SP 500 and NDX Futures Daily Charts

Net Asset Value of Certain Precious Metal Trusts and Funds

US To Reach Debt Limit on May 16 - Treasury Asks For $2 Trillion Increase

This is from Reuters:

"The following are highlights from the U.S. Treasury Department's announcement on Wednesday of its quarterly debt refunding, which will raise $72 billion in new cash.

The Treasury said it would auction $32 billion in three-year notes, $24 billion in 10-year notes and $16 billion in 30-year bonds next week.

When the note and bond sales are settled on May 16, they will exhaust the government's remaining borrowing capacity under the $14.3 trillion statutory debt limit. This will require the government to employ emergency measures to continue borrowing, but these will only be sufficient until Aug. 2, according to Treasury projections. The measures include dipping into two federal employee pension funds.

Treasury officials reiterated their view that they believe Congress will raise the debt limit in time. A Treasury official said that reduced auction sizes or frequencies were options that could be considered to refund maturing debt in case the debt limit increase was delayed."

The Treasury is reportedly asking for a $2 Trillion increase again according to Reuters:

The Treasury has told lawmakers a roughly $2 trillion rise in the legal limit on federal debt would be needed to ensure the government can keep borrowing through the 2012 presidential election, sources with knowledge of the discussions said.

Obama administration officials have repeatedly said that it is up to Congress to decide by how much the $14.3 trillion debt limit should be raised.

But when lawmakers asked how much of an increase would be needed to meet the government's obligations into early 2013, Treasury officials floated the $2 trillion working figure, Senate and administration sources told Reuters.

Gold Daily and Silver Weekly Charts - NAV of PM Funds - Alternate Bearish View of Silver

"A number of high-profile investors remain huge holders of gold and silver, amid continuing concern about inflation and the dollar. Mr. Paulson, known for his lucrative bet against mortgages a few years ago, told investors he still has most of his personal money in gold-denominated funds operated by Paulson & Co. Mr. Paulson told investors Tuesday morning that gold prices could go as high as $4,000 an ounce over the next three to five years, as the U.S. and U.K. flood the money supply." WSJ

"The bankers are waging a paper silver war on paper longs. This is why I urge all of you not to play the crooked Comex. The Comex is nothing but a paper game. Do not use leverage whatsoever. Just go and buy the physical silver from your local dealer or bank. This is what will kill the bankers game." Harvey Organ, 3 May 2011

I told a small group of traders, with whom I speak about the markets and our positions during the day, that I was pulling my big Russell 2000 short position hedges off around 3 PM, and was buying into some deeper long positions in the metals sector. And so I did.

Unless this is going to turn into a liquidation event,  I believe the consolidation/correction, whatever you wish to call it, is about done, save perhaps for another gut check or two in case the dip buyers get over eager.   There was a little profit taking rally back in the last hour, so perhaps I was not the only one who had this idea.

Silver May futures retraced roughly 38.2% of their gains since the last major correction intraday around the low of 40.50,  (or 50% from the point of the last breakout), and the major stock indices tested key support levels as well. Gold has done remarkably well, but just eyeballing the chart, it too corrected almost 50% of its recent gains.  The gold silver ratio is now back to something a little more familiar around 37.

I was very glad to see this correction in silver because it had gone parabolic. As Jimmy Rogers said, if silver had kept going it would have set itself up for a much greater fall later on. If we can sustain a more reasonable appreciation in the market, I think the upside is much further than most think. It depends on how the banks are able to unwind and hedge their shorts, and the progress silver makes as a store of value and alternative currency, particularly in Asia. 

As you know I said I was taking my profits last week.  I started buying back in yesterday and today and am now holding PM positions again with some hedges for a stock selloff.

I tend to believe that much of this market action in the States is just the tail wagging the dog, the few managing market prices for their fairly narrow personal benefit. So perhaps this little episode is done for now.  The offtake of physical at these lower prices overnight has to be killing the supply lines.

There are rumours that some of the PIGS have been selling their central bank gold under some duress.  Too bad they do not have any silver.

I do think there could be a more profound correction in the markets, but not yet. However, something could happen, or I could just be wrong.

Now that Blythe has had her fun, let's see what happens.

Until the banks are restrained and the balance is restored to the economy, markets will not be returning to anything resembling 'normal.'

My friend Pierre Leconte does not agree with my charting of silver, and offers one of his own. I include it here below to show the other side of the discussion.

Obviously I do not believe his chart is probable, but it is possible.  I would not measure the retracement from the very bottom

He presents his argument, en français, here at Forum Monétaire de Genève.  Here is an 'automatic translation into English.

