SP 500 and NDX December Futures Daily Charts

Net Asset Value of Certain Precious Metal Trusts and Funds

That These Dead Shall Not Have Died In Vain

"...It is for us the living, rather, to be dedicated to the unfinished work which they who fought have thus far so nobly advanced. It is rather for us to be here dedicated to the great task remaining before us -- that from these honored dead we take increased devotion to that cause for which they gave the last full measure of devotion -- that we here highly resolve that these dead shall not have died in vain -- that this nation, under God, shall have a new birth of freedom -- and that government of the people, by the people, for the people, shall not perish from the earth."

Abraham Lincoln, November 19, 1863

Gold Daily Chart

SP 500 and NDX December Futures Daily Charts

Twilight's Last Gleaming

If you think you are disappointed in this "reformer" the next one will
probably make you want to take the gas pipe.

Next up: Stocks to Buy for Armageddon and the New Triangular Trade

SP 500 and NDX December Future Daily Charts

"But, once again, I'll get on my soapbox and shout from the top of my lungs that buying U.S. Treasuries is a Ponzi scheme that will all come crashing down on you when the Fed removes their stimulus. Sure it won't be now, or in the next 6 months, but this Treasury Bubble will pop one day, and when it does, the mass exodus to the exit door will be so jammed, that everyone will get hurt."

Chuck Butler, Everbank

Gold Daily chart

Truer words were never spoken:

"One thing I am sure of is that as this situation plays out and as gold and silver rally higher, the reasons given by some as to why the precious metals should not be doing what they are doing, rising higher in price, will become increasingly strident, insistent, and at times unintentionally funny because they are so disconnected and inappropriate compared to reality." Jesse

Gold Daily and Silver Weekly Charts

This is what triggered the selloff in silver today, but the price was rather extended above trend when the news came out. The exchange gave some relief to the short interest.

CME Group to Raise Silver Margins by 30 Percent

NEW YORK, Nov 9 (Reuters) - CME Group said on Tuesday it will raise its silver futures trading margins by 30 percent to $6,500 an ounce from $5,000 an ounce effective Wednesday.

U.S. silver futures surged as much as 6 percent before retreating, with volume rising to an all-time high on Tuesday, boosted by extreme price volatility and possible short covering, traders said.

Also read Three's Company: Silver Margin Change by Jim Rickards

I do not see this as impairing the rally unless stocks undergo a sustained selloff. I would prefer to see a steadier, non-parabolic rise that slowly roasts the big short interest on a spit of their own construction.

SP 500 and NDX December Futures Daily Charts: SP Weekly Chart At Key Resistance

Looking at the SP weekly chart at the bottom, if the Banks and the Bulls can break it out here and stick it above 1250 they could make a viable effort at another asset bubble.

Net Asset Value of Certain Precious Metal Trusts and Funds: Wall Street Takes 8 Percent of M1

Notable that the Gold/Silver price ratio has dropped below 50.

I have noticed that the Sprott Gold Bullion Fund units outstanding is fluctuating slightly. I wonder if the trust is buying and selling their units in the market on a low scale basis for purposes of cash management. The amount of bullion held is not changing.

If you click on the category name "Net Asset Values" at the bottom of this entry you can see the prior reports like this.

I expect gold and silver to meet our forecast targets of 1450 and 30 barring a meaningful correction in US equity prices. The rally is powerful indeed as people and institutions around the world flee the actions of the US banking system and the fraudulent financial activity that surrounds them. It seems intimately tied to the US dollar, in its creation, use, and distribution. The problem is not that dollars are being created but rather that they are being created and diverted over to unproductive activity including war, fraud, and speculation.

Franklin Delano Roosevelt once said,

"In politics, nothing happens by accident. If it happens, you can bet it was planned that way."

I think this same general axiom applies to certain categories of financial developments. If a firm's or trader's track record looks too good to be true, it probably is. And in my own opinion the US financial markets are rife with insider trading, confidence games, and manipulation.

Obama and the Congress has failed to reform the Too Big To Fail banks, and so this is the state the world now finds itself in with Wall Street and other big multinational banks taking record bonuses from their people. In the US alone Wall Street will be taking a record $144 billions in bonuses this year while the country suffers. To put this in context, M1 money supply is now about 1,800 billion. So Wall Street is taking about 8% of the national M1 money supply in personal bonuses this year not including subsidies both direct and indirect. That is not a financial system; that is racketeering. And any reform movement that does not address this need for systemic reform is misguided at best, and quite possibly yet another calculated diversion from the monied interests.

Here is a Chinese cartoon clip describing the US financial system as it is today.

