"When misguided public opinion honors what is despicable and despises what is honorable, punishes virtue and rewards vice, encourages what is harmful and discourages what is useful, applauds falsehood and smothers truth under indifference or insult, a nation turns its back on progress and can be restored only by the terrible lessons of catastrophe." … Frederic Bastiat

Evil talks about tolerance only when it’s weak. When it gains the upper hand, its vanity always requires the destruction of the good and the innocent, because the example of good and innocent lives is an ongoing witness against it. So it always has been. So it always will be. And America has no special immunity to becoming an enemy of its own founding beliefs about human freedom, human dignity, the limited power of the state, and the sovereignty of God. – Archbishop Chaput


Wednesday, February 29, 2012

Silver Chart Analysis

Following is an 8 hour chart of the front month silver contract (that will be changing to May from March) detailing the technical action.

All of the readers know by now that the commodity complex was being targetted by the Fed in today's comments coming from Chairman Bernanke. Prior to his testimony in front of the House Committee, silver was trading higher recovering from some mild profit taking late in yesterday's session and into early Asian trading in the evening. This is normal in a market especially after having put in a strong upside breakout on heavy volume from a recent consolidation pattern. Dip buyers came back in taking the metal towards the $38 level before Bernanke levelled the boom on the complex.

Note the first down bar in black coming after the peak in price which showed the metal BOUNCED RIGHT OFF OF THE BREAKOUT AREA after touching it. That is excellent technical price action and confirmed the former resistance level was functioning as support.

However, once Bernanke's comments began circulating a wave of selling engulfed the metals with gold, copper, platinum, silver and palladium all getting hit extremely hard by algorithm selling. That took the silver price through the resistance level now turned support as large groups of downside stops were hit in a cascading fashion.

I do wish to point out however that the market bounced exactly at the zone where it should have, which is near the $34 level. Look carefully at this chart and you can see how significant this zone is from a technical analysis perspective for it is the region that had been serving as strong overhead resistance going back well over a month and had prevented silver from moving higher. Once price had pushed through $34, it began accelerating to the upside.

Now it has come back down to this level and seems to be attracting the same buyers who were busy accumulating it prior to the march higher.

I suspect that the reason the buyers are showing up here is because NOTHING HAS CHANGED IN REGARDS TO THE FED's EASY MONEY POLICY. Sure, based on what Easy Money Ben said today, we are not going to get a forthcoming QE3 program anytime soon but back when the Fed signalled an ultra low interest rate policy continuing until late 2014, did they tell the market that it was going to get a QE then? NO, it did not. In spite of that the entire commodity complex, but especially the metals, began marching higher based on that expected low interest rate environment being sustained for some time.

The facts are that the Fed is still on hold for an ultra low near-zero interest rate policy for the foreseeable future unless they see something in the economic data that leads them to conclude that this sort of low interest rate environment is no longer necessary. In my view that would necessitate some really astonishing payrolls numbers coming our way for starters. You would also have to see a successful resolution to the woes afflicting those nations in the Euro zone whose sovereign debt issues still linger unresolved in the background.

For now we will watch and see how this market acts over the next couple of sessions. I would not be concerned about it at all unless it were to punch solidly through the bottom of the former trading range down near the $33 level and fail to quickly recover.


  1. Those scumbags just took out all the 1705 stops right through to 1690. Damn, they are going completely old school on us , raiding on comex, then globex.. hell probably even the rare Asia raid too.

    First day delivery notice should be a hoot tonight. I'll predict umm, zero.

  2. Looking at the gold chart as it breaks 1700. Are these guys wreckless or what? Shorting Gold then the stock market slides - talk about a programmed trade! Shameful as Embry says.
    Perhaps Gentle Ben will find his place in the American history books along with Colonel Custard.

  3. Not to downplay the volatility, but I think it's worthwhile to take note of the action in the more solid miners/royalties.

    During the insane 50 point 5 minute candle in the Gold futures, GG shot down only 60 cents. It only ended down 1.5 points today. Just a few months ago it would probably have been down over 10%.

    SLW is similar. During the 50 point move in gold SLW only went down 80 cents, and on the 2 point candle in silver just a few minutes later SLW went down just 50 cents, closing again just 1.5 points on the day.

  4. Well said Brad. Look at these numbers from INO.com now in the same vein, oil, CRB, Natural gas, corn, soybeans and others up.
    Market Last Change %
    Crude Oil 106.86 +0.31 +0.29
    Natural Gas 2.688 +0.061 +2.31
    Corn 658.00 +0.75 +0.11
    Soybeans 1320.0 +7.5 +0.57
    30yr Bond 141.68750 -0.68750 -0.48
    10yr Note 130.953125 -0.437500 -0.33
    Reuters index of commodities aka CRB barely budged: http://quotes.ino.com/chart/?s=NYBOT_CR

  5. Yes sir, I believe now is the time to buy miners. Oil has held it's own. Ben can talk down the QE all he wants, he is ready to print, and if oil continues to rise, he cannot ignore inflation (dollar devaluation) Rushing in/out of the dollar due to iminent collapse of Greece will continue volatility. ECB's answer is printing. Once they print and money goes into a "rat hole", then Greece eventually defaults or quits the Euro due to chaos concerns. Euro strengthens temporarily in relation to dollar. China is printing, Ben has to print. We cannot afford the dollar to march higher against both Asian currencies and European currencies. Major shakedown. Time to buy miners.
    No matter what US no longer in control of Oil prices. Sure a good PR shot by mass media saying we are going to drill, open up more natural gas would certainly ease pressure, but would this genius ever consider that with his base firmly in the other direction. Nope, Oil marches on. Temporary MOPE will not work.

  6. We'll get back to "normal" here shortly, and then rocket up to new highs. All new highs are always preceeded by a shakeout like this. Agree with Dan. Technically, silver held well. The cartel shot their load on the first day of the weekly COT report, so they still got six days to clean it up before the new COT is generated.

    Risk on, weak dollar. Cartel cleaned out all the weak hands, and they had to step on the gas HARD to do so. They are already starting to cover on globex and asia, and you know that by the time Tuesday rolls around, they will have that COT report looking much less manipulative for the prying eyes. Sprinnkle in a little DXY weakness, and a nice rally is in the cards - who knows how high and how fast.

  7. This is all so normal. Today's move is such a total non-issue. How many times have we played this game before???? Every liquidation cleans out the weak hands and makes the bull stronger, which is also why 2008 won't be repeated. Normal stuff, not a story.....

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