"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

Trader Dan's Work is NOW AVAILABLE AT WWW.TRADERDAN.NET



Friday, June 6, 2014

Metals Commitments of Traders

To start this short set of comments, let's begin with Copper, which was hit hard this past week as news came out of China that the authorities were seriously investigating the double and triple counting of copper used to secure bank loans. I have mentioned in previous posts that the internal positioning of the LARGEST set of speculators in this market was something that I have not seen occur too often; more specifically one in which the hedge funds are positioned rather heavily on one side of the market with the "Other Reportables" taking the opposite side of their trade. I commented that one of these sides was going to be proven very right and the other side very wrong.

Looks like the hedge funds came away holding the short stick!

Take a look at the chart and then look at the COT chart. Notice what has happened to the price this week as that news hit the market to start off the week. The red metal dropped over 15 cents off its ending level last week before rebounding on Friday as some shorts rang the cash register.


Now here is the COT chart. Look at what happened to the hedge fund net long position and compare that to the Other Reportables who have had a significant exposure on the short side of this market. Sadly for us, the report does not cover the action from Wednesday to the close of trading today when copper plunged a further 10 cents since the drop the Tuesday cutoff date. Can you see the hedge funds running and what it did to the price?



Based on what I have seen of this report, when comparing it to the price action over the previous reporting period, it is not hard to see that hedge funds were getting hit hard on their wrong bet and were exiting in size. The late session bounce here on Friday makes it a bit harder to read as to whether they were coming back in to any significant increase in long side exposure once again or whether it was just pre-weekend short covering after such a big drop in price. I suspect it was more of the latter than the former.

The really big thing to me is just how aggressive the hedge fund community is becoming towards the bear side in the silver market.



Silver fell through important chart support centered near the $19 mark early in the week. Yesterday it popped higher on the ECB news but today it failed to extend or build on those gains. As has been the case for this metal for a while now, rallies are being sold. Just look at how the market fell early this week but then ran into more selling today as it failed to recapture that broken level of support near $19.

One look at the COT chart shows why. Hedge funds were aggressively attacking the metal this past reporting period. Interestingly enough, it was not so much of them bailing out of existing long positions as it was them adding a large number of brand new shorts. That is what drove the price down through $19. I have numbers going back further but for the sake of ease-of-reading of the chart, I am using data back to 2009 or five years ago. Hedge funds are now holding the largest net short position in at least five years!


I should continue to note here that the Other Reportables camp is still on the net long side - once again they are at odds with their large cousins but not nearly so balanced out as they have been in copper. It looks like some of these guys are spreading copper against silver with hedge funds taking the bull spreads and the other reportables taking the bear side of that spread.


When it comes to gold, hedge funds were big sellers this past week. Here is the thing however when it comes to gold - they continue to be stubbornly bullish as they remain net long just like the Other Reportables and even the small specs or general public do. In other words, yet another week, another deterioration in the chart pattern, and yet the entirety of the speculators refuse to get out and are still net longs. That continues to cause me to marvel. One wonders how much more money some of these guys are willing to lose before they decide to finally get out. I am concerned that as long as these stubborn bulls, who are mounting greater losses, continue to hang on, they are merely postponing any lasting bottoming process for the yellow metal. It seems that the bulls are going to go down with the ship.

At least one positive sign is that the little guys, the small specs or the Nonreportable Positions, look as if they are finally giving up the ghost. They remain net long but dumped about 1700 more long positions than they covered shorts this past week. Their net long position is the smallest it has been in nearly 4 months so that is somewhat constructive.

Here is the COT chart.



Here is the price chart comparing the net position of the hedge funds.


You can clearly see the speculative selling trend of this group and its impact on the price level As they sell, the metal moves lower. As stated above, they are still net long this market however and that troubles me.

Some are already talking up potential short squeezes but as I have said before - they are always talking POTENTIAL short squeezes - because, are you ready - in every single market on the planet that exists there is the POTENTIAL for a short squeeze. Big Deal! What is required is some sort of news or event that will trigger a technical buy signal to force some of the weaker shorts out. However, what is more important that any nebulous "potential short squeeze" is the prevailing trend of the speculator and right now that prevailing trend is one of selling.

I would much prefer to see these precious metals markets with the speculators all on the short side and sentiment miserable to convince me that we have truly formed a solid, long term bottom. Right now, all we are getting is rallies that get sold.

Let's see what next week brings us and whether or not the actions of the ECB this week will be enough to keep the gold price supported among those investors/traders based in the West.

87 comments:

  1. Thanks for the post! I asked this before, but was too vague in my question. Do you know the Hedge Funds outright long positions in gold? My original question was referring to your March 8th 2014 post where you spoke of the “Hedge Funds outright positions in gold”. You had a plot running from Jan 2012 to March 2014. Looking at the OUTRIGHT LONGs, it just looked interesting, in that it seems to not easily drop below ~105K during that time period (even as Gold dropped below $1200. Why does there seem to have support here? It may make us wonder that if the outright longs were to drop below ~110K again, will the selling stop from this group. If the selling continues and the outright longs plunges below 105K, will it accelerate dramatically? I wonder if this 105K of outright longs is predominately made up of old positions that were taken when the price of gold was much lower. And if this group gives up, could it cause an avalanche of selling?

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  2. Probably a lot of CIGA and GATA boys doubling down and going for broke by loading up trying to be heroes. That is who the specs are, LOL....

    Basically, a "Hail Mary" hope trade.

    As the gold bugs are hopelessly married to their theories of "terrifying collapse in the economy", no matter if the Dow goes to 18,000, 20,000, or 30,000.

    We need a $100 one day drop in gold to wash those guys out.

    And see KWN and jsmineset websites go dark.

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    1. Going dark and then hinting that "powerful forces want to keep you away from our site."

      Delete
  3. Mark-I have a gold bug that works for me that used to think I was a staunch ally, now he considers me a charlatan. (Apparently, being pragmatic about markets and occasionally taking a short position in "real money" is heathenry) He is beginning to crack a bit, though, and I will be sure to let everyone know when he throws in the towel. That will be akin to KWN going dark and will represent a good buying signal.