I am holding no positions now since I am a bit distracted by personal matters, and that this will be almost full time for the next few days. I therefore closed my short term silver and gold longs and their hedges this morning so I will not be distracted by them. Gold and Silver are already so close to the targets I set so many months ago that I consider them fulfilled and would not quibble over a few dollars more. Now we will see what happens next.

In the end all things pass away, and only love endures. I will be watchful for a sign that the US equity market has topped but will resist the temptation to anticipate it. My sense it that we are not quite there yet but I have an open mind, and as I said the other day, I will not underestimate the resolve of the bankers to raise another credit bubble.

SP 500 and NDX December Futures Daily Charts

Gold Daily and Silver Weekly Charts

SP 500 and NDX December Futures Daily Charts: Possible Top in US Equities Coming

The inverse head and shoulder formation in the SP 500 has obviously 'worked' and is still active. The measuring objective is somewhere between here and 1245, possibly 1250, depending on where one marks the head and the neckline.  There is a similar formation as indicated in the NDX chart below.

If a decline does develop it could very well retest support at 1030, and close the gaps that were left on the way up. The signal that a top is in will be the confirmed break of the trendline.

We must remember that the Fed is in the markets and providing substatial monetization liquidity which can underpin financial assets at unnatural levels. The worst mistake I ever made in markets was underestimating the resolve of the Fed to create and support asset bubbles in the 2003-07 market rally. Charts are indicative of supply and demand levels. In the case of market interventions and the correction of long term distortions their effectiveness can be diminished.

But even the mighty Federal Reserve does not have perfect latitude to operate in the markets and determine their outcome. Charts are one method of obtaining insights into their success and failure and can be particularly effective when used with other, more fundamental, sources of information.

Very Long Term US Dollar Chart

The revaluation of the SDR should be occurring around the end of 2010. As you know it is composed of a valuation basket of currencies that is adjusted every five years. There has been a recent change in voting power in the IMF that may give more weight to the BRICs and those who favor a broader basket that includes gold and silver. India, China and Brazil Become Major Players in the IMF.  This is also of importance because we forecast that the SDR is going to be a likely candidate to supplant the Dollar as the world's reserve currency, a move that will be resisted and delayed by the Anglo-American financiers.

I do not know of any plans to change the valuation basket of the DX US dollar index. It is obviously out of date as the breakdown on the chart below shows. In previous postings of the very long term Dollar Chart I have warned that the projections may not be realized because the index is heavily weighted to the developed nations. 82 percent of the valuation is attributed to the euro, pound, and yen.

Gold Daily Chart: Some Comments On Gold by John Hathaway

John Hathaway
October 28, 2010

The world’s monetary system is in the process of melting down. We have entered the endgame for the dollar as the dominant reserve currency, but most investors and policy makers are unaware of the implications.

The only questions are how long the denouement of the dollar reserve system will last, and how much more damage will be inflicted by new rounds of quantitative easing or more radical monetary measures to prop up the system.

Whether prolonged or sudden, the transition to a stable monetary system will become possible only when the shortcomings of the status quo become unbearable. Such a transition is, by definition, nonlinear. So central-bank soothsaying based on the extrapolation of historical data and the repetition of conventional wisdom offers no guidance on what lies ahead.

It’s amazing that there is no intelligent discourse among policy leaders on the subject of monetary rot and its implications for the future economic and political landscape. Until there is fundamental monetary reform on an international scale, most economic forecasts aren’t worth the paper on which they are written.

Telltale signs of future trouble aren’t hard to spot. Only a few months ago, Federal Reserve Chairman Ben Bernanke and a chorus of other high-ranking Fed officials were talking about exit strategies from the U.S. central bank’s bloated balance sheet and the financial system’s unprecedented excess liquidity. Now, those same officials are talking about pumping more money into the system to stimulate growth.

Risky Targets

And they’re not alone: Six months ago, the chief economist of the International Monetary Fund, Olivier Blanchard, suggested that raising inflation targets to 4 percent from 2 percent wouldn’t be too risky.

This sort of talk must grate on the nerves of our trading partners, China, India, Russia and others, who have accumulated pyramids of non-yielding Treasury debt. No haven there. Return- free risk may be a better way to put it. And bickering among central bankers over currency manipulation and rising trade tensions doesn’t exactly reinforce one’s confidence in a scenario of sustained economic growth and a return to prosperity.

The prospects for an orderly unwinding of the extreme posture of global monetary policy are zero. Bernanke, Jean- Claude Trichet and Mervyn King, his counterparts in Europe and the U.K. respectively, are huddling en masse upon the most precarious perch in the history of monetary affairs. These alleged guardians of monetary stability, in their attempts to shore up the system, have simply created the incinerator for paper money. We are past the point of no return. Quantitative easing may well become a way of life.

