Metals musings, 1/13

Silver's where it's at right now. In my view, if we're going to see the metals break out of their 4 month slump, silver will lead the way. So, I have just one gold chart, the weekly.


The trend lines on this chart connect every closing price since 2008. There looks to be a symmetry in the recent action with the 2008 bottom.

I said on Christmas that the silver bottom would be in within 4 weeks. We will enter the fourth week on Tuesday, and I have no reason to change my forecast. I had calculated that in the coming week the 34- and 55-week MAs would cross, and that should indeed happen, with bullish ramifications, if historical patterns have any weight.

On the above weekly chart, it also looks like we broke out of the falling wedge. Barely, I'll admit, as an emphatic breakout was prevented yet again with a few very sudden, violent, high-volume, last-minute bear raids. This has been the case almost without exception since Labor Day. Still, my gut tells me that if the lower grey dotted line of the wedge was going to be tested, this would've been the week, and it wasn't; while the finish today +25 cents in closing hours was important. I think we're headed to $36 over the next few weeks.


I missed the breakout Monday, but I used the daily chart from last week to get in today *right* at the bottom ($29.45), which hopefully will be the final low before a strong ascent (see case 1, brown arrow). But, I'm not celebrating just yet, as there are 2 other strong possibilities that I consider more likely than others and that I want to be prepared for: Case 2 (see green arrow), in which we test the bottom of the light blue channel again, and it functions as support, confirming that the black down channel has been "trumped" by the longer term up channel; or Case 3 (see red arrow), in which we fall through the light blue channel, suggesting to me that the $26 red/green horizontal support line will also fail this time, and we will fall at least to the bottom of the downtrending black channel at $25. Don't get too aggressive!



I'm encouraged, though, partly because of the tell-tale 10-year treasury:silver ratio charts. The ratio seems to be falling like clockwork after denoting yet another bottom:

Weekly version:

I'm also partially encouraged because the price action over the past few weeks has strongly resembled the pre-explosion bottom of 11 months ago:

Finally, the gold:silver ratio chart I posted on Christmas:




It sustained a day of damage during the low-volume late December crash, but looks to be back on track.


Of course with looming events such as war with Iran (and possibly WWIII shortly thereafter) it feels kind of foolish to look at charts at all. Truth be told, as big a fan as I am of the metals, I'm afraid that our ruling elite fears and detests gold hoarders with such intensity, even more than they do serial killers and pedophiles, that it's hard for me to feel too encouraged that PM investments will ever be allowed to pay off in a really big way. But, so long as studying chart patterns continues to pay off for me, I'll keep studying them and sharing my ideas with you. Have a nice weekend, everybody.

17 comments:

The Big Setup said...

..Talking about paper and the comex, I am officially kicked off the Turds site..because I stated he writes about how crooked the EE is then trades for paper profits with them. How can you be a cop and a criminal at the same time? I got about 30 hat tips for asking!

Jeanne d'Arc said...

@Big Setup

Yes, unfortunately there are quite a few sites where dissent from the party line is often ruthlessly crushed. I experienced it myself at Turd's site (under two previous incarnations of Jeanne d'Arc) for raising subjects that are not welcome. And I'm banned from commenting as Jeanne d'Arc on several other sites. I think between the five regular Screwtape contributors, we've pretty much got a full set of silver sites where we're personae non gratae.

You would think that, if their much-vaunted mission to inform and educate the sheeple (and get to the truth of what goes on in the PM markets) were genuine, then debate and counter-views would not just be tolerated, but actively encouraged. Alas, this is usually far from the case.

It's enough to make one wonder what their agenda might really be...

Anyway, you're very welcome at Screwtapes, regardless of your views. All the well-known contrarians have passed through here at some point: KD, BOF (now writing for us, in fact), Bron, Yukon, Hammy, Trinity B, the list is endless. What is frustrating is that all of those are generally bullish on the metals, as are the Screwtapes contributors themselves. But we're regularly slated as 'perma bears'. I'm still waiting for someone to explain that one to me...

