlimited funds, would you want to continue building a huge net short position in the metals right now? I don't think so. And you'd have to greatly increase your short position to initiate an attack. No...I don't think they're going to attack, at least not in the massive, coordinated style to which we've grown accustomed.
Their only real option is to attempt to continue "managing" the demand. This means they will continue to create paper when demand is heavy and they will attempt to cover some shorts on every selloff. In an environment like that, you'd expect a steady, increasing, predictable price channel where demand remains constant and forces price higher within a channel of higher highs (demand surges) and higher lows (Cartel covering into selloffs). Hmmm. Do you think the environment I just described would look anything like these charts once you plotted all of the price action graphically?
http://www.tfmetalsreport.com/sites/...2-25goldd1.jpghttp://www.tfmetalsreport.com/sites/..._2-25silvd.jpg
So, how long can these price trends continue? As discussed in yesterday's post, from a fundamental standpoint the firehose of liquidity that is currently flooding the global markets shows no sign of slowing. The question then becomes, how long can The Gold and Silver Bullion Banking Cartels continue to provide the unbacked paper metal necessary to manage the ascent of price? Are they already stretched to the limit like they were last April in silver and last September in gold? If so, we can expect imminent attacks and margin hikes. For answers, let's consult some past CoT reports to see if we can gain some perspective. (For simplicity's sake, I'll start with the gross numbers.)
SPEC LONG 2/22/11 4/5/11 8/2/11 9/6/11 10/4/11 2/21/12
Silver 50,937 48,890 38,265 37,185 23,859 34,819
Gold 246,967 259,792 291,974 248,457 180,635 214,343
As you can plainly see, spec long positions in both gold and silver are still well below their peak levels in April and September, respectively. Additionally, though up considerably from the lows of Q4 2011, these markets are not yet "overbought", at least terms of market participation and liquidity. Now, let's look at The Cartel shorts.
BANK SHORT 2/22/11 4/5/11 8/2/11 9/6/11 10/4/11 2/21/12
Silver 89,728 89,827 75,029 77,869 58,807 70,923
Gold 389,757 415,992 442,648 401,815 345,040 375,306
Just as plainly, from a gross perspective, Cartel shorts are nowhere near the levels they were when silver and gold were making their respective highs last year. To me, this indicates that The Cartels have plenty of "ammo" still available from a paper supply standpoint. But, we have to look at the net numbers, too:
BANK NET (short-long) 2/22/11 4/5/11 8/2/11 9/6/11 10/4/11 2/21/12
Silver 57,793 56,414 44,588 47,216 18,923 39,188
Gold 234,804 258,665 287,634 227,714 164,751 229,302
As you probably expected, the net short position also shows that The Cartels have plenty of room to grow here as they are nowhere near the extreme levels attained at the price peaks last year. Other things to note from this data:
- From 2/22/11 to 4/5/11, silver rose from roughly $33 to $40 but the large spec long and Cartel net short positions barely budged. Why? The small specs drove the market as their net long position rose from 18,000 to 54,000. That's a triple of the small spec net long in 6 weeks.
- But it wasn't the specs that caused the panic, it was the EE. From 4/5/11 to 4/26/11, price rose from $40 to $48 but the large and small spec net position were both declining. However, over those three weeks, the EE net short position contracted by an amazing 14,000 contracts! The EE panicked, pure and simple.
- At that point, The CME stepped in and raised margins 5 times in 9 days
- From 8/2/11 to 9/6/11, gold rose from roughly $1650 to $1900. Though the media and the know-nothing paid disinformation agents of The Cartel would have you believe that this was a speculative "bubble", the numbers tell a much different story. Over this time period, the large spec net long position declined by almost 25% from 247,175 to 184,371 and the small spec net long only increased by an insignificant 3,000 contracts, rising from 40,459 to 43,343.
- Again, this "panic" was caused by a cartel, The Gold Cartel. From 8/2/11 to 9/6/11, price rose $250 as the net short position of The Gold Cartel declined by a whopping 60,000 contracts, falling from 287,634 to 227,714. What happened to instigate this panic? The S&P downgrade of U.S. debt on 8/5/11.
- At that point, central bank intervention drove gold lower in the wee hours of 9/6/11 and the raid was on. The CME also conspired to raise margins in gold, too, thereby increasing the selling pressure.
All that history notwithstanding, it's clear to me that we are still in the early stages of this rally. With this history as our guide, PM prices will continue to ascend in two legs. This first leg is the ongoing expansion of large and small spec net long positions. These numbers will probably continue to grow until they begin to reach the levels attained in April and September of last year. The second leg will be another Cartel panic leg where prices rapidly surge to the upside. Since I think we are still in the middle stages of Leg #1 and, since global liquidity should only continue to surge, I just don't see a huge risk of a coordinated C/C/C smashdown at the current time.