I would not draw my retracement levels in this way, or a rising wedge in this manner.  But that is a matter of taste.  His chart does help to explain where some people obtain their forecast of a drop in price to the $27 dollar level.  He is using a monthly logarithmic chart.

I will not offer any criticism of his point of view, except to say that I think he does not address the leverage in the market, that is, with the dwindling supplies that have been sold many times, and the persistent buying of bullion that is stressing the 'paper markets.'  This is not incidental but critical.  The rally in silver is because of a breaking down of a long term scheme to manipulate the price using paper and leverage.  And the condition that caused this has not been relieved or corrected.  But this is my point of view, my conclusion with which one may or may not agree.

We can discuss these things and remain friendly. This is what makes a market. And the market is the one who will tell us eventually what is correct.

But I think that while Blythe may play the coquette to take our silver, she is really a femme fatale to longer term wealth.

SP 500 and NDX Futures Daily Charts - Le Dollar Douloureux

I told the traders I speak with occasionally throughout the day that I thought the correction ended around 3 PM, and so I took off my big Russell 2000 short position.

Unless this is going to turn into some kind of liquidation event, we might get another jog or two down to spank the eager buyers, but unless something happens the trends are back in play.

Let's see what happens.   And be prepared to follow whatever the market tells us.

CME Announces Third Margin Increase For Silver in a Week - Karma? Ain't It a Bitch.

Some instant pundits were citing 'exhaustion' which they had seen in the silver market as a cause for the recent declines.

Only someone talking their book, or in complete ignorance of market dynamics, would cite 'buyer exhaustion' for such a precipitous decline when the exchange continues to raise margins, and the bears hit the price repeatedly in the off hours trade.

As Dave from Golden Truth observed:

"Needless to say, last night's ambush was comically initiated right at the open of electronic trading, which commences in the early evening on Sunday, when the futures markets tend to be at their least liquid. There was an absolute flood of sell orders at the open but the cliff-dive chart was accompanied by a relatively small amount of total volume. This suggests that there were some motivated "sellers" trying to push the market lower and force selling by the MF Global or Ameritrade customers who would be unable to meet the new margin requirements. To be sure, there was also plenty of unloading by longs who were frightened by the volatility and wanted to protect any profits they might have."

This does not look like a market showing anything like classic buyer exhaustion. This is more like a speeding train, running higher in response to a short squeeze on a massive overhang of paper silver obligations that cannot be delivered at current prices. The exchange authorities are throwing everything but the kitchen sink at it to try and slow it down, to break its momentum. I obviously do not have a problem with that per se. But it would be nice to see the regulators and exchanges occasionally intervening on behalf of the broader class of investors, and not so exclusively for the benefit of their insiders.

The reason is fairly obvious. The Comex inventory is down to a new low of 33 million ounces of deliverable silver, at least according to their published records. It is tough to talk your way out of that one, without showing the metal to the market. Stand and deliver.

And there are no Hunt brothers for the exchange officials to lean on to break the bulls. The buying is dispersed and world wide. They can raise the Comex margins to 100% and it will not affect the buying of bullion. But it may open up a yawning chasm between the paper markets and the physical markets that will be harder and harder to ignore. And that is unfortunate for those who seek to be the masters of the world, at least on paper.

As Harvey Organ notes in his commentary tonight:

"...another startling announcement from the CME, tonight, a third straight raise in the silver margin requirements. This shows how severe the bankers are into the silver glue..they are massively short of ounces and there is no available resources on the planet."

The silver market will keep going until the market clears, wherever that price may be. This may have to involve a few Banks, or their rumoured 'secret customers,' taking a substantial loss on their massive short positions, something that they are loathe to do. It's not so much the money, as the public will almost certainly absorb their losses through the Fed. It will be the admissions of failure, and potential exposure, and the need to construct yet another cover and diversion for a fraud based failure in the Anglo-American banking system.

What does not kill this rally makes it stronger.

Fighting the paper price is becoming counter-productive, because it opens the door to additional buying of physical bullion from Asia.  It is starting to look like a feedback loop, in which the struggle of the shorts to extricate themselves merely tightens their bonds.

Tens of thousands of buyers, both big and small, taking on the banking giants, draining them of silver, bouncing back again and again, and finally leaving them exposed, high and dry, and nakedly short, for all to see. The many, seeking to string the bankers on a rope of silver, and bring them down.

"Can you catch Leviathan on a fishhook, or tie it down with a rope?"