For us, it's the complete opposite. I wish we could get more of the EE crowd from other sites to comment. It would really add to the debate. Unfortunately, they often seem reluctant to engage with critical analysis of what they're saying, or provide evidence for their views.

Jeanne d'Arc said...

GM: thems some fine and fancy ol' charts you've got yourself there, cowboy. I don't say it enough, but you have the best charts and analysis of any of the free sites. Thanks for doing this every week!

And I agree, the time is looking pretty ripe for another silver mania of about three or four months, presumably followed by a couple of months of anguish after another May massacre ;-)

Regarding the GSR chart: it looks pretty compelling. But is it compelling enough for you to convert your famous gold-brick ottoman into 55.47 silver ottomans...? I spent much of last year trying to play the GSR, and in the end gave it up as folly.

I mean, this ratio is all over the place! Just when you think you get a handle on it, it walks up and pokes you firmly in the eye, smugly laughs at your haircut, and waltzes off with your favourite pet guinea pig, 'Biggles'.

So, I'd be interested to know more about whether or not you think that the GSR is really a tradable prospect in its own right (at the moment), or simply another bit of supporting evidence for other trades.

Warren James said...

[I'll be the first to try out this new threaded comment system from Blogger]. I echo everything that Jeanne just said above. Except I'm scared at how he knew the name of my pet guinea pig.

KJ said...

"..Talking about paper and the comex, I am officially kicked off the Turds site..because I stated he writes about how crooked the EE is then trades for paper profits with them. How can you be a cop and a criminal at the same time? I got about 30 hat tips for asking!"

exactly. Manipulation but let's trade anyways?

Pointed out the contradictory positions of 'guru's' - they all predict the collapse of the monetary system, hyperinflation, etc. Yet in the same articles, these 'guru's' are suggesting you buy paper.

imo, it's about integrity through and through. Ann Barnhardt got it right - once she realized she could no longer trust the system (ie. in a bankruptcy, customer accounts wouldn't be transferred elsewhere like they've always done or an entity such as cme steps up to cover losses right away), she went Galt. How could one not when she cannot look her customer in the eye and state if MFG happens to your brokerage, you will get your positions/dollars back.

So she closed up shop. Returned non-mfg clients funds back. She didn't transfer their accounts elsewhere b/c in her opinion that would be setting them up for disaster elsewhere.

Barnhardt has integrity imo. She has a unified and consistent message. She put doing what she believes is the right thing over her own personal interests.

These 'guru's' do not have a unified and consistent message imo. I can only surmise why - many/all are part of entities that sell paper gold/silver products. A few might not even realize their own contradiction.

Mike said...

where have i read this before...oh ya

You know, fiat is a good thing in this day and time and we all could not do without it. These gold bugs would have you think just the opposite, even while they try to make more cash wealth for themselves. Yes, it's true, the current major world fiat is breaking down as it folds it's hand. But the current gold market, these bugs trade in, is run by the same guys that don't want their fiat use to end yet. So when they change the rules of the market, look at how many gold bugs leave? Almost none of them.

The rules of play, using Casino Chips instead of real gold, are all right out in the open just as the gold market we used to know becomes little more than a shell game. A Dollar Gold Casino, if you will, and the gold bugs don't want to leave it. If they can't use "near gold" to play with, they won't play at all. So, their whole advocating of the gold story is just talk. They stay right with trading fiat assets instead of gold even as their market slowly fails their purpose.

It's almost as if they didn't really want gold wealth in the first place. I see it as if they want everyone else to make physical gold worth more so their fiat based assets can grow? God awful logic for a gold advocate, but then again, they aren't gold Advocates? These are the new breed, aren't they? Fiatgold bugs? Well, I write it all off as the Gold Bugs can't see the difference anymore and still crave playing in the same house, using the same house rules. Most of them would rather the government keep the fiat going at the expense of just a little higher gold price. Say $500? Just enough to make their fiat grow. Instead of advocating holding bullion wealth and a freegold market to crash the old system. Ha! Ha!, These guys even want those in charge to change the rules back into the players favor, bankrupting the house in the process! There is no chance in hell of any casino doing that to themselves. It'll only happen when the casino's credit is taken away. And that process is in the works, don't we know! That's why I am a physical gold advocate. My time will come as the fiatgold bugs go broke with the casino. I guess it's the nature of life that we go down with the ship we sail.

urodocia said...

