Silver has just exploded out of the cartel’s 2 week long cap of $28.20, with a vertical move from $28.15 to $28.55, and 2 subsequent vertical moves taking silver to $28.81.
The vertical intra-day move is one of the largest moves we’ve seen in silver in several months.
It appears silver’s seemingly endless consolidation phase is ending, and silver is ready to embark on it’s next bull run.
Look for silver to retest the $28.20 prior cap, and then target the critical $30 level.
We hope you were backing up the truck during the boring multi-month consolidation/ base building in the $26-$28 range, silver appears ready to generate some excitement again!
![[Most Recent Quotes from www.kitco.com]](http://www.kitconet.com/images/live/s_silv.gif)
![[Most Recent Quotes from www.kitco.com]](http://www.kitconet.com/images/live/s_gold.gif)
This is a fake move. Over 5700 ounces of silver traded in that single half hour. Only one entity has the ability to do that and it is the commercials. Moves like this are designed to lure in speculators to buy longs. A real move upwards in price is slow with long holders refusing to sell. This move is sudden. It has Blythe Masters written all over it.
Marshall, I respectfully disagree. $28.20 to $28.30 was a widely known technical alert range and when the typical bottom-fishing bids surfaced to create the initial upside reversal this morning following the dip below $28, the fence sitting buyers got off the fence and started taking notice. On a spot market basis we then touched the $28.20 area (using those numbers because people can see them in the above chart) and a bull jumped the gun in advance of $28.30 resistance. From that point forward, the rush was on.
While it’s too early to tell just what type of buyers surfaced following the London close, it could very easily have been a combination of a handful of hedge funds and even some commercials can be sniffing around such as Barrick, given their problem with Pascua-Lama project delays and the need to feed SilverWheaton silver (hat tip to SRSrocco for his outstanding SilverDoctors posts on this subject). Heck, China’s interest in Barrick’s position in African Barrick Gold might very well be tied into all of this because Barrick seems to be making some efforts to clean-up and re-adjust their production outlook and balance sheet.
We simply don’t have enough information to conclude this is a “fake” move. Even if it was bullion bank short covering in an effort to move the price higher and pull in sheep for fleecing, the character of this market has changed so much in the last month that such a strategy would carry higher risks of backfiring. Furthermore, this is not coming immediately on the heels of a decrease in margin requirements.
I know… we’re talking about a move of about three quarters of a billion dollars worth of silver per your contract count. But that’s not as crazy as it might seem at first glance in our uber-leveraged financial system.
Within a few weeks, time will show what was the right call. Traditional analysis such as heavy reliance on commitment of traders quantitative analysis without sufficient qualitative analytical assessment of the unbelievably strong bid under the market coming from strong hand buyers (including China’s gold buying interest, which was known for a fact) gave a great many analysts a head-fake over the last few months, yourself included, with your calls for sub-$22 silver possibly all the way down to even silver in the $15 area. I bring this up not to rub your nose in it. I bring it up because I think people make the consistent mistake of believing the cartel can exercise near total control over the silver market. Every single time the cartel successfully executes a huge raid and destruction of bullish sentiment such as the period starting Feb. 29, 2012, we go through weeks and months of silver investors bemoaning how all-powerful JP Morgan is. Meanwhile, when the market character starts to change for anyone to see, it nevertheless takes even more time for the cartel bemoaning to switch to neutral, never mind euphoria.
I am pretty sure the cartel does exercise near total control over the silver market. Ted Butler’s recent writings testify to this ability they have. He wrote and I closely quote “they can put the price any where they want it”.
You are right, time will tell.
Look at the price action since last Wednesday. We do not see sustained buying at any point in time.
We see a little buying followed by takedowns and then leaps in price. That is not speculator behavior. It is the commercials.
My call for silver below $26 has not materialized yet, yes. The conditions have not merited a drastic drop as the commercials have been able to snatch longs without taking the price below $26.
The COT week ends tomorrow, in the early afternoon and we will get the analysis on Friday when the report comes out. If you notice the previous COT there was a ton of long and short buying by the commercials. That is trademark Blythe Masters. They laid in those longs, have taken price up to induce speculator long buying.
At the same time those spec longs are bought at higher prices, the commercials are selling and taking some profits, to what degree i do not know. My guess is they follow rigorous rules to garauntee their profits.
Last COT closed around $27.75
Price today made it up to $28.79
Considering we saw some sustained buying from about $28.50 today, if we do a little math, we see that if the commercials sold just a small percentage of those longs they bought last week they have made a very nice profit and will continue to do so.
I would not be surprised to see price jump again.
