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Here is what I am watching this morning. There is a potential bull pennant, but the 50 DMA represents an obvious point of interest.
The devastating earthquake in Japan completely overshadowed the Middle East this morning, and the Saudi Day of Rage was subdued. I am exchanging emails with a friend who is riding out the troubles in the Shinjuku district while he waits for the trains to resume so he can head home.
My heart goes out to all my friends in Japan, and all those who are in distress everywhere.
がんばって Ganbatte.
I thought some of the book-talking commentary from Japan bears early this morning was a bit over the top even for pigmen.
In the spirit of never wasting a crisis, the Masters of the Universe staged a major bear raid on the metals complex this morning. I had to steel my resolve and pick up some positions at deep discounts to reality in the opening half hour of trade. Easier said than done.
Silver is in delivery now and the negotiations for cash settlement are introducing noise into the markets. Their hypocrisy knows no bounds, so prepare for additional swings as their massive short position is in its death throes. It will not be pretty.
“So do not be afraid of them, for there is nothing which they conceal that will not be revealed, or hidden, that will not be made known. What is spoken in the dark will be heard in the light; what is whispered in the ear will be proclaimed from the rooftops. Do not be afraid of those who can harm only your body but cannot take your soul. Rather, be afraid of the One who can destroy both body and soul in hell. " Matt 10:26-28
These events in the Middle East and Japan provide the perfect rationale for the Fed's QE3.
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| Let's play a game. |
The metals and stocks in general corrected today on weak US economic news and reports of growing unrest in Saudi Arabia, especially ahead of tomorrow's 'day of rage.'
Is this anything new? Not really, although traders finally decided to acknowledge the weak US economy and growing unrest throughout the Mideast, so in that sense, it is 'new.'
I mentioned the other day that Blythe is being given some time and some leeway to 'fix her problem,' and the raids that swept the markets today were part of the trade. Take them up, get mom and pop leaning in, and then wash and rinse their position out for a trade.
And certainly the markets were overdue for a correction. How deep a correction we will find out tomorrow, since the key markets have dropped down in many cases to pivotal support. I have clarified a possible bull pennant forming up on the March SP 500 futures and the associated pivot. The 50 DMA on the futures is around 1299 and so that must be watched closely.
It may be clearer now why I repeatedly show my own positions as a paired trade, long the metals and short the US equity indices with a varying emphasis. It makes these corrective drops much less distressing, and provides cover if one should decide to add new positions on retracements and weakness.
Remember, we sell strength and buy weakness; easy to say but hard to do.
Harvey Organ had some very interesting data in his commentary this evening. I thought his comment at the end about mining shares would also be of interest. He describes what sounds quite similar to what Citi had called its 'Dr. Evil' strategy in the eurobonds markets. Interesting that if what Harvey says is true, then the banks are engaged in a what sounds like a clearly criminal conspiracy to defraud the markets through price manipulation. No wonder so many people were upset by Andrew Maguire's testimony to the CFTC, as he alleged to be receiving the word to pull the bids by a certain bank-who-must-not-be-named. And he previously demonstrated it to the CFTC, and was met with a yawn until commissioner Brad Chilton acted, later to be brought to heel by CFTC Chairman and Goldman Sachs doyen Gary Gensler.
"Before I head over to the comex, for those newcomers, let me outline how the raid is orchestrated over at the comex. First the bankers send a signal the day before that a raid is coming. You need to get all the bankers in line that the raid is on for the next trading day. Then the bankers who also represent investors tell investors to hold their bids for later in the day. They will obtain gold and silver cheaper and thus they withhold their bids.
Then the bankers offer huge number of contracts at the opening with hardly anybody bidding. This dramatically forces the price down and in turn it trips all of those stop losses which in turn fuel another downturn. The bankers do not have any signal for a retreat. They only know to keep supplying massive contracts.
With 20 minutes to go, they start covering their shorts as quick as they can. Whatever they cannot cover, it increases the banks total shorts in the precious metals and he see this in the COT report. I will report on this on Saturday but the COT report is from last Tuesday to this past Tuesday. I will not pick up the major raid today.
That is the mechanics of the raid...
Many are calling me about the gold and silver shares. I think you should all be careful here as we are playing with crooks. The bankers are shorting gold and silver shares like crazy and they do not cover their shorts.
They use the money received for their nefarious activities. When time comes to deliver the shorted stock certificate, they say sorry I do not have the certificate. They are then in default and go on a list called failure to deliver or FTD's. The list of FTD's is enormous!! and our regulators do nothing to correct this!
The owner of the clearing house in the states is the DTC and you guessed it..who owns this fraudulent vehicle? JPMorgan and fellow bankers.
So please be careful when you buy mining companies. Please register your certificate and do not lose sleep over a falling mining share prices. However make sure your mining company is a producing mine and in good geographical areas where there would not be confiscation."
Portrait of a Bear Raid on the Precious Metals - Harvey Organ
And before we all walk around with puss faces about the 'losses' from the heights of our recent gains in the metals, keep in mind how well we all are doing overall.
A smackdown in the metals keeps our heads from growing too big for our bodies to hold up. The gains are always due to our genius of course, and the 'losses,' well those must be due to bad advice from somewhere else, or some similarly irrelevant superstitious thing. We seek to explain the ups and downs where the explanation is so obvious: things go up and down, and never straight up. Is the primary trend broken? Not yet. Have the fundamentals changed? No, not at all.
To be strong you have to own your trades. I had to learn this lesson the hard way, and chances are you will too. The greatest curse is an early and easy success, and the euphoria of thinking we are greater than we really are.
This is why it is better not to be a trader, because you cannot afford the dues, and if you are successful, you will see the darker sides of human nature and face temptations that are almost overwhelming, especially in times of general apostasy.
