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As a reminder, the Comex will have their gold and silver option expiration on Tuesday, April 26.
Due to a lax regulation of the markets by the CFTC, there are sometimes major price manipulation shenanigans associated with these events, and these sometimes during thinly traded periods of time.
Someone sent me this article. It makes a point about the calendar holidays which I had not noticed. Here is their follow up aricle.
Since much of the physical buying comes out of Asia, and most of the price manipulation seems to originate in London and New York, this could be interesting. Although the setup is there for a thin trade, it takes a look at the composition of the markets, and the actual details of the options and contracts held in balance to other things, in order to make any judgements.
I do know that quite a few specs are jiggy with their recent gains in silver. This makes a retracement possible if someone 'gets the ball rolling' as they say. On the other hand, I have seen fellows use option expiration to breakout metals and other instruments and beat the shorts mercilessly. It is hard to trade this sort of event reliably if one is not an insider.
I stopped trading on the Comex a few years ago, before I scaled back my general trading, out of sense of discouragement in the integrity of their markets. But it is hard to get away from it, since their trades feed into and affect so many other instruments like ETFs, etc. When one take a position in a short ETF like ZSL, for example, one is trading with the Comex by proxy I would imagine.
While I do not believe in 'hanging bankers' at all, I think some serious investigations, indictments, and prison terms for the guilty white collar criminals would do a great deal to stimulate the real economy by reining in the excessive fee-based taxes from the financial sector, and refreshing the price discovery and efficiency of the markets.
But the Obama Administration is reform adverse, especially while collecting its famous billion dollar campaign slush fund. You don't get that kind of money from the "Yes We Can" crowd. And most Republicans are unashamedly servants of the pigmen.
Here is a nice, concise analysis of the Obama Administration's policy from an interview with William K. Black:
Ryssdal: What about the argument, though, that the financial system is so fragile still, and these cases so complicated, that we can’t really tear things apart with substantive investigations and prosecutions because it will all fall apart again?
Black: Yeah, that’s an excellent point. We should leave felons in charge of our largest financial institutions as a means of achieving financial stability.
Ryssdal: See, that’s funny because I was expecting you to come back with — I don’t know, JPMorgan earned $5 billion last quarter. How shaky can they be?
I am now flat in my trading account, and am not sure about putting on trades for the holiday weekend.
I had quite a few questions on this topic of when to sell silver this evening, based on a comment I made with the normal gold and silver charts. I indicated we could see a pullback and consolidation, and it might be 'impressive.' I was thinking of support around 40, maybe 38.
Unless there is a liquidation panic as we saw in 2008 then I do not believe it will be much more profound than that.
Someone brought this interview on this very topic to my attention, and I include it here for your knowledge.
I have a lot of respect for Jimmy Rogers. He is an intelligent man and a real gentleman. I think there is wisdom and experience in what he says.
I own gold and silver in various forms, but have no plans to sell any bullion for the foreseeable future. I may hedge a little for short term trading corrections, but not actually sell it until the fundamentals change, because there is too much 'friction' is buying and selling bullion.
And even with non-bullion holdings, there is the bigger problem that once you have sold and lost your position in a bull market, it is often very hard psychologically to buy back in. It is natural to wish your decision to sell to have been 'right,' and sometimes so badly that your emotions will tend to distort your perception of the market, causing you to make mistakes.
Too often we see people who have sold their positions early making all sorts of foolish comments and dire predictions, trying to get other people to join them and sell, because misery loves company. I will listen to anyone's reasoned opinion, but too often these fellows just talk nonsense and are nothing more than a distraction.
There might be quite a bit more upside in silver, and that $100 is a respectable longer term target if the dollar does not 'turn into confetti' as Jimmy Rogers says.
Gold and silver are heavily tied to the fate of the dollar in some ways, and I do not yet see a clear path for the US to reform its financial house yet. The dollar denominated debt is the last of the great credit bubbles, and that means the bonds and the currency itself.
And yet the dollar is not the be all and the end all, and this is the sea change that so many are missing. Even without inflation the price of gold and silver would likely increase because of the growing demand in the developing world, which demands its own stores of value.
No, the US will not default per se. But they can sure engineer a de facto default through monetary inflation, which is what they are doing now. And they will never admit it, and take all sorts of pains to disguise it, because that is the whole point of it, to gracefully extinguish the debt without a formal devaluation or crashing the system.
I also think that gold and silver are making up for lost time, for the twenty year bear market during which their price was beaten down, held artificially low through central bank shenanigans.
Most institutions and individual investor are underweight precious metals, at a time when they are probably needed the most as insurance against currency and financial default risks.
I began trading stocks, bonds, and options in the stagflation of the latter 1970's in the aftermath of the great bear market, and vividly remember what it was like, and how people viewed inflation hedges like gold and silver, collectibles, coins, income averaging your tax returns for inflation effects. And this is not it, not even close yet.