You have to realize that those commercials bought virtually all of the shorts (and then way more some) that go with those 3200 longs they snagged last time. That allows them to sell their longs with impunity. They are also buying the shorts that go with the speculator longs being bought after the price leaps.
They are in total control.
Marshall, thanks for the thoughtful reply. When it comes to the overall debate, we’re probably better off just waiting for a week and picking up the discussion later. But I do have to say that I don’t get how you can be so emphatic about the view that “they are in total control.” Certainly, they are not in total control when it comes to the long-term picture. We’d be living in a world of sub-$10 silver if that were the case. I hope we can at least agree on that point.
I would go further and disagree with the idea that the cartel “can put the price (of silver) any where they want it.” They might be able to do that on many specific single days and over short periods of time. But when one matches the reality of the presence of strong-hand bottom-fishing buyers willing to act at a given price point (roughly $26 proved to be that level) and the actual price trading history we have seen since Feb. 29, 2012, the object reality of these market dynamics over this time STRONGLY suggests that the cartel WAS trying to get silver lower and outright failed. That’s what the price and other data shows. Period. Sometimes, the physical market tail pulls around the paper market dog, and the cartel most certainly does not operate total control over the physical market.
I am emphatic because once you understand the math behind a concentrated position you realize only some anomaly buying on the part of the speculators can actually force price higher and that anomaly has to include the will to not sell longs in spite of price raids. I will try to explain more once I see the COT numbers this coming Friday.
I have modled the short position of the commercials and I can tell you they are in control but unless you do the math it is a hard point to wrap one’s brain around it. That plus their use of HFT to raise or lower price psychologically makes this a captive market.
I do not buy this statement of yours:
“But when one matches the reality of the presence of strong-hand bottom-fishing buyers willing to act at a given price point (roughly $26 proved to be that level) and the actual price trading history we have seen since Feb. 29, 2012, the object reality of these market dynamics over this time STRONGLY suggests that the cartel WAS trying to get silver lower and outright failed.”
If fact, I believe the lower price from Feb forward is proof positive of their power and a result of efforts to induce long buying to find ways to offload their short positions.
For over two years now, reducing short positions has been the goal of the commercials and they have been successful at it. They do, however, run the risk of dropping the price too far too fast and not having enough speculator long buying to cover their short coverings.
I do not know precisely why they stopped at $26 but I know mathematically they could have dropped it to $20 if they wanted it there.
Currently, as of last COT, the commercials hold 71K shorts and the speculators hold 54K longs. There are only so many longs that can be milked from the speculators based on a certain percentage price drop over a certain duration of time.
In fact, the producer merchant category of the commercials holds 56K shorts so too drammatic a price drop would start robbing the swap dealers of the commercials category. Much cleaner to get the specualtors to go short over a longer period of time.
There were well established analysts who told me early this year silver would never go below $31 for the very same reasons you are now saying there is some sort of support at $26.
That support simply does not exist just like it did not exist at $31.
Every trader has their price point they will sell at…
As I said before, given COT data release timing I think it’s best that this debate is more fully addressed in a few days/week so I’ll just wait rather than hit all your points. But I also think it’s worthwhile underscoring a point where we can possibly agree with ease: my contention that in the long-run, as defined by periods of time in excess of one year, the cartel most certainly does NOT have total control. Your posts have focused on the short- and intermediate-term. Do you honestly believe that the cartel has “total” control over the long-term too? You kind of skirted around that point.
I can’t resist commenting on this, however: “I do not know precisely why they stopped at $26 but I know mathematically they could have dropped it to $20 if they wanted it there.” Marshall, they stopped there because buying interest by a small number of deep pocket investors, for the most part, simply proved to act to buy at that level and the cartel found it too expensive to fight that force. When the cartel pushes paper prices below true physical market clearing prices the distortion doesn’t come without cost and leakage into the physical market as available supply of real physical shrinks at an increasing rate in direct response to the degree of pressure put on paper silver as the cartel labors to drive prices down. This is also a contention that is supported very clearly by simply looking at a 9 month daily chart of silver. Sometimes, we’re best served by keeping analysis simple. You have to remember that in the real world, there’s no more than about 1 to 3 billion ounces of silver above ground (closer to 1 billion), and to steal a quote from AGXIIK, that’s “…worth maybe $90 billion. We spend more than that on dog food, manicures and toilet paper. Compare to any other form of wealth, silver is bupkis.”
There comes a time when individuals and nation states controlling a heck of alot more wealth than bupkis decide a specific store of wealth asset should be bought anytime a given price is hit, and $26 proved to be that price in silver. As I noted above, we know for a fact that this thesis regarding China and low $1500s gold was in operation over the last few months. The silver market is a bit more opaque but the trading pattern matches w/ respect to $26.