    Dan-I re-re-re-read the ZH reasoning again for gold being exempt from the downdraft with the Chinese commodity loans and it is getting to be funny to me now. (It just bugs me to not understand someones reasoning). Basically, it reads like "but gold will be different because we REALLY want it to be". Like you said, if it looks like a duck....

    Great post earlier on 70 years ago. Perspective is much needed these days. Merci beaucoup

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    1. This gold bug is ballsy! Calling his boss a charlatan, must have Cajones of Gibraltar -- which explains why he can withstand gold dropping the way it has....LOL

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  4. Just think about all those comb overs and blue hairs attending the Q & A sessions with their 1980's suits and walking canes.

    So far, they have put all their faith into General Jim, James Dines, and some of the other "old timers".

    Everyone has their breaking point.

    Pretty soon, we'll find out what it is going to take to wash out these CIGAs for good, so they will be so embarrassed, they will never be able to be seen in public again.

    Maybe its a $100 downdraft in one day.

    Maybe its a $500 drop in a month.

    Maybe its TRX at 50 cents, or NEM at $8/share.

    Who knows??

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  5. There is a news story going around on e.g. Zerohedge that I would like to make some factual comments on; here is the original source http://www.scmp.com/news/hong-kong/article/1525986/all-glitters-businessman-who-bought-hk27m-gold-ends-metal-bars

    In the Zerohedge rendition " these gold bars were shipped to a Chinese warehouse before Zhao was able to confirm the fraud." and this is untrue - Yuen Long is very firmly in Hong Kong and is not far from the airport (hence its use as a warehouse facility) http://www.zerohedge.com/news/2014-06-06/one-ton-gold-shipment-hong-kong-revealed-contain-just-worthless-metal

    Similarly Zerohedge makes the comment is made that "We can't help but feel this is not the last time as commodity-backed financings are unwound en masse and the underlying collateral found missing... sourcing the underlying by any means will be on the rise." but there is no indication that this incident was related to commodity-backed financing, and the guy involved seems to have shipped other consignments including other metals before now

    Passing fraudulent bullion is hardly a new problem - and I am now personally concerned because I own several dozen 10 oz bars identical to those involved in this incident - but for Zerohedge to try to tie this into its "China = BAD NEWS" meme is more than slightly lame. There are many bad things going on in China - this is not evidence of one of them

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    1. Zhang;

      You know probably much better of the arrangements behind obtaining loans in China. There are only so many things that can be pledged as collateral there. Housing can be tricky so many use metal, first because it is extremely liquid and second because it can be vouched for in the warehouses. However, that does not stop some slick characters from pledging it twice or three times or maybe even more, in order to obtain loans. Speculating is a big business in China as the wealthy there are accustomed to making huge double digit gains in invested money. They are generally not interested in single digit gains. That has led to a large amount of overleveraged plays.

      My concerns are centered around the fears of the authorities trying to put an end to this double or tripling counting and to cool off some of the more egregious cases of speculation. If they do, and those loans are called, the metal is going to be sold to make good on the loan. The lenders might only get back 25% of their original loan, perhaps 50%, perhaps 35%, etc,. but the metal will be sold and that will add to the supply.

      If a Chinese investor wants capital to start a warehouse or a manufacturing concern or an import/export business clothing store, etc., they can buy metal, and then use that metal as collateral several times over. That means the demand for the metal is in a sense, "artificial" because it is not going into the construction of things but is being used for "speculative" purposes instead.

      Same goes for gold - much is constantly made of Chinese gold demand and I do not doubt that for a moment - but the question then becomes how much of this Chinese gold demand is tied to loans?

      All I know is that I want to watch this story and see where it goes.

      I do hope your gold bars are not corrupt. Have you had any of them assayed?

      I wish you the best on this - please keep us posted as to anything you might learn about your bars.

      Delete
    2. It's not just a coincidence that ZH is known as the Bulgarian Bullshitter

      Delete
    3. Dan - what you say about the Chinese approach to /use of Gold may be correct (I think it isn't) but there is no indication whatsoever that this is what the Zerohedge story is about

      What I was pointing out was that - as is frequently the case - ZH has taken a story - in this case sourced from SCMP - and deliberately twisted it to its own ends. The warehouse involved is NOT in "China" per se, it is in Hong Kong - and does not even appear to have been a secure bullion facility

      There are large numbers of fake Gold items in circulation - a certificated PAMP bar was found in New York a few years back, another item turned up in the UK a few years back also with a certificate of authenticity, and if you want to buy such things, then China is certainly one of the places to go: try http://southkingze.com/suisse-gold-plated-bullion-bar_p3935.html for example

      However, unless you subscribe to the "no smoke without fire" / "Yellow Peril" school of thought, there is no rational basis for wrenching the facts known about this instance into a pre-determined all-weather agenda to interpret everything as still further evidence of China's longed-for demise.

      You, Dan, of all people, tend to stick to facts rather than idly wet-dreaming of conspiracies and hidden meanings, and as you have said in the past, if it walks like a Duck etc..... In this case it can be shown that Zerohedge have not only exaggerated by baseless speculation about collateralised loans, but have distorted the truth about where the warehouse is located. This is not a matter of opinion - look Yuen Long up on a map - and once you find this kind of deliberately misleading information, it surely raises questions about the legitimacy of the entire article, As it turns out, the bars involved in this instance are not the 10 oz Credit Suisse ones shown in the Zerohedge article either, and I personally therefore have no more to fear today than I did the day I bought my bars

      On the face of it a guy - and the SCMP article casts some doubt on his personal probity - bought some Gold bars in West Africa (as you do, when looking for the genuine article), had hos "staff" check them out, had them collected by "a courier", stored in " a warehouse" and then checked them in a hotel room before handing the consignment over to his Buyer (not a "Shadow Bank" or a Loan Shark, but a Customer in the port district of Kowloon). If you were playing Cluedo with these cards, you would not be suspecting "Professor Plum in the Kitchen with the Lead Pipe", would you - unless you had already decided that the Evil Chinese are basically behind everything and this can be used to prove your point (all you have to do is change a few words and drop a few dog-whistle hints)

      I am not Chinese; right now, I am not even in China; but just as it nauseates you to see the Goldbugs selectively twisting every news story as evidence of either manipulation or Gold going ballistic, I gag at blatant disinformation about China. People would be very very surprised indeed if they knew the truth about China - and the first thing this knowledge would do would be to stop them talking about "the Chinese" as a homogenous construct. How would you react to the notion that "the Americans" all speculate in worthless mortgage backed securities, all have massive unsecured personal debt, and all get obscene bonuses for ripping off customers, which they then blow in Vegas. Such a facile suggestion would be absurd, and to write as you just have that "Speculating is a big business in China" is equally ludicrous.