Truly a novice here though I have followed the metals market for several years.i had often visited the silver forum at Turd's site but it has morphed into a petty mindless collection of punches and jabs with little redeeming qualities. A number of the regular contributors have moved to the "speak" area!!??

Nonetheless, I find this site more suitable to my way of thinking which is I enjoy diverse opinions and then I can decide what to do!!! This site doesn't seem to have many participants but probably has a significant number of people who visit, like me, who have not commented.

Finally an opinion. I do believe that silver will move higher but with some very big dips particularly if it reaches 36-37 in the next 8-10 weeks. Many believe QE3 is a done deal but I am not so sure. "Looking for input Stephanie". Loved that movie

The Big Setup said...

Your comment has been queued for moderation by site administrators and will be published after approval.
When you post on the fraud Turds site! LOL!

KJ said...

premium to NAV is now ONLY about 24%...this mean there's TOO MUCH physical silver available and silver has come out of hiding?

Jeanne d'Arc said...

@urodocia

You're very welcome here, and thank you for taking the step of commenting for the first time. Please speak up with your opinions (whatever they are) whenever you feel like it. You'll always find a receptive audience willing to engage, even though we are - as you say - few in number.

For what it's worth, I'm sort of with you on the QE front. Mind you, in Sterling it's a done deal: we're already on about QE456, and QE457 will be announced in the next few weeks. Good news for people like me who buy gold in Sterling; bad for those who save in Great British Pounds.

Jeanne d'Arc said...

Damn, I just realised that I'm supposed to be using this new-fangled 'reply' feature on Google Blogspot.

Sorry, Warren. Does this mean I'll have to go back in the coal cellar for some more 'hard thinking' time? Please, don't make me do that again. I'll be good from now on, I promise. Sniffle.

GM Jenkins said...

A lot of good stuff here.

Re: Turd and others talking about the COMEX being criminal but still trying to profit from it, I see no problem with it, unless it's a moral problem (problems of a kind I hear exist though I'm not familiar with them :P) But I agree that there are a lot of the contradictory positions in the PM blogosphere. For example, if the criminality is as rampant as commonly asserted, and that criminality is descried using pattern recognition, then there is virtually limitless amount of money to be made by trading according to those patterns. Why isn't a guy like Ranting Andy on Fortune magazines bilionaire list? This isn't a rheotircal question; as I've poitned out in previous posts, I've found a lot of the accusations of the cartel to have predictive value (e.g. keeping an eye out for violently dropping silver stocks on days when otherwise th emarkets are all flat; on three occasions that has been a perfect indicator of coming a silver raid. Or else just last week, some argument the specifics of which I don;t recall on LeMetropole Cafe about a 2% cap, then a 1% cap presaging a Friday attack, which also worked perfectly.) But if profits can;t be made consistently from the Cartel patterns, then how can one confidently assert collusion? Similarly, there are weird seemingly-contradictory argumenbts about leverage: is it good that these markets become "physical only," or bad? Without leveraged speculators, what woudl the price be? Etc. I don't have answers to these. Finally, there's the heads we win tails you lose mentality on the cheerleading sites, where if prices go up, yay fiat. If prices go down, only ounces matter. Seems ot me a lot of these so called gold bugs are really fiat bugs who want to make a lot of fiat with gold as their vehicle, because it's a damn easy investment to make (buy. stack. bury. wait), and because of other psychological factors.

JdA, re: the gold:silver chart, it is such a wide wedge that it doesn't really have much predictive power except perhaps at its very boundaries, which it does appear to be at now. I was surprised that the top of the wedge was so easily broken late December, but it only lasted one day, and looks similar to an outlier in 2006 on the lower side. It makes me more confident that silver has bottomed, but you're right it is not at all a well-behaved graph and trading it has led to a veritable guinea pig holocaust in several nations, or so i hear.