There are times when looking at the micro level of COT and similar data mechanics can lead one to miss the forest (macro qualitative analysis) for the trees. Time will show who — and what methodologies — are most efficacious overall. I hope you don’t take this the wrong way because I don’t mean to insult. I respect your work and I employ similar analytical tools as well. But I have a hunch I do a lot more work using qualitative supply/demand and global macro analysis than you do, and that’s a big factor behind why we come to very different conclusions. Such makes for a market — a free flow of ideas and perspectives. That’s a good thing and I thank you for your contributions here because I’d be an idiot were it not for the opportunity to learn from people that see the world differently.
Let’s continue this debate next Monday, including any and all the detailed math you want to get into.
I like your comment about seeing the world differently. Too few people see the world differently these days otherwise more would be convinced the sun revolves around the earth…
Unless we get some sudden change before the pit close today this COT is going to be easy to predict. Lots of long buying by all parties and lots of short position accumulation by the commercials. My guess is the commercials have stopped buying longs, still accumulating shorts and just waiting to see how far this fake rally will go before they reel those longs in.
The only question in my mind is when to the commercials decide the party is over….
Finally today we see some sustained long buying on the part of speculators. If that holds then price could run into the 30s.
What we do not see is any attempt at all on the part of the commercials to contain price.
What’s wrong with this picture?
You have to realize the commercials cannot do the exact same thing over and over and expect to get the same results. They have to mask their activity and in this case I believe it is to make speculators believe there is actually a rally going on.
I agree. Sharp moves up and down reek with the stench of manipulation.
I misspoke. That was 5,762 contracts or 28,810,000 ounces traded withing one half hour.
There are no speculators just sitting out there waiting to pull the lever on that many long ounces. They all fear that if they bought long then price would get slammed and their stops would be tripped.
This is a false flag.
I am going to go with the boys for GATA. We will see what happens at the end of the week or I should say within the next few hours. Three hours before closing in New York. I will keep the faith and watch it rise.
Possible they are driving silver up so they can short for more profits.
28 dollar silver could bounce anywhere, it’s terribly under-valued. Take a look at Kitco’s historical charts for 2010.
In December, 2010, over 1 and 1/2 years ago, silver was banging around from $28.50 to $30.75 an oz.
So a little spike up to 28.80 can’t be real? Sure it can, the jury’s still out.
BTW, the ‘Commercials’ might be covering their shorts, who knows?
C’mon, it is a fcuking $0.75 move to the upside. This is nothing not even worth discussing. Give me 10 consecutive days like this and then we might have something to talk about…
It’s not just about today’s price move. You have to put it into context of market evolution. Price signals and the changing flow of the cue of people in the buy and sell lines manifest over longer periods of time. With the multiple testing of support at $26 and the multiple re-attacking of upside resistance lines in the sand such as what $28 proved to be up until now, the data is right in front of all of us. What I see is a stealth bull market, being temporarily held together by deep pocket large buyers that picked their buying target prices and simply sat there, hoovering-up any and all metal they could get at such opportunistic prices. It’s a proven fact that China was acting in this way in the gold market over the last few months for example. And there has never been any question that, overall, the fundamentals for the PM sector have been improving all along, even while prices were declining. Markets can be irrational to the downside as well as upside even without manipulation.
In any event, Lex, you’re right about one thing: it’s just a one day move. But it didn’t come out of thin air. It has a context and the profits are going to go to those that can read context best, up or down. Time will tell who’s right here.
Heck, in our managed PM sector markets, it actually has been unusual to see many 2% or higher up days for gold and 3% or higher up days for silver over the entire 11+ year history of this current bull market vs. the relative percentage of times such occurred in previous bull markets like the 1970s-1980. GATA contributor James McShirley has documented this well and you can find some of his stuff in the LeMetropole Cafe archives if you want to look at the data.
Just to clarify FW and LL, I do not view this as a one day move.
My view is always larger in scope and always takes in the prior COT ( or several COTs) plus the price action in between that close and the present.
Can’t attach a chart here or I would draw a picture.
So, in words, the price bottom for the last 10 days was last Wednesday at $27.43 and since then we have had 3 leaps of faith. one on Wed, one on Thurs, and one today to price at $27.79 high. That’s a $1.30 move in less than 4 days.
Study the chart for that duration and you will see price was very stagnant during that timeframe with no sustained buying in between those price leaps.
I say it is a false flag to induce long buying and it really has not worked until today from $28.08 to $28.51 and then we see some long buying. And guess what? Since the pit close this afternoon, all we see is profit taking…
But, I could be wrong.
Wed I expect the shoe to drop as the cartel tries to drive it back down again.