No Freak Occurrence

The consensus investment view seems to be that the credit crisis of 2008 was a freak occurrence, unlikely to repeat. That is wishful thinking. Monetary policy has painted itself into a corner. Based on our present course, there will be more bubbles and more meltdowns.

Financial markets and institutions sense trouble, as reflected in the flight to supposedly safe assets such as Treasuries and corporate-debt instruments with paltry yields, as well as the reluctance to lend by commercial banks. We are stuck in an epic liquidity trap. The irony is, if global central banks succeed in creating inflation, the value of these safe assets will be destroyed. It is a slaughter waiting to happen.

In the pedantic mentality of central bankers, their playbook creates just the right amount of inflation. As inflation accelerates, consumers will spend to get rid of their dollars of diminishing value and spur the economy. Once consumers start spending, it will be time to raise interest rates because a solid foundation for prosperity will have been established, they say.

Slender Thread

But whatever the playbook promises, the capacity of financial markets to overshoot can’t be overestimated. The belief among policy makers and financial markets in the possibility of this sort of fine-tuning is preposterous, but it is the slender thread on which remaining investment and business confidence rests.

The breakdown of the monetary system will be chaotic. When inflation commences, it will be highly disruptive. The damage to fixed-income assets will seem instantaneous. Foreign-exchange markets will become dysfunctional. The economy will become even more fragile and unpredictable.

Gold is an imperfect, but comparatively reliable, market gauge for the extent of current and future monetary destruction. The recent acceleration in the dollar price of the metal to $1,381, a record high in nominal terms, coincided with talk of a new round of quantitative easing and highly visible discord among major nations on trade and currency-valuation issues.

Naysayers’ Bubble

Naysayers point to gold’s price and see a bubble, without understanding that the only acceleration that is taking place is in the rate of decline of paper currency. The Fed is organizing an attack on the dollar’s value, believing that this is the most expedient way to defuse deflationary market forces. The man in the street is unaware, a perfect setup. Inflation can only be successful when the public doesn’t see it coming.

The sudden torrent of commentary on gold isn’t the sign of a bubble. Anti-gold pundits provide a great service to those who grasp this historical moment: They facilitate the advantageous positioning of the one asset most likely to be left standing when the dust settles.

(John Hathaway is a managing director of Tocqueville Asset Management LP in New York. The opinions expressed are his own.)

h/t Terry Laundry for the Hathaway commentary and Phoebe for sending it my way

Gold Daily and Silver Weekly Charts

Today was what they call a 'buying panic' driven primarily by short covering in US denominated dollar assets, and gold and silver were significant beneficiaries.

One would expect some follow through and then a consolidation after such a big move higher. I was heavily hedging my own positions into the close.

Let's see what happens.

SP 500 and NDX December Futures Daily Chart

Quantitative easing yes, and the reflation trade of course.

But if you look you may notice that the rally today was a bit narrow, and driven in part by heavy buying in call options that eventually forced market makers into the equity market to buy stocks to hedge their positions. Financial and material companies were leading the pack.

Still, as you can see, do not jump into a bearish posture or you will be forced to make your losses good and feed the beast. This looks like a Ponzi scheme, but that does not mean it can cannot go on for some time.

Sprott Adds 6.5 Million Ounces of Silver to Its Trust at Approximately 25.82 Per Ounce

It is my understanding that the Sprott Trust 'books' the silver when it makes the deal to acquire it, but the actual silver will not be obtained and delivered to their vaults for some weeks as the market gathers the bullion together and ships it to them.

This was a very large purchase, and it will be interesting to see if we can determine where it is coming from as inventories draw down. Many analysts watch the reports from the Comex each day for example, and how the various levels of supply fluctuate. Then again, in this paper driven world of fractional reserve inventories at the LBMA and the unallocated accounts of certain holdings it may not show up at all, at least for now. The paper game is pervasive.

Our estimate based on the available data is that they purchased 6.5 million ounces of silver at an average price of 25.82 US dollars per ounce. This is a 1.2% premium over today's spot price of 25.51, and a much larger premium over yesterday's paper prices that went as low as 24.10 intraday.

It is interesting that even on very large purchases it appears there is a premium to be paid to acquire actual unemcumbered bullion versus fractional reserve paper claims. Handling charges? lol.