      I had not intended this to become a rant, and I hold no candle for either China or the Chinese, other that my wife is Chinese and our principal home is there. It appears, however, upon reflection, that I react similarly to absurd preconceptions and preconceived agendas just as viscerally as you do, albeit set off by different contexts

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    4. Speculating is a big business in China.

      Since you hammered on it, I thought that point should be reinforced, since it's true:
      http://www.olgr.qld.gov.au/__data/assets/pdf_file/0006/249945/gamblingAndProblemGamblingAmongChinese.pdf

      Investment risk taking: http://www.cnbc.com/id/48142500

      Studies showing that Chinese are average in their aversion to risk appear to be scarce, but feel free to cite one.

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    5. "In this case it can be shown that Zerohedge have not only exaggerated by baseless speculation about collateralised loans..."

      Here's the latest on this latest ZH baseless speculation, courtesy of Goldman Sachs (why are they bothering with baseless speculation?):
      "Financing deal concerns mounting as CNY volatility rises

      Concerns on an unwind of commodity financing deals trigger selloff

      The recent sell-off in copper and iron ore prices reflects the market’s ongoing concerns regarding the impact of a potential unwind of Chinese commodity financing deals, though the weak underlying market fundamentals should not be discounted. The concerns intensified following the recent CNY depreciation which has raised uncertainty regarding the profitability of the deals and the impact on different asset classes were they to unwind. Up to 1mt of copper and 30mt of iron ore could be released were the deals to unwind, which would be bearish given the relatively limited physical liquidity to absorb the shock."
      etc.

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    6. spectacular, Greg

      and how, even approximately, does that have any relevance whatsoever to story about a fake consignment of gold reported in an article which misguidedly suggests that a warehouse in China was involved

      Clearly, we don't know everything there is behind this story, although you, as ever, apparently KNOW IT ALL

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    7. I am no ZH fan, because they make money specifically via Alarmism. But I also trust NOTHING coming out of China. Because it is a communist dictatorship where folks live in collectivist hives.

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    8. "collectivist hives"?

      I take it you have never been any closer to China than he crockery aisle at your local Walmart!

      Yes, China is evil evil evil so who cares about facts lets just make something up to reassure ourselves that we are exceptional and everybody we don't like is a fraud and a liar. Life's far more reassuring that way.

      I am not Chinese, I know China intimately, and I can assure you that personal liberties are far, far greater and more widespread than in many nominally "civilized" places in the USA and its vassal states. This is not an appropriate forum for a slagging match, but declaring yourself as a bigot lies uneasily with Dan's preference for rational debate.

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    9. Zhang;

      Yes, I should not have painted all of the Chinese with the expression "speculation is a big business in China". Obviously in a nation that large, it is not wise to use too broad of a brush. However, I am confident that there is a Large number of Chinese individuals who, just like some of their American counterparts, are extreme risk takers and are not interested in investments in which the potential rate of return is less than double digits.

      I have a very close friend who is a owns a business which facilitates business between China and US would-be manufacturing interests. He is Chinese but lives here less than 20 minutes from me. His kids so to school with mine. He was a young person when Mao was in power.

      He is an extremely intelligent and well-read man who understands both China very deeply ( born and raised there and travels there about 5-6 times each and every year on business.

      He is the one who informed me of how both the Chinese business system operates and the nature of transactions. There are many in China ( and remember I am not speaking towards the less well off workers and farmers, country dwellers, etc.) who are part of the newly rich and growing middle class there. Some are quite wealthy and personal contacts of his. They are very aggressive risk takers and he told me that it is not uncommon practice for double counting or triple counting of metals or ( even homes) when it comes to pledging them as use for collateral.

      China is like any other nation in that regards - there are always folks who will play loose and fast. Same can be said of some here in the US.

      and by the way, Eric Webber - Chinese folks to not live in collectivist hives. You would be surprised to learn how China has been changing and growing. I have long admired and respected China for its people's intelligence, their creativity, their resourcefulness and their work ethic.

      One must make the distinction between some of China's rulers and its people in the same way that anyone looking at the US should make the distinction between its rulers ( especially its current man child) and its people.

      I have had the pleasure to meet many of my close Chinese friend's acquaintances and friends and they are a delight to be around. Besides, they have all told me that they are going to make me an honorary Chinese because I am a Caucasian who is actually very good at ping pong! When I was younger, I used to compete at high levels!

      I am actually trying to find some time to learn Mandarin as well. Don't expect me to be able to write anything here about that as I am having enough trouble just learning to speak it much less write it!

      Delete
    10. Sorry, I thought you were referring to the copper and iron situation when you wrote about ZH trumpeting 'baseless speculation about collateralised loans.'

      People may not like ZH's Austrian skew on things, but a lot of those same people make less fuss out of the fact that the media in general is owned and leftist. Is it really so bad to have an Austrian voice? And if you have an Austrian view, this crack up boom is alarming, everything looks like a crack in the facade. Apparently ZH's great sin is being alarmist and encouraging people to own metal. In five years, I don't think their readers will be worse off for having read there. And I think you would be hard pressed to find any TD article encouraging people to have more than 20% of their investments in metals.