Take your positions and hold them, without leverage, and with realistic expectations. And then go do the things that you are well suited to do, and address the needs of your family and your friends, and enjoy what you have, the gifts of life and God's tender mercies. And when you need the occasional wake up call, He will provide that too.
The paired trade of long metals and miners and short US equity indices should be a little clearer today. Yes it limits upside, but it certainly provides some comfort on these big down days, and provide some will to be able to add selectively to positions, or open new ones, on weakness.
So what next? Tomorrow is the Saudi 'day of rage' and I suspect the markets were due for a breather, and this provided an excellent reason for taking profits.
The drops in many of the key markets I watch were down to pivotal support areas especially in the SP 500, so we'll have to see which way it goes. If we break this pivot, I would be looking down to the 1250 level. I am not sure how far bullion would travel down this road once the initial liquidation is done.
I have clarified a possible bull pennant forming up on the March SP 500 futures and the associated pivot. The 50 DMA on the futures is around 1299 and so that must be watched closely.
First a bit of housekeeping. There will be no chart updates tonight.
Here is an interview that may be a little overdone in some parts, and with the opening codenames, but is very interesting, containing an abundance of informative content nonetheless. This is an interview from December of 2010. I thought it would be interesting to reprise it now, because so many of the things which they say are unfolding even three months later. The gold/silver ratio has dropped to 41, and silver has rocketed higher in price. I missed it initially because of an illness in the family.
Harvey Organ is a wealth of knowledge and detail. I am not sure what is happening obviously because of the opaque nature of the situation and the apparent dissembling and obfuscation regarding the facts, especially in a period in which fraud has been revealed to be rampant in a variety of financial transactions. I mean, really. How can one be certain of anything when dealing with this brood of vipers running the financial system?
And yet trust and confidence is at the very heart of a well functioning free market system for the allocation of capital and the pricing of goods. And so it seems that crony capitalism could write its own epitaph in its mindless pursuit of greed. It is this abject and otherwise inexplicable failure to reform the financial system and break up the Wall Street Banks that undermines the economic recovery. I can think of no more obvious reason than a credibility trap.
The shorts appear to be trapped, and are playing for time, in what seems to be an increasingly untenable situation. I mean, unless you are completely naive or a book-talking dolt, having one or two institutions short about 25% of the world supply does seem a bit much, especially with all the secrecy surrounding it, and the inability to demonstrate that this is due to legitimate hedging by producers, information which should be disclosed since it absolutely impacts the valuations of publicly traded companies.
And it's a serious issue for the powers that be, because the trapped fish are some very big fish indeed, and may be connected to other things in other markets, and much bigger fish, perhaps the biggest in their ponds.
Before that happens, and after a protracted period of trading antics in which Blythe is given some leeway to try to wiggle out of the problem, I think that they will be told to 'throw in the towel,' and let silver run to roughly 16:1, from the existing ratio of about 41:1, with whatever price they can tolerate for gold given their limitations, on the basis that this is the historical and natural balance.
Without admitting any wrongdoing of course. The Fed can print enough paper to cover their losses. I suspect this would be done in concert with some other crisis. So I would not be looking for JPM to 'crash' per se. Rather, I would look for the next bagman patsy for a stealth bailout of the banks such as the role that AIG played for the Street in the 2008 financial crisis.
This gives me rough targets of $2000 gold and $125 silver. If you prefer $400 silver, then you should be looking for gold around $4000. And I think gold will at least reach a ratio of 2:1 with the Dow Jones Industrial Average, and maybe 1:1, so take it from there.
But first they have to dampen any talk of placing silver in the SDR basket if it is given international reserve status in lieu of the dollar. And then they have to persuade the world to move on, and not take any inconvenient notice of this particular fraud, as it may lead to questions about all those other frauds and deceptions being played, well-intentioned as they think they may be, or at least as they represent them, as in the case of the Wall Street bank bailouts, the insider trading, naked short selling, fraudulent financial instruments, campaign payoffs, and revolving door sinecures.
Harvey Organ's Gold and Silver Report
"As for the gold-silver ratio? It currently stands at about 41. Deutsche Bank, in a not particularly daring forecast, says it should fall below 40 in 2011 and 2012. We’re nearly there.
They run through some history that hints that the ratio could drop even further. Among their tidbits:
* From the 12th to the 17th century, the ratio held at about 12.
* Isaac Newton set a ratio of 15.5 early in the 18th century.
* The earth’s crust: silver exceeds gold by a ratio of about 18.75.
Lastly, China and Hong Kong were the last places to abandon the silver standard, in 1935. The China word for bank: Silver House.
'Trading activity from China has increased considerably over the past several years; we believe that much of this is a function of increased investor demand within the country as inflation threats build.'
So, like any good bull story these days, China plays a role."
Deutsche Bank: Silver Will Keep Streaking
Additionally, here is something a little more controversial. I am not quite sure what I think about it yet. In this interview Harvey is discussing what he perceives to be the musical chairs nature of GLD and SLV, Part 1 and Part 2. They work well in what might be called 'normal market conditions.' I would not use the word fraud, as it appears that it could be more in the nature of undisclosed counter party risk. And of course, I have little to no background in securities law. It is my very lack of knowledge that made this discussion interesting. I do think their comparison between PSLV and SLV is unfounded and incorrect, because one is a closed end fund and the other is an ETF.
I have felt for some time that Brown's Bottom in gold, the sales of England's bullion near the bottom of the market, were stealth bailouts of a bullion bank or two caught short in deals such as those discussed in the above interview.
No matter, these markets do appear on the surface to resemble a house of cards. And this is cause for me at least to view them with concern, especially with the rank failures of regulation which the financial crisis recently disclosed.