Some might consider the price that Sprott paid to be a 'leading indicator' of where silver will be going. I think when the paper Ponzi scheme actually collapses silver will be much higher than that. After all, "he who sells what isn't his'n must buy it back or go to prison." Unless, that is, they are running the game. Then they just pay a fine and admit no guilt.

By the way, I have heard that it was J Aron (Goldman) leading the bear raid on gold with a 'monster short' in the futures pits yesterday. I wonder who they were acting for and whose money they lost? The CFTC could always pull the tickets and inquire, but it might very well be one of their colleagues down the street. As you may have heard, it is said that Goldman itself is accumulating bullion. I have heard of this for quite some time, and you may recall that I said when the time is right a big player like the squid will slither out of their lair and strangle the metals shorts,  and perhaps ruthlessly so.

As an aside, I get a few 'sour grapes' emails almost every day out of the many hundreds I receive. I try to read and respond to each one, with a few exceptions for the spam filter. Some think I am too liberal, some think I am too conservative. Some think I am even guilty of the crime of being French! I am not but would gladly claim that prize. If you can offer me dual citizenship please do. lol. Some believe I speak about spiritual matters too much, or mention personal matters even obliquely, or don't invite them to my restaurant for 'free meals when they are in town.' Sometimes the self-centered and self-righteous indignation is remarkably funny. How dare anyone exist who does not do so for their personal and immediate convenience! Well, we see these types on the highway almost every day, so I imagine they must be on the internet as well.

But by far the greatest complaint I am getting is that I "write about gold and silver too much."

I write about the things that I love and that interest me: good food, good people, beautiful ideas and things, the vagaries of human nature, the Spirit.

I can think of no more interesting or important phenomenon than the decline and replacement of the US dollar as the world's reserve currency. And if you are in any way influenced or affected by the world of money, believe me when I say that it is of importance to you as well. And there is no more certain sign right now of what is happening than the bull market in gold and silver, and certain other commodities.

It is time to get your affairs in order. There are times ahead that will try men's souls.

Gold Daily Chart and the Fed's Monetization Plan

Volatile day in the metals with bear raids abounding from the New York open.

Gold and silver would not be denied.

Here is a nice summary of what the Fed announced from Everbank World Markets.

"The Federal Open Market Committee announced they would be purchasing $600 billion of treasury securities over a time period ending in June of 2011. These security purchases will be concentrated in the 3 to 7 year area with an average duration of 5-7 years. The official statement said the purpose of these purchases was to promote a stronger pace of economic recovery and to help ensure that inflation, over time, is at levels consistent with its mandate.

The FOMC also directed the NY Fed to continue to reinvest principal payments from agency debt and agency mortgage-backed securities into longer-term Treasury securities. Based on current estimates, the NY Fed expects to reinvest another $250 to $300 billion over the same period. This brings the total of the stimulus package to just under $1 trillion dollars."

SP 500 December Futures and US Long Bond Daily Charts

Benny and the Fed delivered a 600 Billion dollar in new monetization program today, not including rollover purchasing which should take the total purchasing for 2011 a bit closer to a trillion.

The program will be for 8 months, rather than the expected 6, and will not include MBS or the 30 year Bond, which was particularly hard on Big Daddy today which you can see from the second chart below of the 30 year bond.

As a side note, coming into today's FOMC meeting, Bloomberg says that Goldman Sachs was advising traders to 'buy the long end of the curve.' Surprise, surprise, surprise. LOL.

New COMEX Related Silver Manipulation Lawsuit Includes Charges of 'Racketeering'

Self-regulation and efficient markets hypothesis. Feh!

It will be interesting to see if this makes it into the discovery process and if any government officials will assist in the investigation process. This looks like a job for hairy knuckled prosecutors armed with subpoenas and wiretaps.

The mainstream media will most likely ignore this and the usual suspects from the demimonde of the financial media will dismiss it as nonsense.

One has to wonder if this is what CFTC commissioner Bart Chilton was alluding to in his recent statement.

NEW YORK, Nov. 3, 2010 /PRNewswire/ -- JP Morgan Chase & Co. (NYSE: JPM) and HSBC Securities Inc. (NYSE: HBC) face charges of manipulating the market for silver futures and options in violation of federal commodities and racketeering laws, according to a new lawsuit filed Tuesday in the U.S. District Court for the Southern District of New York

The suit – which alleges violation of the Commmodity Exchange Act and the Racketeering Influenced and Corrupt Organizations (RICO) Act – alleges that the two banks colluded to manipulate thhe market for silver futures starting in the first half of 2008 by amassing huge short positions in silver futures contracts they had no intent to fill, but did so to force silver prices down to their benefit.

