Best of the Week
Most Popular
1.What Happened to the Stock Market Crash Experts Were Predicting - Sol_Palha
2.London Housing Market Property Bubble Vulnerable To Crash - GoldCore
3.The Plan to Control ALL Your Money is Now at Advanced Stage
4.Why Gold Is Set For An Epic Rally This Spring - James Burgess
5.MR ROBOT NHS Cyber Attack Hack - Why Israel, NSA, CIA and GCHQ are Culpable - Nadeem_Walayat
6.Emmanuel Macron and Banking Elite Win French Presidential Election 2017 - Nadeem_Walayat
7.Trend Lines Met, Technical's are Set - US Dollar is Ready to Rally (Elliott Wave Analysis) - Enda_Glynn
8.The Student Debt Servitude Sham - Gordon_T_Long
9.Czar Trump Fires Comey, Terminates Deep State FBI, CIA Director Next? - Nadeem_Walayat
10.UK Local Elections 2017 - Labour Blood Bath, UKIP Death, Tory June 8th Landslide - Nadeem_Walayat
Last 7 days
Stock Market Forecast for Next 3 Months - Video - 23rd May 17
Shale Oil & Gas Production Costs Spiral Higher As Monstrous Decline Rates Eat Into Cash Flows - 23rd May 17
The Only Metal Trump Wants More Than Gold - 23rd May 17
America's Southern Heritage is a Threat to the Deep State - 23rd May 17
Manchester Bombing - ISIS Islamic Terrorist Attack Attempt to Influence BrExit Election - 23rd May 17
What an America First Trade Policy Could Mean for the US Dollar - 22nd May 17
Gold and Sillver Markets - Silver Price Sharp Selloff - 22nd May - 22nd May 17
Stock Market Volatile C-Wave - 22nd May 17
Stock Market Trend Forecast and Fear Trading - 22nd May 17
US Dollar Cycle : Deep Dive - 21st May 17
Bitcoin Breaks the $2,000 Mark as Cryptocurrencies Continue to Explode Higher - 21st May 17
Stocks, Commodities and Gold Multi-Market Status - 21st May 17
Stock Market Day Trading Strategies and Brief 20th May 2017 - 21st May 17
DOW Needs to Rally Big or Correction is Next - 20th May 17
EURUSD reaches DO or DIE moment! - 20th May 17
How to Get FREE Walkers Crisps Multi-packs! £5 to £28k Pay Packet Promo - 20th May 17
UK BrExit General Election 2017 - Will Opinion Pollsters Finally Get it Right? - 19th May 17
Gold Mining Junior Stocks GDXJ 2017 Fundamentals - 19th May 17
If China Can Fund Infrastructure With Its Own Credit, So Can We - 19th May 17
Evidence That Stocks are More Overvalued than Ever - 19th May 17
Obamacare May Become Zombiecare In 2018 - 19th May 17
The End of Reflation? Implications for Gold - 19th May 17
Gold and Silver Trading Alert: New Important Technical Development - 19th May 17
Subversion And Constructive Synthesis Of Capitalism And Socialism - 18th May 17
Silver: Train Leaving Station Soon! - 18th May 17
Credit and Volatility Signal That Financial Conditions Are Very Overheated - 18th May 17
Another Stock Market "Minsky Moment" or Will the Markets Calm Down? - 18th May 17
WannaCry Ransomware Virus Is a Globalist False Flag Attack On Bitcoin - 18th May 17
Euro, Stocks, Gold Momentum Extremes All Round! - 18th May 17
US Stock Market Slumps on Establishment / CIA Trump Impeachment Coup Plan - 18th May 17
Tory Landslide, Labour Bloodbath - Will Opinion Pollsters Finally Get a UK Election Right? - 17th May 17
The stock market sectors which are breaking out in 2017 - 17th May 17
A ‘Must-See’ Chart for Gold and Silver Aficionados  - 17th May 17
Will the SPX Stock Market Final Surge Fail to Appear? - 16th May 17
Claim your FREE copy of Jim Rickards’ explosive book - 16th May 17
GOP Establishment Elite Plots Trump Removal - 16th May 17
Walkers Crisps Pay Packet Cheats, Shoplifters and Staff Conning Customers - 16th May 17
Gold and Sillver Markets - Silver Price Sharp Selloff - 15th May 17
Gold Stocks Poised to Soar Sharply Higher! - 15th May 17
This One Undiscovered Pot Stock Could Help Investors Cash In On The “Green Gold Rush” - 15th May 17
WIll Trump Tax Cuts Debt Binge Save Stock Market From Double Top Bear Plunge? - 15th May 17
Trump Rally or Geopolitical Meltdown: Currency Management for Dollar Risk - 15th May 17
A Shallow Stock Market Correction? - 15th May 17