That said, we can't be complacent, either. The charts are at a very significant juncture and silver lease rates are scary-low so a raid, particularly in silver, cannot be ruled out. Ignore the silver lease rate chart below at your peril. I don't think it's a direct indicator of an impending raid but even Stevie Wonder can see the obvious correlation between the last two forays into deeply negative territory and steep price selloffs.
http://www.tfmetalsreport.com/sites/..._2-25lease.jpg
And now here are your charts. As you can see, we are now at the Battle Royale...the points at which gold and silver will either be forced to reverse or they will overcome this last line of resistance and charge higher. My point in dissecting all of the CoT data was to help you see why I feel that the Battles Royale are going to be won not lost and that, after a likely period of serious volatility over the next 5-7 trading days, gold and silver will begin accelerating higher. First, here are your gold charts showing the same view but from different angles.
http://www.tfmetalsreport.com/sites/...25goldd1_0.jpghttp://www.tfmetalsreport.com/sites/...2-25goldd2.jpg
http://www.tfmetalsreport.com/sites/..._2-25goldw.jpg
And here are your silver charts. Note that silver is fighting two technical battles. There is the horizontal resistance from the recovery highs of late October (35.50) and there is also diagonal resistance from the down-sloping trendline connecting the highs of April and September (about $36). When silver is able to move through and close above both of these two lines, it will be off to the races for a while as there won't be much resistance until price reaches $40.
http://www.tfmetalsreport.com/sites/...-25silvd_0.jpghttp://www.tfmetalsreport.com/sites/...-25silvdw1.jpg
http://www.tfmetalsreport.com/sites/...-25silvdw2.jpghttp://www.tfmetalsreport.com/sites/...2-25silvd2.jpg
In closing, let me just say that I sincerely hope you enjoyed reading this as much as I did writing it. It's not exactly how I intended to blow my Saturday but I felt it was imperative to get this information to you today so that you could study it before Monday. The next 5-7 trading days are very, very important and if you don't approach them with a plan, you will instead be prone to acting on your emotions and, as we all should know by now, letting your emotions get the best of you is about the only way you will lose fiat money trading gold and silver in this remarkable, continuing bull market.
Keep the faith. Be patient. Have courage. Believe in yourself. Prepare accordingly.
TF
http://www.tfmetalsreport.com/blog/3...important-post
Does this mean that between $33.50 and $34.50 is the lowest silver is likely to go before continuing to go up (and that's only if there's a raid)?
http://kingworldnews.com/kingworldne...les/stroke.pnghttp://kingworldnews.com/kingworldne...s/stroke_1.pnghttp://kingworldnews.com/kingworldne...s/stroke_2.pnghttp://kingworldnews.com/kingworldne...s/stroke_3.pnghttp://kingworldnews.com/kingworldne...s/stroke_4.pnghttp://kingworldnews.com/kingworldne...s/stroke_5.pnghttp://kingworldnews.com/kingworldne...s/stroke_6.pnghttp://kingworldnews.com/kingworldne...s/stroke_7.png
With gold near $1,770 and silver near $35.50, today King World News interviewed James Turk out of Spain. Turk told King World News the fact that silver is not pulling back is an indication of how strong that market is right now. Here is what Turk had to say about the situation: “This is a great start to the week for the precious metals, Eric. We need to see this kind of strength to make sure both gold and silver follow through in the next few trading days to confirm the big gains from last week where gold climbed 2.9%, while silver soared 6.4%. It is remarkable to see both metals hold their gains with no profit taking. Clearly, traders see something big is about to happen, and so do I.”
“In this regard, I have mentioned several times my expectation that once resistance at $35 is taken out, silver will climb to $68-$70 in 2 to 3 months. I still expect that outcome, but of course, only time will tell. I thought it might be tough going for silver in the $35-$36 area, but maybe not based on the strength we are seeing today.
But regardless, Eric, I expect the silver price will begin to accelerate to the upside once $36 is hurdled. In many ways silver is positioned today like it was back in the summer of 2010. Long-time KWN listeners will remember the events from back then and my bullish views about silver. I feel the same way today.”
When asked about gold, Turk responded, “We spoke in the last blog about the relationship between oil and gold, which was up 2.9% last week. Oil jumped a remarkable 6.3%. With all the money printing going on in central banks around the world, not to even mention the growing tensions in the Middle East, oil looks ready to test its record highs some time this year....
http://kingworldnews.com/kingworldne...peimage_23.jpg
“So KWN readers have to remember that right now so goes oil, so goes gold. It is also quite possible that gold will outperform oil by the end of the year. But the bottom line is the wind is at the back of the bulls in both the gold and oil markets.
I follow this like you do, Eric, on a daily basis, but I look at it differently. I look at the price of crude oil in terms of gold and since the beginning of 2012 gold has been outperforming crude oil. This relationship between oil and gold goes back decades. Today an ounce of gold buys basically the same amount of crude oil it did 60 years ago.