On QE3, Jeff Nielsen made a good a good argument it has already begun (as has Peter Schiff). If it hasn't, and an annoucnement is made that leads to the expected burst in commodity prices, what will happen to oil once the Iran War that Jim Rickards says has already begun, escalates? It won't be pretty, and is a reason to think perhaps such an announcement may never be made.

Warren James said...

Hey GM, you're dead right on the aspects of manipulation and financial profit from it. If you accept that silver is manipulated (up or down - it doesn't really matter) and that there's nothing to be done to personally change it then why not benefit from it. It appears to me that everyone ends up at that spot - Andrew Maguire is there as far as I know. Whoever was behind Wynter Benton (bless her cotton socks) was there. Turd, is sort of there. By the way, Turd's profile is recently following a blog site which talks about trading based on the LBMA gold price fixes. It's a curious site - not sure what to make of it apart from it being an example of looking for ways to gain value from the manipulation - in fact given some of our latest research ... I wouldn't mind betting that the sole purpose of that new blog is to support the meme of the LBMA price fixing manipulation (you know the one that Ranting Andy from Gata talks about constantly).

p.s. I think the cheerleading crown goes to the author of the bears videos 'price fiat means nothing', it is sort of an antithesis to value investing.

KJ said...

GM,

"Pointed out the contradictory positions of 'guru's' - they all predict the collapse of the monetary system, hyperinflation, etc. Yet in the same articles, these 'guru's' are suggesting you buy paper."

It would be good if Eric King or whoever asked these 'guru's' specific questions such as:

a)you have commented at length about market manipulation. Do you believe your readers should be trading/investing in manipulated markets or would you recommend only buying physical?

b) you predict hyperinflation/collapse of the monetary system. When do you think it will happen?

c) after a hyperinflation/collapse, what do you think will happen to ones silver/gold mining shares? Will they rise in value/enhance purchasing power in the devalued currency? What do you think the prospects are for gov't confiscation of gold and/or silver mines? What do you think the prospects are for very high taxes on gold and/or silver mined?

d) what do you think the prospects are for gold/silver etf's such as slv/pslv/sivr/gld/phys/etc. termination before hyperinflation/collapse?

e) should i still invest in mining shares and/or gold/silver etf's and/or paper gold/silver products in general in a MFG type scenario? How can I be protected that my shares/warrants/accounts will be returned to me in whole? What if I only receive a % of cash like MFG customers?

There's probably other questions people have been wanting to ask; those are the few that have been on my mind.

Fast Mover said...

Thanks for bringing attention to my blog

http://goldenlightswitch.blogspot.com

I discovered the simple system about a year ago and have found it very reliable and predictable...the banker's manipulation is blatant. I decided to publish the system and teach trading it because I desire as many people to know the evidence is still on-going.

I don't charge any money for this information. If people want to trade it and eventually made it ineffective so be it. Once MFGlobal blew up, I stopped trading paper and now only deal with physical.

I am not in the financial services industry, rather a fighter pilot in the military who chooses to do this as a hobby.

Cheers,
Fast Mover

Warren James said...

Hi Fast Mover, thank you for stopping by and for the clarification about your site, background and motives. Good stuff.

I suppose you noticed I'm following your site as well - I'm interested in what you have to say on the matter, this is a hobby for most of us as well (apologies for thinking your site existed to push a meme - I've now had my anxiety pills). Rgds, Warren

ultarnerd said...

I know of some traders that are gold bugs but still trade in paper gold, silver, reason being you cant day trade in physical.The ones I know are afraid of the paper markets too and all also keep physical with the intentions of turning paper profits into physical. Most fear the paper like a big musical chairs game and do not feel safe until it's actual physical,but got no choice if you want to trade.Most fear they may eventually lose all of what they had in the paper but the gains justify the risks.I watched as they made money believing its a manipulated marked,and it really looked to me that they could not have made if they believed it to be an honest market. There speculating on when the manipulates would gain the best advantages actually seams to work almost consistently.I watched them unable to do it myself as they made fortunes on what seamed so simple with that knowledge, but was getting the knack for it myself but lacked the resources.Probably lose your shirt thinking its honest.