      Delete
    11. I began this side-discussion simply to highlight the blatant distortion in Zerohedge's article - which is endemic; I carry no kind of banner - nor, hopefully, any baggage - for China, the Chinese or Chairman Mao. However, I have never thought it a sound long term strategy to respond to something you don't understand or especially like by calling it names and pretending its not real

      I have no doubt that ignorance and antipathy towards China is widespread in the West; that's not news - though what would perhaps surprise many people is how strongly both are reciprocated by the Chinese; if you are interested in reading translations of some of the more fruity blog comments from inside China, then Bill Bishop's www.sinocism.com is perhaps a good place to start ; and if you want to flirt with learning Chinese, try http://chineasy.org/ or (better still) http://www.sexymandarin.com/

      For better or for worse, China is a fact of life - and will become even more so when Hilary ascends the throne; my recommendation is not that people should go China-mad, but rather that simple lies such as those in the ZH article - and they are far, far from the only ones*** at it - should perhaps raise concerns that all is not perhaps as we have been led to believe it is. No hives, no dictators, no slave labourers - form your own opinions, because those you have been drip-fed for the past 25 years are at best outdated, at worst dangerously misleading

      So, finally, the POINT of this rant - and this really, honestly, is the last thing I have to say on this matter in the current context. IF the Chinese have been "infinitely" rehypothecating Gold and other assets, then what does this actually signify? - Collateral stands as backing to a loan, and whilst fraud is to be deprecated wherever it takes place, it is not the Chinese economy which will suffer, but the Western lenders. One of those noted in the Goldman Sachs / ZH article is Standard Chartered Bank, and, faced with the impending collapse of this shadowy shadow banking ponzi house of cards fake invoice did I say ponzi yet? situation, what is their take on the situation? - http://ourviews.sc.com/chinas-dominance-as-a-megatrader-is-only-just-beginning/

      And all that Chinese risk taking? Forget reports on gambling written by Brisbane University and follow the money: at 52% of GDP, China has one of the highest domestic savings rates in the World (compared to the USA at 16% and the UK at 13%). It's hard to believe that "the Chinese" are leveraged up to the hilt - though I have no doubt some of them are - and people in the West should strive hard to distinguish hard facts from what they merely wish would be the case

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    12. *** this is not the place for a political discourse and the following links are offered solely to illustrate that it is not just Zerohedge which plays fast & loose with he facts

      - http://www.chinafirstcapital.com/blog/archives/8465
      - http://www.cjr.org/behind_the_news/the_myth_of_tiananmen.php?page=all
      - http://www.globalresearch.ca/what-really-happened-in-tiananmen-square-25-years-ago/5385528

      I myself have absolutely no stance on these incidents other than to note that they occurred 25 years ago, and that 25 years after WW2 people were no longer vilifying Germany and Japan, and nor do they remember events in Taiwan or South Korea with anything like the same venom

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  6. Dan- great posts today. Regarding the COT charts in Silver and Gold, the commercials have reduced their short positions steadily and significantly over the last year and half or so. A reduction of almost 200,000 contracts for gold and 40,000 for silver. You have shown the tight correlation between the hedge fund positions on the metal price. But what are the implications, if any, of this huge shift in commercial's positions? It has come during a time when the metals price has continued to essentially move sideways...

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    1. What happens when these commercials begin to sell? I heard an argument that gold follows the commercials because they are the contrarian. But, if they are building up their long positions, and eventually give up - could that cause gold to break support at ~$1200?

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    2. Actually, if you study the chart more closely, the Commercials don't necessarily tell you much. They have been net short since 2008. Then they started reducing their short positions in October 2012 as gold began its drop. So, their trend was in the wrong direction for the past 5 years. They were net short as gold rose from $700 to $1900. And then when gold began to decline from ~$1800 to $1200, they became more and more positive. Perhaps they are hedging physical buying, but then it means there has been less buying since July 2013.

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    3. Trinity Trader - follow the hedge funds - commercial traders take positions because that is how they hedge, either long or short. they do not drive markets - specs do. I watch the commercial position only so as to try to gauge when there might become a huge imbalance between speculative positioning and commercial posititioning. Even at that, there is no predetermined level at which one can say with certainty that an imbalance exists. We can refer to past conditions but those are notorious for making projections upon.

      The entire thing about the specs in gold that has me concerned goes back to that article and chart I put up some time ago detailing the levels at which their positions are going to be underwater. Below $1240 and it happens for a large number of them which is one of the reasons that this level is being defended by them especially.

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    4. Thanks Dan. Would it be fair to say the commercials are not selling as much future production as they were 18 months ago and as a group are more neutral on further downside price for gold and silver?

      To help me understand your perspective in your last few posts (if I may attempt to summarize because you have laid out allot of info):

      There is some downside risk in Gold price due to the acquisition price below $1240 by hedge funds for a good number of long contracts.

      These positions will be under water with any downside movement in price below $1240ish level. Also the number of net long positions by all speculators (hedge funds and other reportables) could be "fuel to the fire" for downside price movement if these start to be liquidated.

      Also the developing story of Chinese authorities cracking down on the use of physical copper and industrial metals to back loans could also effect any loans backed by Gold. Authorities could potentially tighten up loan standards and cause some of this loans to be called and the physical inventory to be sold (Copper and potentially Gold).

      For Copper, the number of long contracts held by hedge funds is out of balance and could be subject to more liquidation (possibly related to the Chinese loan issue). It liquidation of theses positions started this week with the big sell off in Copper.

      Finally for Silver, it is still figuring out if it wants to act more like Gold or Copper. Either way, if Gold and Copper move down, Silver would also likely follow... Hedge funds are net short Silver.

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    5. If you look at the hedge fund chart above, it seems like the hedge funds' reversals slightly lag the market. If that's the case, what's causing the initial changes in market direction? Is it generally nothing special happening, just a change in direction that hedge funds are then piling onto?

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    6. Trinity Trader - yes that is how I generally see things at the moment although the copper scenario is a bit off. I would not say that "copper is out of balance" in regards to the hedge fund positioning but rather than one of these TWO groups of LARGE speculators is going to be quite wrong. For now, the large reportables are winning and the hedge funds are losing but markets are not static and change constantly so we need to simply be flexible enough to recognize any shift in sentiment among either group.

