Sunday metals pre-game, 8/25/2013

Hey folks, I'm back after a short misadventure. I owe Louis Cypher a big favor, as he kindly put me in contact with a young Thai woman whose generous ministrations expedited my getaway from Samphanthawong, where I had run afoul of some Chinese nationals. 

(Long story short, the phonemes "pu shay," which I uttered for reasons beyond my present recollection, apparently translate to "Death to your mother.")

Apart from all that, I confess to some metal fatigue setting in. Maybe some mental fatigue too, but luckily they make drugs for that.  Speaking of which, I did recently send a money order for Metalfinil, a new boutique drug that purports to trigger artificial excitement in gold and silver trading. It's endorsed by Eric King. But it hasn't arrived yet... I have to write to Gonzalo Lira, who is apparently behind the project.

Anyway, maybe fatigue isn't even the right word; it's more just confusion where to get dependable info. I think it's pretty clear JPM (to name just one example) is an agent of Fed policy, as well as a basically criminal enterprise operating in plain view. Central banks and bullion banks also obviously care about the price of gold (they buy and sell the damn thing, for starters). Means and motive for massive manipulation? Check and check. But, then, the people who have proven to actually know what they're talking about don't seem too concerned about this, basically playing along with (if not outright propagating) the view that the market is more or less fairly operated. 

Then, there's the GOFO/backwardation jazz that's been flooding the metals space of late, which means everything or nothing or something in between, depending on whom you ask. Big thanks here to Warren, S.Roche and Slow Loris Larry for keeping the ball in play, because I must confess: I haven't the slightest clue what any of it might mean. When I try to follow careful explanations proffered by others (see VtC's recent one here in the comments), my eyes slowly glaze over -- it all sounds like mumbo jumbo to me. (I refer, of course, to Dr. Mumbo Jumbo, the late Professor Emeritus of Economics at the People's College of Cameroon, whose work has been widely discredited since his death by crocodile under suspicious circumstances in 1978).

But all that said, the two charts I've been closely following since February worked like a charm.

GM's advice: Buy gold at three line break:

GM's advice: Buy silver at three line break: 

But that said, I actually sold half my gold position Friday and plan to dump all my silver longs this week and buy some puts (I'm thinking $25 is a possibility first). I'm playing it safe ... Both metals are overbought (RSI at 70), both are at +5% of their EMA envelopes (e.g. gold here:)

I still expect this chart to hit the top of the opening wedge:

And two hugely important long term charts in which major trend lines were violated very recently look ready to reverse.

First is the DJIA priced in gold:

And then, of course, this long term gold chart:

 When huge trend lines are broken, you don't usually get a quick reversion to the same old. So my advice would be to be careful out there -- there seems to be a lot of euphoria developing, when gold hasn't even cracked $1400 again...