The suit was filed on behalf of Carl Loeb, an independent investor in silver futures and options, by Seattle-based Hagens Berman Sobol Shapiro LLP, a class-action and complex litigation firm. "The practice of naked short selling has long been a serious issue on Wall Street," said Steve Berman, co-counsel and managing partner at Hagens Berman. "What we know about the scope and intent of JP Morgan and HSBC's actions in this short-selling scheme dwarfs any other similar attempt to manipulate a commodities market."

According to the complaint, JP Morgan amassed a sizeable short position in silver futures and options in part through its March 2008 acquisition of investment bank Bear Stearns. By August 2008, JP Morgan and London-based HSBC controlled more than 85 percent of the commercial net short position in silver futures contracts.

The suit alleges that, starting in early 2008, the two banks began manipulating the silver futures market by accumulating unusually large "short" positions and then secretly coordinating enormous sales of silver futures contracts on the Commodity Exchange, which is known as "COMEX" and is part of the New York Mercantile Exchange.

According to the lawsuit, JP Morgan and HSBC used a variety of methods to coordinate their manipulation of the market for silver futures contracts, signaling when to flood the COMEX market with short positions, which caused the price of silver futures and options contracts to crash.

The suit describes two "crash" events that were set in motion by JP Morgan and HSBC, one in March 2008, and the other in February 2010, after defendants had amassed large short positions. In the wake of both events, the suit alleges, COMEX silver futures prices collapsed.

"We believe that JP Morgan and HSBC's scheme was carefully conceived and coordinated to maximize their profits at the expense of innocent investors who believed that they were trading in a market free from manipulation," Berman said.

The complaint also contains allegations that in September 2008, the U.S. Commodity Futures Trading Commission launched an investigation that would eventually consider allegations made by a London-based independent metals trader named Andrew Maguire that the silver futures market was being manipulated.

The complaint alleges that Maguire disclosed to the CFTC on Feb. 3, 2010 that he received a signal from the two banks of their intent to drive down the prices of silver futures two days later, on Feb. 5, 2010. Maguire's information was correct and the price of silver dropped dramatically between Feb. 3, 2010 and Feb. 5, 2010.

In addition, the lawsuit states that both JP Morgan and HSBC still maintain highly concentrated holdings in short positions in silver futures and options, giving both banks the ability to continue manipulating the price of silver.

Plaintiffs' attorneys have asked the court to certify the case as a class action and enjoin JP Morgan and HSBC from continuing their alleged conspiracy and manipulation of the silver futures and options contracts market.

Attorneys also ask the court to award damages and attorneys' fees to the class.

Just remember that Blythe said Don't Panic. She's got your backs. Or is busy cutting a deal. You will have to decide which is more likely.

I also hear that high flyer Steve Black, who was promoted up at the beginning of the year, will be leaving JP Morgan.

Net Asset Value of Precious Metals Trusts and Funds: Sprott Silver Trust Cash Position

With the addition of 7.5 million units, presumably from the allotments to the underwriters, the cash position of the Sprott Physical Silver Trust has risen to over 180 million US dollars according to their data and our calculations.

According to the terms of this trust, the monies must be applied to the purchase of silver bullion. Sprott may have already arranged for the delivery and price of the bullion, but has not yet booked it. Or perhaps they must still secure supply.

Gold and silver received some fairly stiff and obvious bear raids this morning, at least by recent standards, no doubt in anticipation of the FOMC announcement of Quantitative Easing II this afternoon. Market manipulation will continue until public confidence is restored. lol.

Today I am still running light positions in a well balanced pair of long bullion and short stocks, particularly in the financial sector. I expect I might make some changes around 2:45 New York time this afternoon.

The Working Class

Gold and SP 500 December Futures Daily Charts

Net Asset Value of Certain Precious Metal Trusts and Funds

We had some very unexpected news today.

One tries to prepare for anything, hope for the best and prepare for the worst, but sometimes when we least expect it, are completely surprised by joy.

Thanks be to God and thank you for your good encouragement and especially your prayers.

Gold Daily and Silver Weekly Charts

SP Daily Chart: US Equity Rally Reverses on SEC Probe of JPM and Magnetar CDO Issuance

The US equity market reversed its rally with the better than expected ISM number on news that JPM is under SEC investigation as reported by Bloomberg.

It appears as though JPM put together a CDO with Magnetar, which helped to select some of the components. While Magnetar bought some of the CDO, it also invested a significant amount in CDS that bet on the failure of the CDO.

The implication is that JPM and Magnetar did some of the same things that Goldman and Paulson had done.

This reversed the rally and took the financials down.