      Yes on silver ....

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  7. Wait a minute. So you are saying that it turns out copper was way over committed? Overleveraged? And when the news broke, it...plunged?

    Doesn't that blow a hole in another article of faith for the goldbugs? I thought the theory was that gold is way overleveraged and overpromised, blah, blah, blah, and that when the "truth" comes out it is supposed to cause a massive squeeze, blah, blah, blah, as people are forced to buy, blah, blah, blah.

    Yet another alternate reality all shot to hell by actual facts.

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    1. The plethora of paper gold vehicles (plus China's, unknown until recently, massive economic/monetary stimulus) that ushered in golds 10 year bull market will also be responsible for golds downdraft (sub-$1150) when the extent of China's paper charades is fully realized.

      While it appeared that the U.S and EU banks might be the primary drivers behind the highly leveraged paper gold funds and derivatives it now seems more likely that the catalyst behind golds ascent (until it stalled at $1900) was due in part to TENS OF TRILLIONS of Chinese stimulus AND the paper leveraging of gold (and silver?) within the Chinese business or banking sectors.

      The blowback from this has the potential to ultimately scare away future (and present) investors enmasse away from the metals commodities.

      Imho, if China intends to use gold or silver to back the yuan in some way in the future then the way they publicly handle this copper/aluminum or iron ore issue goes a long way into how far they'll allow possible shortages of warehoused metals to be investigated and revealed...or not.

      China's got a lot to lose perceptually in the markets IF it turns out their warehoused or vaulted metals inventories are by and large an epic multi-billion (trillion?) derivatives/collateral scam.

      This could get uglier then how it's already shaping up into as gold and silver struggle at their current price levels amid poor sentiment.

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    2. PS. Can someone explain to me RATIONALLY how the traitor Bergdahl's release/exchange has anything to do with U.S.monetary policy, gold or empty gold vaults etc?

      Anyone?....Beuller?

      The mere mention of Bergdahl and gold or USD or empty vaults ( how ridiculous is that?) in the same setence can't be taken seriously...at all.

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    3. Hi Dan
      Although I do appreciate all the information you give us it is very well informed I have to ask my self why if the economy is doing so well as the main news media reports that our job participation rate is at a 35 year low and our disposable income is abyss? And also our GDP is completely negative? Also if you look at the charts on SLV more so than GLD Friday afternoon it was complete computer algos bidding against each other whether to keep it up or to keep it down I do not know. Your comments would be greatly appreciated.
      Thank You
      God Bless
      Joe

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    4. Joseph;

      Remember that you have to think "like the crowd" is thinking to understand how and why the markets do what they do.

      There is a huge difference between how the stock markets operate and the rest of the real world.

      Stocks are looking at ultra low interest rates, no inflation, stable growth ( they believe that the economy is muddling along) and for stocks, that means higher prices as it is the asset class in which gains can be made on invested money. Money managers get paid to produce yield so they go where that yield can be gotten.

      From a personal standpoint I am extremely worried about the future of the country if we get another left-wing leaning administration because I am afraid that will finish off the nation I have known and love and transform it into something that I no longer recognize.

      I am optimistic ( maybe naively) that the American public is going to realize the gravity of its voting mistake and correct course.

      I sure hope so Joseph or even Wall Street would have to then realize that the nation is declining.

      DarkPurpleHaze - who or what in the world is someone doing making a connection between Bergdahl and US monetary policy?

      Delete
    5. TD...it's out there if you look.
      I'm not looking to fan the embers on here with my comment so I won't point fingers (or links) towards anyone.

      The Bergdahl/gold/vault etc "logic" I'm seeing kind of blows my mind although I'm not shocked some folks see almost EVERYTHING as having to do with gold or silver or the USD or the US's demise or Obama's "agenda" etc.

      The 24/7 conspiratorial mindset is interesting to witness on some level even if it's completely absurd.
      On another level, it should serve as a flashing warning sign to any newbs out there or any "old timers" who are starting to ask themselves some uncomfortable questions about the mantra they've become wrapped up in or smothered by.

      Do some of the unfounded or unknowable claims or negative/dark vitriol by others seem a bit extreme and wayyy over the top?

      My overly patient conclusion was...yes.











      Delete
    6. As a Jeffersonian Classical Liberal, I agree with Trader Dan's political sentiments. However, I think it is important NOT to resort to alarmism regarding economics. No doubt we're heading in the wrong direction. BUT, according to the Heritage Foundation we're still ranked about 12th in the world out of 188 nations that get measured for economic freedom. So, while growth might be slower had our ranking been higher, we still can grow. Obviously, we want to turn the trend around and improve our ranking. But, I think it is important not to go around professing that the next economic apocalypse is coming.

      Delete
  8. Well I can tell we are far from a bottom.

    KWN running yet another "Terrifying Collapse" story by Egon Von Greyerz, a so called 42-year veteran who missed out on the one of the greatest bull markets in U.S. stocks.

    I guess a $100 drop isn't going to do it.

    Maybe a $500 drop in 3 days will get these guys to shut their Pie Holes and maybe re-examine the theories they have been pitching as the Dow has risen 2,200 points from October 2013, the month KWN had no fewer than 8 crash articles posted on their site.

    LOL....

    ReplyDelete
    Replies
    1. OK, so von Grey Hairz is saying that Austrian Economics only LOOKS like it is all bunk. In actuality it's all correct, but unfortunately all being covered up by manipulation of everything. And we are all doomed, by the way. As always.

      Whatever!

      Delete
    2. Salutations du Wisconsin! Merci Hubert!

      but back to the comment at hand... the Austrians would say that we are in the crack up boom phase, and that the Fed has simply managed to funnel all that hot money into the stock market. and Confucius would say, woman who fly airplane upside down, have crack up. bada bing, bada boom.

      :-)

      Delete
  9. And what's up with Eric King posting those pictures of exotic escorts wearing red lipstick?

