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Monday, April 1, 2013

Silver Breaks Down

Silver has been struggling to get anything going to the upside for some time now but it has been able to hold above chart support near the $28 level; until today.

It broke down out of the bottom of a 6 week long trading range and in the process made a fresh 7+ month low. That is not bullish action no matter how you look at it.


If you have been listening in to my regular weekly interviews over at King World News on the Metals Wrap, I have been discussing the fact that this market has looked heavy due to the fact that it has been under attack from hedge funds which are playing the base metals such as copper, and silver, increasingly from the short side. That speculative money is selling rallies and working to push these markets lower and it has been having some success. Silver has managed to hold up but now looks to be falling apart.  I want to see another day's price action to learn whether this is just a one day wonder and a bear trap or the start of another leg lower down to the next support zone I have noted on the chart.

For the silver bulls out there - you must keep in mind that the way the speculative community at large looks at this metal, it must have an inflationary environment present if it is going to thrive to the upside. With the global economy showing no signs of inflationary pressures at the moment and with Copper continuing to wilt, it is going to be a near Herculean task to see silver generate enough bullish action to spook this growing contingent of shorts.

Notice the following breakdown of the HEDGE FUND positions in this market. Can you see the steady increase in their short positions and the continued liquidation of existing long positions. That data is only good through last Tuesday so my guess is that the hedge funds are NOW NET SHORT the silver market.



I should also note here that using the data provided by the COT which shows a definite breakout of the hedge fund positioning going back to 2006 as a starting point, the hedge funds have never been short silver since this data collection began! In other words we are looking at something that has not occurred in SEVEN YEARS! The closest the hedge funds came to being net short in the silver market was in September 2007 when their net long position has a mere 168 including futures and options.

For now, until we get some sort of spark or reason for these hedge funds to reverse their bearish leaning, silver looks to be headed lower. I would watch copper for any sign of a reversal to the upside but unless copper can do that, silver is going to get cheaper.






18 comments:

  1. They say, no news is good news, but, I would rather face the music than be blind(sided). Oh my pretty silver coins......um.

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  2. Value is based on perception, and perception drives price. Despite everyone in the bug community desire to spit in the face of that reality, silver does not give a care.

    The price is right and you are wrong if you are long and have been wrong for seven months.

    Perhaps the long term will show that long was the right trade, but count me out of either long or short silver as of now.

    I am too smart to short silver at this point but not willing to bloody my hands by catching a knife.

    I will get back into silver long when the chart tells me its worth my trouble and hard earned money to do so.

    That is not today.

    Today the markets as defined by price, do not perceive relative strength and value with pursuing in silver. The tape has told us and continues to tell us as much.

    Bugs can imbibe their broken clock bullish propaganda all they want and catch knives or enjoy more painful drawdowns.

    It's a free country (I think) for those bugs to do that, but I would rather make a profit and not touch the white stuff for now.

    ReplyDelete
  3. Without casting aspersions, if you (general sense) are a blind faith bug (not Dan), perhaps it is you that is part of the "Dumb money" that Eric has suggested....the sooner you lose faith and give in...the sooner we have cleaned house for the next move up.....but it still does not mean you buy that as a bottom.....that still comes with a catalyst other than hope and prayers....http://edegrootinsights.blogspot.com/2013/04/why-is-silver-so-reluctant-to-rally.html

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  4. That's nothing.

    Look at the grains, they are even worse.

    In fact, just look at a chart of coffee and sugar, no wonder Starbucks is minting money.

    Ben Bernanke must be laughing at all the guys warning of hyperinflation and a currency collapse.

    He now knows that he has a hall pass to print as much as necessary, rack up even bigger debts, whatever it takes to improve employment.

    Who would have known that 4 years ago we would have this kind of printing campaign with absolutely no adverse impact whatsoever.

    Paul Volcker's head must be spinning with foam coming out of the corners of his mouth.

    I wish I could show a chart of the national debt and the size of the Fed's balance sheet, 1980 vs. now, overlayed with the 10-yr. treasury yield.

    If you showed anyone that chart 30 years ago and said "this is what is going to happen", you would have laughed out as a lunatic.

    ReplyDelete
  5. It will be interesting to see if curbs on property speculation in China moves money into gold. That might pull silver.

    ReplyDelete
  6. Why does it not seem possible that these hedge funds are as ripe as they have ever been for a short squeeze sheering from the bankster's?

    ReplyDelete
  7. gold will pull it higher tomorrow, I'm guessing it will finish around $28.6 or so

    ReplyDelete
  8. Dan,

    Do you mind giving an opinion on what the US Dollar index chart is saying.

    TIA

    ReplyDelete
  9. Robert and Eli,

    Refer to my earlier post where hope is not a strategy. I see silver at $27.8 to $27.60 before it is at $28.60 and if it breaches $27.60 then its a straight shot to $25.60 and since everyone is thinking that level will hold it probably won't because markets rarely have triple bottom and fulfill prophecy and hope....so $24 to $22 or $20 will follow that level not holding....this is all technical analysis of the chart combined with knowing the hope driven stubbornness of gold bugs who only learn by hemorrhaging to the point insanity....

    ReplyDelete
  10. Another way to triangulate why we may see $20 to $22 as the bottom is to think about the March 2008 high at $22 and the following low at $9...that was the washout required to expunge of the hope in all but a few bugs then....on a pure pychological basis...it may need to happen again as that would also correspond with sub $1400 gold...and by the way then the trendlines would still be intact.

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  11. 27.60 has held for the moment....precarious....

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  12. Any market that goes vertical is unstable and that is exactly what the Silver short is. I expect them to have a "come to Jesus" experience any time now.

    ReplyDelete
    Replies
    1. Joe,

      Not until the bug longs finish their all but assured finishing stroke on their 7 to 8 month Come to Jesus pounding....next stop is 25.50 so pucker up.

      This target is near assured as we sliced through a key pivot target this morning at 27.50 this morning like it didn't exist. This one goes back to a daily pattern that started at to $29.50 as a dead cat high point....

      But there is likely also no way that $25.50 holds but for one key reason = you all think it will hold in the bug community and thus, the markets will make you pay for such hopeful conviction with a blinding slice through that $25.50 to at least $24 to as low as $20....

      To me this one has to go the depths of hell like 2008 to kill all these hopeful bug comments....you know you are going be hating life if we come from a High of near $50 in 2011 to to ball-crushing correction like 2008 from $21.44 to $8.40...that would bring in an adjusted low of at least $20....and exact similar correction is $19.50....that is likely the time to buy....in my view...

      Delete
    2. hmm...no, I still see a support at 27.15 / 27.20, the line links 4 bottoms on PRT on a daily basis, and that's just where we stopped.
      Sure doesn't mean we won't go further down, but at least you have a kind of support at that level if you want to be optimistic (for a bull :))

      Delete
  13. Agree with Joe. Could go back to $20/$21 retracing the full parabolic move.

    ReplyDelete
    Replies
    1. That would wipe out most of the over leveraged bulls. Just as a blow Under 1530 would probably do the same with gold bulls.
      Sinclair put himself on the line by declaring that the older lows would hold.
      A dangerous statement which could worsen the capitulation if they don't. How many sitting bulls would throw the towel and leave under the recent lows?
      Watch out around 1550, we are pretty close to that area now...

      Delete
    2. from what i've the technicians use 26 as the line in the sand for silver (so capitulation to 20 or so) - took my silver off the table after dan's post.

      the line in the sand for gold is something like 1536 - aden sisters and 1539 or so from an older posting by louise yamada...needless to say, after that bot see it going to the 1350-1400 level..

      Delete

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