Personally I think US equities are still in their trading range with 1168 as a lower bound and 1194 as the upper bound. The wiseguys are doing a daily wash and rinse on the specs. Volumes are thin and positions are almost without any substantial foundation with the average holding time of most positions under a minute. This is a market that seems primed and ready for a flash crash, but it requires some 'trigger event' to materialize. So timing a trading decline is a bit of a fool's game in the short time.

There are three events that could affect US equities this week.

First is the national midterm election tomorrow, in which the Republicans are widely expected to take control of the House of Representatives. The Senate is a much less certain outcome. Most likely there will be 'gridlock' in the US for the next two years with power more evenly balanced between Republicans and Democrats. Any divergence from expectations in the elections results could provide some momentum out of this trading range.

The next event will be the FOMC decision on Wednesday with wide expectations of a $500 billion commitment to quantitative easing. A significant deviations from this number could provoke a market reaction.

And finally back to the real economy there will be a Non-Farm Payrolls report on Friday that will be closely watched. Consensus is for 60,000 jobs to be added.

In the background there is the 'cargo cult' of new terrorist threats permeating the news with the revelation of disguised bomb packages originating in Yemen.

This market is so artificial that it is difficult to forecast just what it will do that is out of trend.

Chart added at 4:20 PM NY Time

Sprott Physical Silver Trust

Here is a link for the Sprott Physical Silver Trust

I will be tracking the progress of their silver accumulation and will be working them into my Net Asset Valuation calculations as time permits this week.

I do own some shares which I bought in the IPO. I may add later if the markets indicate this. I would like to build a long term position but will  'make haste slowly' as the Romans said (Festina lente).

This is a busy week for me in a non-market related matter. For those of you who have offered their prayerful support and encouragement I thank you from the bottom of my heart.

Things can be replaced. People can't.

Gold Daily and Silver Weekly Charts

The charts seem to be fairly obvious. Gold hit the pivot point for a 'significant decline' and rallied sharply. Silver is just a juggernaut, using the top of the old trend channel now as support.

Unless and until US equities crash, I would expect both gold and silver to continue to rally. The reasons are obvious to anyone who is following the markets and has even a basic understanding of money and economics. These are not charts so much as economic IQ tests.

People who lost money trading silver futures or options on the New York Commodity Exchange since 2008 are eligible to join the class-action price-manipulation lawsuit brought this week against J.P. Morgan Chase & Co. and HSBC Bank in U.S. District Court for the Southern District of New York. To express interest in becoming a member of the class of plaintiffs, contact:

Kellie Lerner
Labaton Sucharow LLP
140 Broadway
New York, NY 10005
Telephone: 212-907-0700
Fax: 212-818-0477
KLerner@labaton.com

SP 500 December Futures Daily Chart

If a close look at this chart suggests to you that someone is inflating US financial asset prices you might very well be right.

Except for hedges and scalps I would not even consider shorting this market until it breaks the obvious trendline. I'd be willing to miss the first 10 percent of a down move to catch the meat of it, and not exhaust myself trying to anticipate a correction. Only amateurs make calls and chase 'bragging rights.'

At the same time the 200 week moving average has proven to be formidable resistance in the last rally, and so I would not feel comfortable taking determined longs here either. The average holding time of a position in this market is literally less than a minute, so the potential for another 'flash crash' seems rather high.

Sprott Physical Silver Trust: PSLV To Debut at 500 Million Dollars

Keep an eye on the Sprott Physical Silver Trust which will begin trading this week as symbol PSLV.

Reuters
Sprott silver trust IPO to raise $500 million
Fri Oct 29, 2010 8:34am EDT

TORONTO Oct 29 (Reuters) - Sprott Inc, the Canadian fund manager specializing in resource investments, said on Friday that it planned to raise $500 million in the initial public offering of the Sprott Physical Silver Trust.

The offering will consist of 50 million units priced at $10 each.

The trust, which will be managed by Sprott Asset Management, will invest and hold nearly all its assets in silver bullion.

It will be listed on the NYSE Arca and the Toronto Stock Exchange under the symbols "PSLV" and "PHS.U," respectively.

The offering was made simultaneously in the United States and Canada through a syndicate of underwriters led by Morgan Stanley (MS.N) and RBC Capital Markets (RY.TO).

As part of the offering, the underwriters have been granted an overallotment option to purchase up to an additional 7,500,000 units at $10 each.

The Canadian syndicate includes TD Securities Inc (TD.TO), Canaccord Genuity Corp, National Bank Financial Inc (NA.TO), BMO Capital Markets (BMO.TO), HSBC Securities (Canada) Inc, GMP Securities LP, Wellington West Capital Markets Inc, and Mackie Research Capital Corp.