    Never really figured that out.

    Seems like he should be posting pictures of H-Bomb explosions or something.

    ReplyDelete
    Replies
    1. This comment has been removed by the author.

      Delete
    2. Careful Mark,
      I'm already short SP500 with all my might now, that is...1 CFD contract, so basically the price of the SP in dollars (is it 1/50 th of a futures contract :)) and I will use the nuclear weapon of doubling my position if SP makes immediate new highs and reaches the 1970 area, totalling an awesome 2 short contracts.
      Give up now all your long positions or I will show no mercy.

      Delete
  10. Why did IAG shoot up this week? Pump Job ? ( A couple of days later Cramer's Street.com jumped from a SELL rating to an overnight BUY rating )
    You be the judge

    www.moneyandmarkets.com/reports/GST/6068/v/?ccode=&em=&sc=p446&ec=6068131

    http://www.thestreet.com/story/12734474/1/top-swing-trade-ideas-for-thursday-june-5-dexcom-conns-and-more.html?puc=yahoo&cm_ven=YAHOO


    ReplyDelete
  11. Thanks Dan for all you are doing on this blog.
    It's a pleasure and a privilege to get to know people like you via Internet and your actions on this blog. I am honored to be an internet friend of yours and wish you long life and prosperity as Spock would say. Hope to have the occasion to meet you someday before the imminent end of the world :)
    Greetings from Paris, where I'm staying for a few days.
    Have a nice weekend all, and let's keep this blog fun and constructive...

    ReplyDelete
    Replies
    1. Hubert, this is the reason I asked your thoughts on silvers close June 27th. http://i.imgur.com/mNDstTd.jpg?1 (100 ounce prize pool) I have two entries 17.60 thru 17.68 and 18.12 thru 18.20 If silver closes on or between those numbers I win the lot. 50 /1 bet

      Delete
    2. Hubert;

      Yes indeed my friend. You are a class act.

      I am trying to make the "v" thing with my fingers to return the Vulcan greeting so pause to see that here... :o)

      I have thought about visiting the American cemetery at Normandy one day so perhaps we can meet there and get to know each other's family.

      All the best to you Hubert.

      Delete
    3. This comment has been removed by the author.

      Delete
    4. With pleasure, Dan, sounds like a good idea.
      Take care as well,

      Delete
  12. I agree with Hubert 110%. It's a pleasure to come to Dan's blog. What a gentleman.

    ReplyDelete
  13. Hi Dan,
    (Sorry, I have not checked, if someone else had already made the following comment...)

    You write that hedgies are too often too long and not getting the mkt right ...

    But I used to hear, that this group (MM) includes gold-holding funds for small investors, which means they are long-only participants by nature.
    Isn't that the case?

    Maybe it is possible to measure over the time axis, which net-long figure stands for this long-only share.
    Maybe in phases, when sentiment is neutral towards gold, the net-long at this time could be a good estimation.

    Regards, Alex
    (and: keep on!)

    ReplyDelete
    Replies
    1. Alex;

      You raise a good point about the "long only" funds. Those are generally referred to as "index funds" because they benchmark against one of the many leading commodity indices such as the Reuters/Jeffries CRB index, or the Goldman Sachs Commodity Index, etc.\

      Those positions are broken out for the agricultural commodities but unfortunately we do not get any of that for the metals, both industrial or precious.

      I can tell you that some of those index funds, for the sake of reporting purposes , get lumped in with the swap dealers category. Some do not. When it comes to gold I honestly to not know if they are included in the swap dealers or not.

      but even if they are not, one can see for example, with copper, that earlier this year, the MM category was net short. So if the index funds were lumped into that category in the instance of copper, it still showed the MM category being net shorts in spite of the fact that there would have been "long only" funds in copper. In other words, the amount of hedge funds on the short side was larger than index funds to the point that the reading for the MM category was still net short.

      The same goes for the MM category in the silver market, It is now net short so if one includes the long only index funds in there, it is still not preventing silver from moving lower or from that particular category ( MM) as being net short.

      I say all that to say this - that those long only index funds limit the amount of money they put into any single commodity based on that commodity's weighting in the basket of commodities that make up the index against which they are benchmarking.

      Gold weighting in those various indices will vary but I do not think it is index funds which are keeping the MM category from registering any net short reading at this point _ I think it is hedge funds who bought in at a lower price and who have not yet been forced out of those longs.

      Let me just say this - try not to get too hung up on the COT as a trading or timing tool. It really is not made for that. I know that they are some kooks and hucksters out there who view it ( and their esoteric reading of it) as some sort of Holy Grail of trading. It is NOT.

      Use the support and resistance levels on the chart as trade entry and exit points. Monitor the COT for sentiment but that is about it.
      Hope this helps.

      Delete
    2. Thanks a lot for this detailed reply.
      Alex

      Delete
  14. SP500...ok I'm cheating because there is one exception (purple arrow), but without it we would have 11 consecutive daily tops. It is a rare configuration.
    We can make 12,13,14...but I think I saw only 2 or 3 configurations with 14 consecutive tops during last few years.
    So I think we are quite near a short term top on SP500 and a necessary correction (question being how deep will it be? 20 points maybe, lol :))

    Anyway, I'd be very happy to see a 12th top on monday, even more a 13th top on tuesday, because then I would definitely add up to my symbolic short position I took at 1944 to stop Mark's army of long contracts:)

    http://i57.tinypic.com/2qckw8g.jpg

    ReplyDelete
    Replies
    1. One last thing for SP.
      There has been a first upwards move of 72 points, then a consolidation (orange channel, but the uptrend is so powerful that the consolidation itself is moving slightly upwards!...else looks like a flag), then getting out from flag the usual target is another 72 points, i.e the target was 1942 $.
      Because of all this, I feel that this market is overbought short-term and should correct within the 1950-2000 area next week.
      Now...I have no idea how deep this correction could be, it could yet be a horizontal correction or some mere 20 points down before another wave up, and that's why my short position now is so unsignificant :)
      Have a nice weekend,

      http://i61.tinypic.com/x4hgsj.jpg

      Delete
    2. Two more long term charts for SP500 (2months and 2 weeks).
      This area would be a nice place to fall deeply, but as long as we remain in the upwards channel on the 2 week candle chart, I remain bullish long term, despite a lot of alerts on my indicators, telling me that I should closely watch shorter time units and watch for a reversal.

      http://i57.tinypic.com/2z7r4t1.jpg


      http://i62.tinypic.com/2n0rjnc.jpg

      Delete
  15. Eur Usd.