Those dreamers.  Those crazy dharma bums.

And the shorts are trapped in their pride, and their tangled web of lies. Karma? Ain't it a bitch.

"Our battered suitcases were piled on the sidewalk again; we had longer ways to go. But no matter, the road is life...Whither goest thou America, in your shiny car in the night." Jack Kerouac

CME Margin Increase for Silver

These are wild, triple black diamond markets.  These are big changes occurring, understood by very few, and emotions will be running high.

If you are not a very experienced trader, better to stay off the slopes and as far away from leverage as you can get.

Gold Daily and Silver Weekly Charts - Fool Me Once Shame On You...

One cannot help but notice that the bear raids in the precious metals sector are coming in thin trading and are notable for their lighter volumes as compared to buying. They are also coordinated across a variety of related products including mining stocks etc. which are likely used to hedge losses on the futures contracts.

One possible explanation for this unusual volatility is here: Portrait of Desperation, and I suggest that you take a minute to look at it.

I think the Comex dealer inventory chart is telling, and while it might be resolved through procurement of a large, unallocated inflow of silver, I am at a loss to find out where that might originate, unless it is from the market itself, which would seem to demand higher, not lower prices, despite all the jawboning and spin from the Wall Street demimonde. The western governments, central banks, and IMF have long ago exhausted their strategic supplies of silver, so the bullion banks cannot effectively turn to them for direct relief as they have done over the past ten years in the case of gold.

Obviously there are other explanations. But a short squeeze being conducted not by one or two big players who can be dealt with by the exchange, but by a global market acting independently and almost en masse seems to satisfy Occam's Razor, at least in my mind.

In this case the market corner by a few traders has been on the short side, which is what went parabolic first, in both the futures and the derivatives markets.  And it appears to be largely held by two big banks.

The big players are eating that short position in stages while they scramble to hold the markets under some measure of control. I agree with those who say that this will end badly.

As someone who watches the markets daily, and for many years, I cannot help but feel that after all this, after the financial collapse and all the related frauds and deceptions in mortgages and CDS, that we have ultimately learned nothing.

Could the precious metals market and the Comex be placed at risk by a few large financial institutions that in their hubris engaged in over-leveraged but highly profitable trades that placed them at excessive risk, and by extension risked the financial system?

How many times can one be surprised by the disclosure of an outrageous and pervasive fraud before they might wish to start questioning their basic assumptions about how things really work?

But at the end of the day in the short term silver had gotten ahead of itself, and it is now correcting and consolidating its gains as I had mentioned it would. And the new holders of futures contracts from the option expiration will be tried, and after this silver will be held in strong hands.

And in the background, gold grinds steadily higher to our objective of 1590.

SP 500 and NDX Futures Daily Charts

The early day rally proved to be a good fade, and a nice hedge for new precious metals positions.

Nothing was broken to the downside, and the Street crawlers are pumping stocks in a big way. A little unusual for the market to end in the red on a 'merger Monday' but this is a strange market overall.

Notice that the US dollar rally failed again.

Net Asset Values of Certain Precious Metal Trusts and Funds and Running the Stops

I would be embarrassed to tell you the prices that were paid for some new positions this morning as the wiseguys 'ran the stops' for another dose of shock and awe. To run the stops means to take the price down quickly with wanton selling to trigger stop loss orders which have been preplaced, creating further selling 'at market.' The exchanges and market makers can see where they are concentrated beforehand.

Over the weekend a reader showed me anecdotal evidence of naked short selling and tape painting by the major financials on some of the Canadian exchanges that was fairly shocking, but required further investigation. He has been sending this to their regulatory authority and been ignored.

For a country with such a sound banking system, the equity markets in Canada are quite exceptional. The Canadian exchanges sometimes appear to be like a carney sideshow, at times making even the Comex look good by comparison. Why they tolerate that sort of thing in such a normally sensible country makes one wonder, as it seems all out of character.

By the way, today is federal election day in Canada. Does anyone south of the border have the vaguest idea of what the issues are for one of their largest trading partners and neighbors? Judging by the mainstream media I think not.

I rarely discuss specific mining stocks and will not do so here. But there are some interesting divergences in the precious metal funds this morning as can be seen in the chart below.

Later...

And near the end of day...

Portrait of Desperation

The Comex is facing a default, and the powers that be are very nervous since it involves at least one of the TBTF monstrosities.

That does not mean it is going to happen, but with less than 12,000 contracts of silver left in the dealer category, it remains a distinct possibility unless prices go much higher to free up the inventory held by stronger hands.