Sprott did an initial public offering of the Sprott Physical Gold Trust in March, which raised $400 million. The value of that trust crossed the $1 billion mark at the end of last month as gold prices soared.

JPM and HSBC Sued for Silver Market Manipulation

As I recall when Blanchard sued Barrick and JPM for manipulating the gold market one of the first motions to dismiss came from Barrick who claimed that they were acting at the behest of the government and the central banks.

I believe the law firm representing this was the one who was successful in the Sumitomo copper litigation.

Reuters
JPM and HSBC Sued for Alleged Silver Market Manipulation
By Jonathan Stempel

NEW YORK, Oct 27 (Reuters) - JPMorgan Chase & Co (JPM.N) and HSBC Holdings Plc (HSBA.L) were hit with two lawsuits on Wednesday by investors who accused them of conspiring to drive down silver prices, and reaping an estimated hundreds of millions of dollars of illegal profits.

The banks, among the world's largest, were accused of manipulating the market for COMEX silver futures and options contracts from the first half of 2008 by amassing huge short positions in silver futures contracts that are designed to profit when prices fall.

"Defendants reaped hundreds of millions of dollars, if not billions of dollars in profits" from the conspiracy, one of the complaints said.

The respective plaintiffs, Brian Beatty and Peter Laskaris, each said they traded COMEX silver futures and options and contracts, and lost money because of the alleged manipulation.

Beatty lives in Connecticut and Laskaris in New York, court records showed. The lawsuits seek class-action status, damages that may be tripled and other remedies. The defendant banks are major participants in the silver market.

JPMorgan declined to comment. An HSBC spokeswoman had no immediate comment.

The lawsuits were filed one day after the Commodity Futures Trading Commission proposed regulations to give it greater power to thwart traders who try to manipulate prices.

The CFTC began probing allegations of silver price manipulation in September 2008.

"Going back to the early 1980s, silver has been an extremely volatile market," said Bill O'Neill, managing partner at Logic Advisors, an Upper Saddle River, New Jersey investment firm specializing in commodities. "I often describe it as a speculative playground. You have to be a big boy to play."

FRAUD, DEVIOUSNESS ALLEGED

Only once in its 36-year history has the CFTC successfully concluded a manipulation prosecution, in a 1998 proceeding concerning prices for electricity futures.

Speaking on Tuesday, Chairman Gary Gensler said the proposed regulations would give the regulator greater power to police "fraud-based manipulation."

Commissioner Bart Chilton added that there had been "fraudulent efforts to persuade and deviously control" silver prices.

A CFTC spokesman said the regulator does not comment on investigations, and would not discuss the investor lawsuits.

Earlier this year, the CFTC began looking into allegations by a London trader that JPMorgan was involved in manipulative silver trading, the Wall Street Journal said on Wednesday, citing a person close to the situation.

Silver prices have faced regulatory scrutiny in the past, perhaps most prominently after the Hunt brothers in Texas in 1980 attempted to corner the market, driving prices above $50 an ounce. The price later plunged.

Since the CFTC began its probe, spot silver prices XAG= have ranged between $8.42 and $24.90 an ounce, Reuters data show. They traded Wednesday at roughly $23.53. Silver futures prices SIc1 are up 39.1 percent this year.

Gold Daily Chart

SP 500 December Futures Daily Chart

The US stock market is like velveeta cheese: full of artificial content and favored by rats.

Gold and Silver Options Expiration

Those who hold in-the-money options receive long and short positions in the futures today. Sometimes they like to run the stops to test the new hands on board.

Just in case you were wondering.

The Sprott Silver Trust is pricing tonight as well I believe.

Full Text of CFTC Commissioner Bart Chilton's Statement on Market Manipulation

Has the US financial media mentioned or even discussed this? Today the Bloomberg television news people are busy discussing the World Wrestling Federation, a caricature of sport analagous to the Comex and NYSE as financial markets.

Statement of Commissioner Bart Chilton
U.S. Commodity Futures Trading Commission
Public Hearing on Anti-Manipulation and Disruptive Trading Practices
Washington, D.C.
Tuesday, October 26, 2010

I take this opportunity to comment on the precious metals markets and in particular the silver markets.

More than two years ago the agency began an investigation into silver markets. I have been urging the agency to say something on the matter for months. The public deserves some answers to their concerns that silver markets are being, and have been, manipulated.

The legal definition of manipulation under the law is a high bar to prove. It is a much different test than what the average person might consider as manipulation. Under existing law, to prove manipulation, the government is required to demonstrate not only specific intent; we also need to prove that as a result of the intent and market control, that activity caused an artificial price -- a point that can certainly be debated by economists.