Market Oracle FREE Newsletter

Trading Commodity Markets

Precious Metals Short Squeeze Underway

Commodities / Gold and Silver 2010 Sep 20, 2010 - 11:40 AM GMT

By: Captain_Hook

Commodities

Best Financial Markets Analysis ArticleThe first thing I want you to do this week is to read this past article from the spring entitled ‘Smoke and Mirrors Markets to Sponsor Precious Metals Mania’, which will benefit new and exiting subscribers alike for several reasons. (Apologies to non-subscribers as this article cannot be opened to the public.)  First and foremost, and reflecting the title, it discusses market sentiment in detail – it’s importance and how sentiment is a primary driver in any market. Secondly, it discusses this with respect to silver as a focus, which makes for a good comparison with present circumstances. What’s more along these lines, it also discusses aspects of the bullish fundamentals that are now driving silver (i.e. seasonals, fractional reserves finally drying up, etc.) that are contributing to silver’s long awaited breakout higher, which is occurring as we speak in my opinion.


Why do I think silver is finally breaking out to the upside moving forward? Because of important developments not present back in the spring. First, in terms of the paper markets, not only does the likelihood of position limits on COMEX finally have JP Morgan and the banking cartel rethinking their situation; but also, sentiment has gone bearish on silver as measured by rising open interest put / call ratios on the primary silver ETF known as SLV, fostering a short squeeze higher just like this condition does for stocks; again, both aspects discussed in the above attached article. We would be amiss not mentioning how inter-market relationships play a role here too (i.e. money from a popping bond bubble looking for a new home will be drawn to precious metals), which is also discussed above, however we will not expand on this point today.

Instead we continue to focus on sentiment, as it’s appears to have been an important missing link in terms getting a long overdue move higher underway once again, where we would like to bring your attention to the logic loops used by speculators when placing bets, bets in the derivatives (primarily options) market. Where are we now in this respect? An increasing percentage (still low) of speculators think deflation is immanent, which is causing gold and silver to rise (because of a short squeeze), which in turn has the larger population seeing an inflation signal, which is keeping open interest put / call ratios on US stock indices generally low. Here, unlike previous instances that witnessed low and falling put / call ratios on precious metals and their related equities (think GDX and XAU), now we have the opposite (hence the higher prices due to squeezing); and, we also have the opposite in stock indices ratios as well, which is why they have had trouble catching a bid. So you see what goes around has come around for both silver and gold in the paper market pricing mechanisms, which is a large part of the reason they are rising.

And the second reason silver is breaking out in my opinion is a physical supply squeeze is also now finally underway, which is not discussed above, and is essentially new from this perspective then, however we always knew this was coming, we just didn’t know when. Here, I can tell you from my own experience in buying physical in Canada, where one would assume supplies to be plentiful until a genuine supply problem emerges, wait times, especially with larger quantities, are getting longer, which supports this thinking. Things are nowhere near as bad as in the States, with silver eagle sales suspended regularly (and are still unavailable today) amidst record demand, however this could happen in Canada too, which would be telling in my opinion.

What’s more, this would also be another example of what goes around comes around in that in perpetuating paper markets and the dollar ($) all these years at the expense of the silver market (because this aided in controlling the gold price), now, we will have a buoyant silver market pushing gold higher, which would hopefully see both finally return to not just some semblance of reasonable inflation adjusted pricing, but more, as the currencies they have been for thousands of years. Of course if Egon von Greyerz is correct, and gold (and silver) is entering a virtuous cycle, then this brand of thinking is far too conservative, with prospects for the metals potentially into the multi tens of thousands.