Nine out of ten Americans might realize that dwindling supply coupled with growing demand tends to result in higher prices, or rationing and other methods of dampening demand, or all of the above. Well, maybe not that high a percentage of the people would notice, given these days of truthiness in thinking and the power of spin.

Perhaps there is some 'Plan B' to handle this growing scarcity of inventory. The only plans I am aware of from the exchange are forced settlements in cash or SLV.

Shock and awe in the thin Sunday night trade, running the stops of the new futures holders whose options were filled. Even more heavy handed and blatant than usual.

Run it up, and then smack it back down.

Take a letter, Ted...

Oh, and by the way Blythe, skip the histrionics. Stand and Deliver.

From Harvey Organ's Saturday commentary:

"The total open interest on the silver comex fell steeply by 6,132 contracts from 135,763 to 129,712. There is no doubt that the leverage for the longs suffered a bit but so did those shorts that have to pay margin requirements. This created much volatility on the silver price yesterday.

All eyes are on the front delivery month of May were the open interest stands at 2166 contracts or 10.83 million oz. The options that were exercised were given future contracts on Friday night and will be reflected in the numbers on Monday.

I believe that Blythe will be some busy lady this weekend.

The next battleground front month for silver is July and the OI rose from 76,365 to 78,060. We still have a long way off until we hit this trading month. The estimated volume at the silver comex was good at 77,167. The confirmed volume on Thursday, the day before first day notice was 226,267 where we witnessed most of the silver longs rolling to July and September."

Here is some background on Comex Inventory and the Eligible vs. Registered categories.

The much higher margin requirements serve to dampen demand due to speculation. But it also has the effect of making sure that the demand that continues to exist is held by some relatively stronger hands, not as susceptible to margin calls and other price antics.

Paper good, metal bad. Paper good, metal bad.

Open Letter From Ted Butler to Custodian of SLV Silver ETF

Ted Butler raises an interesting point about the large short interest in SLV.

I think his faith in the custodians, the ETF, and in the past, the CFTC and SEC, to do the right thing is probably misplaced. So far they have done nothing but extend and pretend.

The shorts are impaled, and their schemes are unraveling across a broad set of dollar denominated assets. This is not the time when I would expect honest disclosures, but even more coverups, deceptions, market manipulation, propaganda, distractions, intervention, and misdirection.

The highly leveraged scheme that is the US financial system is going down in a spiral like manner, slowly but surely. It will find its level, but where that is, no one can say. It's downfall will come not with disclosure and reform, but with hysteria and disbelief, and denial to the very end.

And then the difficult task of rebuilding can begin.

April 28, 2011

Mr. Laurence D. Fink
Chairman and CEO
BlackRock
55 East 52nd Street
New York, NY 10055


Dear Mr. Fink,

I am writing to alert you to a possible circumstance of fraud and manipulation in your popular ETF, SLV, due to the excessive short-selling of its shares. Current reports indicate the most recent level of total short sales now exceed 36 million shares. This is an increase of more than 14 million shares from the previous reported amount.  ShortSqueeze.com

Each share of SLV requires that one ounce of silver be held at the Trust's custodian (minus accumulated ed management fees), according to the prospectus. Since short sellers of SLV shares do not deposit metal with the Trust's custodian, this means that the buyers of the more than 36 million shorted shares of SLV do not have metal backing, as required by the prospectus. It is my belief that many of the shares shorted have been shorted precisely because no physical silver was available to deposit. If I am correct, this may constitute fraud and manipulation, possibly on the part of Authorized Participants (APAs) who make deposits and redemptions of metal in the Trust.

I am a silver analyst and a fan of SLV. I had raised this issue with the previous owner and sponsor of the trust, Barclays Global Investors (BGI). I never did receive a satisfactory answer from BGI about the shorted shares issue, although they did agree to list and publish the bar serial number and weights held in the Trust after I publicly urged them to do so. I am hopeful that BlackRock might be more responsive to this issue.

Publicly-traded ETFs that have specific metal backing are highly unique securities. Perhaps a small short position may be overlooked on a temporary basis until the metal is deposited in the Trust due to logistical considerations. But a short position that represents more than 10% of the outstanding shares issued means that many buyers of the shares have no metal backing. This is clearly not in keeping with the spirit of the prospectus that each share issued be backed by one ounce of silver on deposit with the custodian.

I trust you will look into and rectify this circumstance.

Sincerely,


Ted Butler

Butler Research, LLC
www.butlerresearch.com