Attempted manipulation is less difficult to prove -- requiring an intent to manipulate and some overt act in furtherance of that intent. There are also other violations of law that could contort markets and distort prices.

I believe that there have been repeated attempts to influence prices in the silver markets. There have been fraudulent efforts to persuade and deviously control that price. Based on what I have been told by members of the public and reviewed in publicly available documents, I believe violations to the Commodity Exchange Act have taken place in silver markets and that any such violation of the law in this regard should be prosecuted.

In saying this, I am fully aware of the prohibition from divulging trader names or information about their positions I am extremely careful not to violate the law in this, or any, regard. I also cannot pre-judge anything the agency may do with regard to our silver investigation, or any other matter.

The Wall Street Reform and Consumer Protection Act, which I strongly supported, contains new manipulation provisions as well as anti-disruptive trading rules. These new authorities, along with the implementation of thoughtful position limits in metals, will go a long way toward ensuring more efficient and effective metals markets devoid of fraud, abuse, and manipulation.

Thoughtful investigations take time. The CFTC staff has worked extremely hard on the silver investigation. That said, there is a point at which it is our responsibility to say something. Within the law, I have done so. I am hopeful that the agency will speak publicly about the investigation in the very near future and when they do so that it will be in a more granular fashion than I am permitted from doing at this time.

CFTC Probes JP Morgan's Silver Trading

The spectacular silver rally and current price is no bubble. HSBC and JPM stopped shorting the market so vigorously and began to actually cover some of their positions as a result of CFTC investigations.

Since the CFTC had previously investigated the market and done nothing, one might speculate that the publicity had provoked some behind the scenes discussions. JPM recently shut down its proprietary trading unit under Blythe Masters.

I will be absolutely stunned if anything except for a wristslap with no admission of wrongdoing is the result. However behind the scenes we might see a less oppressive domination of the silver market by these TBTF banks. But the profiteering will continue here and elsewhere. This is no reform administration and the Republicans were the primary authors of much of the crony capitalism so there is little relief to be found there.

What the masters of the universe seem to have not quite figured out yet is that you cannot keep skimming about 8 percent of M1 off each year as Wall Street bonuses, gimmicking and distorting the financial system to enable their control frauds, and maintain robust real economic activity. There were quiet coup d'etats in the UK and US, but the people do not yet realize it. At some point they will see the necessity of reform, and then we might have a sustained recovery. Until then, welcome to Zombieland.

CFTC scans JP Morgan's silver trading business
By Sakthi Prasad in Bangalore
Wed Oct 27, 2010 2:13am EDT

(Reuters) - The U.S. commodity futures regulator is looking into claims by a trader in London that JPMorgan Chase & Co (JPM.N) was involved in manipulative silver trading, the Wall Street Journal reported, citing a person close to the situation.

In recent months, U.S. Commodity Futures Trading Commission (CFTC) lawyers have interviewed employees of JPMorgan in its metals trading business, the newspaper said, citing a person familiar with the situation.

Along with JPMorgan, CFTC lawyers have also interviewed industry traders, commodity executives, experts and employees of other metals trading firms, WSJ said.

JPMorgan declined to comment to the Wall Street Journal on any aspect of the investigation. The firm could not immediately be reached for comment by Reuters outside regular U.S. business hours.

On Tuesday, Bart Chilton, a commissioner at the U.S. CFTC said there had been repeated attempts to influence prices in silver markets.

The Journal said JPMorgan and HSBC Holdings PLC (HSBA.L) have usually been the big players in the silver market.

However, in recent months the banks with large futures positions have sharply reduced the size of their holdings, the paper said.

(Reporting by Sakthi Prasad in Bangalore; Editing by Clarence Fernandez)

Here Is What A Significant Selloff In Gold Might Look Like With Our Active Chart Formations

If there is a severe correction in stocks a selloff in gold could ensue that would be a more severe than a simple retracement and consolidation. I am showing this not because I now think it is more likely, but rather because people write in and have asked for this type of more pessimistic scenario.

Here is what the correction might look like as a retest of the breakout trendline. From a timing standpoint the US November election looks likely as a pivotal event and a decision point in the November 2-9 timeframe.

On a nominal basis, the depth of this selloff would be approximately the same as that which happened in July and August of this year following the initial breakout in the cup and handle formation.

If there is not a severe correction in stocks, gold is more likely to stay within the short term trendlines in blue until it regains the upward momentum and follows the intermediate green trendlines higher.