Where are we right now? With silver at $20 and looking to test more recent highs at $21; and gold just under nominal all time highs at $1260, we may be knocking at the door of entering such a virtuous cycle, however both of the metals are short-term overbought as can be seen on daily measures (gold and silver), so corrections could come at anytime. In bull markets like this however, you don’t want to make the mistake of looking at a daily chart in gauging potentials (or even weeklies sometimes [not with silver and gold now however]), where under present conditions, which are potentially explosive for the metals, prices can keep moving higher despite overbought conditions that would normally stop a move. This, is what manias are all about, where it imperative to watch the monthlies, with silver featured first below. (See Figure 1)

Figure 1

Moreover, in manias such as this you don’t attempt to trade lower degree swings, allowing the momentum to work in your favor. If you wish to look at such a strategy (short-term swing trading) then one must use a system (like put / call ratios, sentiment, technicals, etc.) or identify trade signatures, such as the one that appears dominant right now, with the cartel attempting to push prices down every night, only to see new highs daily as cash market / ETF trade overwhelms such efforts. Here then, a short-term top in silver would be apparent with a strong overnight performance possibly leading to a gap opening in daily COMEX / ETF trade. This is the signal I would be watching for to mark a short-term top in both silver and gold, which as suggested above, with the former taking the lead these days. (See Figure 2)

Figure 2


Further to this, and as you can see in both charts above, technically both gold and silver have further room to run, with the latter still playing catch-up from a technical (and fundamental) perspective. (i.e. gold is more over extended than silver.) With both gold and silver approaching overbought conditions on the monthlies what is the primary reason they would continue higher then? Answer, because the Fed (Bernanke) will likely need to start monetizing stocks and real estate, which could lead to asset hyperinflation. It’s either this or the US government will eventually be forced to devalue the $ Roosevelt style, meaning by declaration, making technicals moot with such a move. This is of course why it’s a very good idea to have healthy core holdings in physical gold and silver.

Aside from such a development however, if precious metals are to continue advancing on a more natural basis, the shares will need to participate too, meaning we should look at the health of the indexes as well. Here, with broad index health important to precious metals shares, it makes sense to look at the Philadelphia Gold And Silver Index (XAU) because it has a tighter correlation to the broad measures of stocks compared to the Amex Gold Bugs Index (HUI) or Amex Gold Miners Index (GDM). And in looking at the long-term weekly print from the Chart Room we see quite a constructive picture, with indicators well supported and positioned to move higher. The potentially exciting part of this chart comes in the observation a channel recapture is being attempted right now (as has been the case off and on for some time), this accompanied by an important time line turn right now, allowing for volatility to re-emerge with a bullish impulse higher. (See Figure 3)

Figure 3


Unfortunately we cannot carry on past this point, as the remainder of this analysis is reserved for our subscribers. Of course if the above is the kind of analysis you are looking for this is easily remedied by visiting our web site to discover more about how our service can help you in not only this regard, but also in achieving your financial goals. As you will find, our recently reconstructed site includes such improvements as automated subscriptions, improvements to trend identifying / professionally annotated charts, to the more detailed quote pages exclusively designed for independent investors who like to stay on top of things. Here, in addition to improving our advisory service, our aim is to also provide a resource center, one where you have access to well presented 'key' information concerning the markets we cover.

And if you are interested in finding out more about how our advisory service would have kept you on the right side of the equity and precious metals markets these past years, please take some time to review a publicly available and extensive archive located here, where you will find our track record speaks for itself.

Naturally if you have any questions, comments, or criticisms regarding the above, please feel free to drop us a line. We very much enjoy hearing from you on these matters.

Good investing all.

By Captain Hook

http://www.treasurechestsinfo.com/

Treasure Chests is a market timing service specializing in value-based position trading in the precious metals and equity markets with an orientation geared to identifying intermediate-term swing trading opportunities. Specific opportunities are identified utilizing a combination of fundamental, technical, and inter-market analysis. This style of investing has proven very successful for wealthy and sophisticated investors, as it reduces risk and enhances returns when the methodology is applied effectively. Those interested in discovering more about how the strategies described above can enhance your wealth should visit our web site at Treasure Chests

Disclaimer: The above is a matter of opinion and is not intended as investment advice. Information and analysis above are derived from sources and utilizing methods believed reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Comments within the text should not be construed as specific recommendations to buy or sell securities. Individuals should consult with their broker and personal financial advisors before engaging in any trading activities, as we are not registered brokers or advisors. Certain statements included herein may constitute "forward-looking statements" with the meaning of certain securities legislative measures. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the above mentioned companies, and / or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Do your own due diligence.

Copyright © 2010 treasurechests.info Inc. All rights reserved.

Unless otherwise indicated, all materials on these pages are copyrighted by treasurechests.info Inc. No part of these pages, either text or image may be used for any purpose other than personal use. Therefore, reproduction, modification, storage in a retrieval system or retransmission, in any form or by any means, electronic, mechanical or otherwise, for reasons other than personal use, is strictly prohibited without prior written permission.

Captain Hook Archive

© 2005-2016 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Catching a Falling Financial Knife