When the inflation concerns catch some wind in their sails, there is nothing like it. The bulk of the people and unsophisticated investors are convinced that deflation is either here or imminent. So Bernanke has smooth sailing for some time yet.
Here is what Jimmy Rogers has to say.
- Eventually everybody's going to own gold, and then we'll have to sell our gold, but that's a long way from now.
- If triple digit silver happens this year then we'll have a parabolic move and we'll have to sell, and all parabolic moves end badly. I hope it doesn't happen, because I own silver and want to buy more.
- My hope for silver and gold and all commodities will go up for ten years in an orderly manner.
I sold the rest of my index short positions on the Goldman disappointment this morning, and flattened out the metals longs into the close.
Silver is a dreadnought and I would find it hard to bet against it even at this lofty level. Gold is running into stiff resistance here in the 1500 to 1510 level. It tagged the short term measuring objective on our chart today. Whether it will higher and break through before consolidating its gains I cannot say.
A word about objectives on the chart.
Someone wrote in taking me to task a bit for 'limiting my gold target to 1500' whereas some other fellow put it at 1520 based on a little inverse H&S and why don't I show that, the implication being that I was being stingy.
First of all, the objective on the chart is pretty clear, a range from 1500 to 1510. I drew both lines as a range, and labeled the lowest one as the 'minimum. It obviously depends on how you measure the head to the neckline. I was not sure so I showed the range as a 'slop' factor.
An objective from a classic chart formation is a MINIMUM measuring objective, not a limitation. This is basic charting. The minimum has been met. That does not mean I am saying that's it, pack it up, we're done.
Second, I even drew the line down from the neckline and to the head on the little inverse H&S that forms the right shoulder of the big inverse H&S that measures up to 1590. And then I drew the same line up from the neckline to 1510. So I show the work. The measure from the head to the neckline is roughly the objective for a clean breakout from the neckline. That is how these things work. I did not put H, R and L labels on it because then the chart gets too busy. And the biggest factor for me are the trendlines.
I added something that looks like a trendline on silver. Its going straight up here which makes even me edgy, but that's what is happening, a massive short squeeze. There is a lot of pain on that chart. Try not to add to it.
At some point silver will retrace and it could be fairly impressive. But rather than waste your money chasing it for bragging rights, and shorting ahead of the breakdown, why not just buy a lottery ticket and limit your risks on that kind of strategy?
I will most likely not sell any bullion, and at most hedge it in the event of a decline that breaks a key trendline by either shorting something or buying an inverse ETF.. But that is what seems to be appropriate for me. There is too much 'friction' in selling bullion to do it frequently. The problem with selling bullion is that it is very hard to make oneself buy back in.
Some guys make a career out of taking calls after big moves, saying down if it was up, and up if it was down. Some of them word their forecasts such that they take both sides. It's not that they make any money doing this, but odds are decent they will be right half the time, and most people will forget the times they were wrong, and they certainly won't remind you.
Most of the time it's an ego thing. Trying to recapture a golden moment when they were lucky and got it right. That's a tough addiction because you don't even see it; self-delusion is a powerful drug. But they talk down to everyone else, those other dumb sheeple, because that's how they get their kicks, on Route 66.
I was fortunate. I got really lucky once, selling out a huge long position around the top of the tech bubble, and then going short and riding it almost to the bottom. And I can definitely see where that might have gone to my head. But God in His tender mercy had the market just beat the living crap out of me for almost two years in the run up to the housing bubble, as I was incredulous that the Fed would keep such a obviously reckless behaviour going. And I was wrong. So my humility was assured.
And I learned from that, and am back ahead of the game. Every speculator has to go through this, the big hit, the bloody beating, and have their teeth handed to them, at some time or another, before they are well seasoned. The trick is to remain standing and not lose your entire stake, whether it be stocks or even cards. Life is a school of probabilities, and everyone must learn. Most traders lie and will never discuss their losses, but if they are any good, they are there.
But I know a lot of guys who made big bucks in the bubbles who fell in love with themselves, and have never shaken the need to succeed, the euphoria of winning, even yet. But most of them go broke one way or the other, either monetarily or morally. And when the going gets tough, they can get rather creepy. They are perfect, but they are not doing well, so someone must be out to get them, pulling them down. That never ends well.
Silver will let us know when it is done for the time being. That does not appear to be yet, but I wonder if we are not close.
Any wonder that the United States of Amnesia would slough off any concerns about its sovereign debt this quickly?
Intel beat after the bell, and IBM posted good numbers, so all is well.
I went fairly flat into the evening, having lost most of my short index positions last night, and shed the rest of them this morning.
I lightened up considerably on metals into the close.