    Fibonacci useless? T.A useless? As you want... :)
    EurUsd hit its next fibonacci level (1.35 vs 1.3490) exactly at the moment when MACD was hitting its propagation axis. Nice.
    So two reasons two bounce exactly there, as it happened.
    I can still write an ascending wedge regarding EurUsd.
    All this simply confirms what Dan wrote before : 1.35 is a key support and EurUsd is not bearish as long as 1.35 is holding...

    http://i58.tinypic.com/qoak8y.jpg

    ReplyDelete
  16. Only 47 more points on the NY Composite and a 1 to 1 extension off the 2011 lows will be completed.

    Chart and measurements here:

    http://www.traders-talk.com/mb2/index.php?s=85c1333221f678630eafe0dd606bb255&showtopic=154566

    After that, I expect a significant correction in stocks.

    However, as long as the XLF and SMH are leading, and Transports outperforming the Dow, we are nowhere near the final top.

    It will take months, maybe years, for the market to go through a topping process before a real bear market can start.

    ReplyDelete
    Replies
    1. That's if we think linearly. Of course, only a black swan would be sufficient to start the process like now.

      Delete
  17. Spellcheck Armstrong is at it again in justifying his bullish stk position; to wit, he again references Jesse Livermore in another classic cherry picking of history, but somehow neglects the fact that the boy wonder blew his brains out in the men's room of a saloon. I guess he got a few calls wrong late in the game. But hey, not to doubt a guy who has the largest data base in the world and can tell you where interest rates were 300 B.C. Yes,, stks are heading higher still, but I would think it not a bad bet that this master of fractured syntax will end up in the ashcan of history with the donkeys of KWN and others too numerous to mention; my call on California Chrome was wrong; take care

    ReplyDelete
    Replies
    1. "But hey, not to doubt a guy who has the largest data base in the world and can tell you where interest rates were 300 B.C."

      lol Steve, you nailed it :)

      Delete
    2. Best to stick with the guy that learned it all from bert and jesse and "knows the future before it happens. You know the guy that sold 3.6 million shares while claiming he had 30 million invested in his company and said armstrong had sold out when armstrong turned bearish in 2011.

      They all make me sick.

      Delete
    3. Jasper where is the filing showing that many shares sold?

      Delete
    4. www.sedar.com

      Since just about anyone that is being led over the cliff by Jim Sinclair seems to lazy to check even the most basic of facts, i have compiled a spreadsheet with the trades.

      https://dl.dropboxusercontent.com/u/26429644/TRX%20Insider.xlsx

      "TRE doesn't put out releases on his sales of millions of shares of the stock, though he has steadily sold TRE shares into the open market. He sold stock more than 50 times in 2008. Over the years, as the stock price soared, Sinclair and his family have reduced their TRE stake from 25% in 2002 to less than 3% now, company documents show. "

      http://online.barrons.com/news/articles/SB123941230924310403?tesla=y

      According to the 2002 Annual Report Jimmy never put more then 6 million into the company. He and his associates got 25% percent of the combined company. Jim now owns less then 1.5%

      https://dl.dropboxusercontent.com/u/26429644/2002AR.pdf

      If there is one single person on the face of this earth you cannot trust about anything, it is Jim. There is a reason why they call him Jim Sinclier.

      Now, lets see how Jim is going to produce on Buckreef before September as he promised over three times this year.


      What can you expect from a guy that predicted the end of the bearmarket in gold - absolutely - in 1993!.

      https://www.dropbox.com/s/v7qxa0nhpesx5q6/Jims%20fax.docx

      You might as well buy my bridge.



      Delete
    5. "Jim Sinclair’s Commentary

      My security officer."

      - insert dog picture -

      ****************************************************8

      Jasper commentary:

      Honest people dont need security officers.

      Delete
    6. Jasper one post I do remember on JSmineset back in about 2012, I think, he was inferring that TRX is up for sale, and that his phone line is always open. I was kinda confused over that as I thought good gold shares will be like utility companies going forward the way they were back in the 1960's or something. Well then why is he looking to sell his hole in the ground?

      In addition, remember the sheik story, where he hired an actor showing up in a limo?? Shows how he operates.

      Delete
    7. Dont get me started on that inethical hack. Once you start digging into jim you cant help but become a cynical person.

      Its sutton resources all over again. Where jim wins everybody else loses because jim doesnt play the rules. Any rule. Hes got the ethical perspective if a shark.

      The lies - it seems pathological to me.

      Noone wil buy trx. Its worth about 60 to 70 cents if you find a generous professuonal investor. Im not sure those exist.

      Delete
    8. Hi Jasper,

      Maybe you are all right, but then I guess you don't mind that Sinclair knows what you are writing about him here?
      It's a bit easy to shoot constantly at people who are not there to answer you.

      Delete
    9. Hubert

      1 i am definetely right. I posted the evidence didnt i?

      2 Jim only responds to potential victims. You try asking him hard questions and we talk again. I did already.

      3: its easy to sell 15 million shares personally and then blame the manipulators.

      4: One can fail building a company. One can sell 15 million shares. One can raise the boards salary by 200% to 500%. One can ruin people while promosing protection. But one cannot do all these things at the same time.

      5 Hubert do some due diligence and stop assuming jim is a decent person as you are. He is not.

      Delete
    10. Jasper is right, JS only has 1.9 m shares in the company. Weather you look at it from book or mkt value it's a far cry from 30M.

      http://apps.cnbc.com/view.asp?country=US&uid=stocks/ownership&symbol=TNX-T&country=CA

      But didn't he say he has gold TRX and other forms? This could mean bullion and ETF's. Hope it's not short ETF's - thoughts?