But you do get some fluctuations in this relationship and right now I expect the purchasing power of gold to increase. What I am saying is that an ounce of gold at the end of the year will buy more oil than it does today.
I am a firm believer in letting the market tell its own story, Eric. The market does this with the movement in prices. Then, if we watch closely, we can see important trends. By jumping on those trends and riding them, you position yourself in harmony with what the market is telling you, which is important.
You always want to be in harmony with the major trend in prices. As they say time and again, never fight the market. So here's the point I am making, Eric. Events so far this year have been extraordinary. The markets are signaling it. In reality, events are spinning out of control.
Despite this new bailout scheme being foisted on Greece, the situation there continues to spiral out of control, which is one of the factors causing confidence in the safety of European banks to continue eroding.
Surprisingly, over the weekend, the Telegraph in London reported comments by George Osborne, the British Chancellor, who said, ‘The British Government has run out of money because all the money was spent in the good years.’ Finally, a political leader came out and said what everyone has been ignoring. While I applaud Osborne for telling the truth, the frightening reality and what everyone has been ignoring is governments around the world are broke.”
This is why it is so important to be outside of the banking system by having a portion of your assets in physical gold and silver. Governments are broke and much of the banking system is insolvent.
http://kingworldnews.com/kingworldne...26_Silver.html
Quote:
Originally Posted by jbeck57143
Predicting price movements in silver from charts is difficult but the turd gives it a go and yes that is what he means,going by the shaded in area.
“I think scarcity in oil is a dramatic tailwind for gold. Politicians will inflate. They don’t want oil to bring down the economy like it did in 2008. Remember, this inflation will take place with commodity prices already high. So this will create significant inflation.
Today acclaimed money manager Stephen Leeb told King World News that gold is already the de facto reserve currency in the world. Leeb also said oil is headed much higher and soon the Chinese will look to make a move in the silver market. Leeb is Chairman & Chief Investment Officer of Leeb Capital Management. Here is what he had to say: “I am not surprised there are no significant pullbacks in gold. I think it’s essential that individuals own gold here. The gold market definitely wants to power ahead on a short-term basis. I don’t think you can separate oil, gold and copper from one another.”
This means higher gold and silver. Gold at $3,000 by the end of the year, easy. Silver $60, $70, easy. What else do you buy? What currency do you buy? Do you buy the euro or the dollar when we are inflating? You can’t buy the Chinese yuan because it’s not freely traded.
Do you buy the yen with the Japanese pumping money into their economy? There are no other answers. Gold right now is the de facto reserve currency in the world....
Governments from China to India, to most all governments, except those in the Western world, want to assure they have enough gold on hand. It’s just that simple.”
When asked about the move in oil, Leeb replied, “We’re sitting here in this country saying fracking is a solution. Fracking is no solution. Fracking buys us maybe a year or a year and a half. The amount of reserves we have in these shale deposits are smaller than we had at Prudhoe Bay. They are also much harder to cultivate.
If you look at the production profile of the US over the past 40 years, you see a little blip associated with Prudhoe Bay. It barely even makes a dent. Even with Iran still exporting their 2.2 million barrels per day, the OECD right now is at sixteen year lows.
Now some of that is because Saudi Arabia doesn’t have it. There is no doubt in my mind that China sees the writing on the wall and they are socking away a lot of this oil.
Right now this country is lost. What we are likely to see here in the US is the Obama administration, politics being what it is, will probably release oil from the strategic reserve. We have already heard a little bit of talk about this. This, in my mind, is as dumb as it possibly can be.
The reserve should only be used if there is armed conflict with Iran and subsequent turmoil in Saudi Arabia. Then you really need that oil. This oil should not be used to get somebody elected. Improper usage of this oil would be a terrible mistake.
Oil, left to its own devices, without any talk of the strategic reserve, could go anywhere on the upside. Oil could easily go up to $130, $140, $150. If the Saudi oil fields are shut down temporarily, there goes 9 1/2 million barrels per day. How do we make that up?
If we do see oil dip because of a release from the strategic oil reserve, buy it. Buy oil and buy gold on that kind of news because it is so short-sighted. If we release from the reserve do you know who will be buying it? China. We will be giving a gift to China.”
Leeb also added: “China is also going to increase their consumption of copper. China’s copper consumption has been growing at about 3% to 4% per year. It should grow 6% to 7% per year over the next five to ten years. It’s not about economic growth in China. What China is doing is spending massive amounts of money on smart grids and alternative energies.
I also believe the Chinese are going to start accumulating massive amounts of silver again. They will stockpile silver the same way they are aggressors in the copper market. The other plus for silver is the ‘monetary’ plus. More and more investors are beginning to recognize silver, once again, as a monetary metal.”
http://kingworldnews.com/kingworldne...26_Copper.html