      Delete
    11. LOL.

      400.000 of those shares are Restricted Stock Units Jim has rewarded himself since 2011. That is, TRX gives hundreds of thousands of shares to Jim and the rest of the board for free.

      He owned less then 1.5 million shares a few year ago.

      Jim said in London in April 2012 he had everything he owned in TRX. He has said that publicly many many times and wrote it on mineset too.

      But Jim also said in London TRX would be producing in 2013 at a cost of 250-350 operational expenses. Now what can you believe at all from someone that stated that?

      (Ps, this years AGM story was, TRX is going to producing before september 2014! - I guess, this is it!)


      Delete
    12. Hi Jasper,

      Decent or not, my only concern is that you are giving precise details about a precise person without him standing a chance to answer you on this blog, and that's a bit awkward to me because when you make the trial of someone, he usually has right for a lawyer :)
      Now as I said before, I didn't make my due diligence, I won't, I'm simply reading jsmineset as I read other blogs and use the information I want from it. I'm not at war with Sinclair and won't try to either defend nor bash him about the above mentioned issues as I have no idea about it myself, but your point is taken.

      Delete
    13. Dont worry, Jim couldnt care less what I think or say about him - or anyone for that matter. Jim however is not standing trial in court / as he should.

      As to his blog - I cant wait to see the USDX at 0.50 and gold at 50.000. looking forward to 2000 gold before the end of this year.

      There is a reason why jsmineset is called "mineset`. We like to call it - "Nomineyet".

      Production in September and I will go away. There will not be any, trust me.

      You may as well buy my bridge, if you think the Ukraine warmongering posts mean anything. Just pumping tops, that Jim.

      Hese is Jaspers advice. Sell the news Jim pumps. Iran, Bees, Bats, Politics, Banks and two dozen other fronts Jimmy makes em believe hes figting a war for the good cause on. Its a sure winner.

      Delete
  18. Speaking of California Chrome, His owner Steve Coburn showed how much class he has after the race. He couldn't stop whining about his horse getting beat. He sounded just like the people who complain all the time about the markets being manipulated. Steve, your horse got beat, he wasn't good enough to win the triple crown. Cased closed. Greatest race I ever saw, Affirmed, Alydar, 1978 Belmont. Greatest horse I ever saw, and IMO best racehorse in history, Secretariat.

    ReplyDelete
  19. Big Red was the best of them all Bobbo, I agree. Coburn was emotionally all spent and just let it all hang out and you can say he was whining for sure. However, he did make valid points.

    ReplyDelete
  20. Gold was firm above $1,250 an ounce on Monday after U.S. jobs data matched expectations, while a rally in stocks curbed the metal's appeal as an investment hedge.
    Bullion Tips

    ReplyDelete
  21. That's good that it was not so much of them bailing out of existing long positions as it was them adding a large number of brand new shorts for the Gold Trading Advisory Company.

    ReplyDelete
  22. Gold getting bashed before the NYSE open, USDX rallying on a tear.

    Peter Schiff and Gerald Celente must be joining Bill Murphy on a Wild Turkey binge down at the saloon.

    As Bob Brinker is fond of saying:

    "Never before have so many been so wrong for so long".....

    ReplyDelete
  23. Hi Dan , if you have a minute , what do you think of the AUSUSD chart ? any chance of a break out ? Thanks !

    ReplyDelete
  24. And one more consecutive high on the SP500.
    Tomorrow if there is a new high, I will short whatever top it is with a big short :)

    ReplyDelete
  25. Hubert, be careful as this is all fantasyland, regardless of what Mark says, and deep down inside he knows that the greatest engineered and orchestrated bull mkt of all time, is VERY long in the tooth, unless of course that Spellcheck Armstrong is right.

    ReplyDelete
    Replies
    1. Thanks Steve, I'm only playing the statistically impossible series of Sakata (12,13,14 consecutive highs). I know there will be a pause pretty soon.
      That pause may be only one or two days consolidation.
      It may be only 20 points.
      But I think it's not a bad thing to try a small short here expecting prices to at least correct a bit very soon.
      We'll see :)
      I'm more doing so so that I can show how I'm using Sakata as a trading decision tool, which I haven't made yet on this blog, plus someone needs to be here to bash Mark a bit or it wouldn't be fun at all :) :)

      Delete
  26. Well Jasper, I would say that you are very incorrect on the Security Officer position. Last time I checked the USDA had offered a bid contract for 7,000 machine guns. Well, those must be some very big pests they are looking to shoot in the corn fields..LOL....I myself tell every security company and their are an awful lot nowadays..one of the big growing bright sectors here in the good ol USSA. I tell them, no sir, no need for any alarm systems. I have two watchdogs who let me know anytime anyone is near my place, and several nice semi auto .308 caliber carbines, two .45's nicely made stainless steel Kimbers, a great fighting gun with limited accuracy but easy to handle Mini 14; and a few Biden special .12 guage shotguns, one regular stock and one with a handgripper. Bring it on.

    ReplyDelete
    Replies
    1. But, you dont have to post it on your "mineset" blog all the time to remind your extended family.

      You should have seen the volunteer goons that were protecting jim at the 2014 agm.

      I can wait for next year.

      Delete
    2. Jasper; can you explain more ?

      Delete
    3. I see steve why you asked clarification.

      I ment to write "i cant wait for next year".

      Again, im just observing.

      Delete
  27. What explanation are you looking for? The fact that many things were promised and now its clear there never was the intention to deliver these promises makes that more and more people are becoming unhappy. Hence the security at last agm. I fully expect even more unhappy people during next agm.

    Jim started advicing folks to take certificates before the 2008 crash. He did it again from 2011 untill now.

    When you treat your investors like khomeini treated his childsoldiers you need protection. Jim knows that.

    Im just observing.

    ReplyDelete
    Replies
    1. Jasper, I did not know what agm meant and so forth; thanks much

      Delete

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