Market Curiosity: Exploring Markets And Systems

May 6, 2011

May 6th silver update…

Filed under: Just Watching — Tags: , — Jeff Fitzmyers @ 10:03 am

Ed Steer: My bullion dealer just had the two biggest back-to-back sales days in silver in his company’s history. It was wall-to-wall buyers [and some sellers]…and the phone was ringing off the hook all day long, as the buy-the-dips crowd was out in full force again, like they have been all week.

Comex silver partial backwardation = $1.36 between front month and furthest back month. Still rooting for SIFO to get below -0.6.

I don’t think today is a good risk reward to go long silver or SLW.
+ Price on weekly 170 EMA support.
+ Daily CCI crossing over a low weekly CCI.
– Price is just not strong.
– Price did not spring up off 170 EMA magenta line as much as it could.

April 30, 2011

If current silver pause is shallow due to shorts covering, I imagine a large price rally is nigh.

Filed under: Just Watching — Tags: , , , , — Jeff Fitzmyers @ 9:05 pm

+ Jason Goepfert, “This is 4th time in 30 yrs that US Dollar fell 8 days to 52wk low. Others = quick rally, then lower low (10/25/04,4/19/07,3/6/08).”
+ How the COMEX Didn’t Lose its Silver Lots of info on the silver delivery process.
+ Comex Explains Large Adjustment in Silver & Gold Registered Inventories “… the reclassification was … due to a change in its reporting system to electronic warrants and the metals that had not fully converted from paper to electronic were moved to eligible.”
+ Ghost Informative short article about some historical aspects of timing major currency changes of trend.
+ Ed Steer: Silver on fire in India: “Despite a 100% jump in price in just over six months from October 2010, demand for the silver metal refuses to die in India.”
+ Ed Steer again: “There’s still the possibility that the bullion banks may blast gold to the downside one more time, to get one more shot at the silver shorts…but, regardless of that, the price management scheme by the bullion banks in both the silver and gold markets, is obviously on its last legs. From this day forward, all price bets are off.” Pretty strong words!
+ SilverGoldSilver sums it all up well:

“8,438 contracts covered. Bullish… Thats a large amount of contracts to be covered in Silver especially at these prices. Now if I was JPM and I knew where the price of silver (or anything is going since THEY are the market) WHY WOULD YOU COVER AT ALL TIME HIGHS? If silver was truly in bubble territory they would have added to the shorts and covered at a much lower price. Something BIG is about to happen. This is a HUGE tell unless the data is a set up for a bull trap. I doubt this is the case… This is huge. Realize that the biggest players in this market dont cover to take massive losses at 5000 year highs if they know its not going higher. So. We go higher. They have given us a “tell.” May not be tomorrow, but this report just told me to keep buying.

Some “tops” to compare with April 2011’s:
+ The 10 EMA was at least tagged by the 3rd day following the high.
+ Price never challenged the high just 3 days later.
+ Price had a marginal new high followed by a correction twice. This is kind of what I think Mr Ferguson suggests. (Up next week to about 52, down possibly the next 2 weeks to 47(?) then up enough to buy small countries. And this fits in with the USD index having a dead cat bounce off about 70 for ?2? weeks ??)

One speculative interpretation for the past few trading days is that the naked shorts used the advantage of many dumping their longs and / or going short at the big psychological number of 50. Now if price goes up next week to about 52-53, would that be enough to entice short covering by the new shorts. Then the market can fall again with gold and possibly stocks, allowing the new longs to get whipped once again. I suppose there are not a lot of other options. Once silver breaks free of everything, it might go up a lot and be “unmanageable.”

April 23, 2011

First notice day of May silver is in 5 trading days yet open interest of silver just ROSE 5.5% to 49,418

Filed under: Just Watching — Tags: , — Jeff Fitzmyers @ 12:47 am

That’s 247 million ozs. There is less than 36 million ounces available for delivery.

Ed Steer suggests the one day 12,340 contract rise is a record.

If I have it right, many will think that the naked shorts are piling in to make a big dip. And that might very well be true, if they still had the upper hand. Another view is the naked shorts heavily sold most of the last 24 trading hours and price STILL rose $2. Important numbers for future rises: 53, 66, 105, moon, pluto, Proxima Centauri.

April 22, 2011

When will silver stop going up??? (update 1, Sep 2, 2012)

Filed under: Just Watching — Tags: , , , — Jeff Fitzmyers @ 3:31 pm

Ed Steer: It’s a short-covering rally, pure and simple… Ted Butler has mentioned for weeks now, this silver rally is a short-covering rally. Open interest is actually declining because the bullion banks are covering their short positions…it’s not caused by new speculative longs coming into the market and bidding the price up.

If so, I have read that short covering rallies usually end when the shorts are basically done covering. The shorts just stay pressured on an hourly basis until they capitulate. That does not seem near. 🙂

Also, Mr Steer has commented each of the past few days how his local bullion dealer is very busy.

My bullion dealer had another monster day at his store yesterday…and it was certainly one of his biggest sales days of 2011. He has almost more business than he can handle. Because silver bullion deliveries are now many months in the futures, customers are limited to 10 oz. of silver bullion per customer in over-the-counter sales. If they wish to purchase more, it’s a 3-month minimum wait for most items.

Ted Butler: While the current lofty price levels do allow for a sell-off of significant proportions, the underlying facts and market structure also indicate a melt up is also possible. The financial pain to the silver shorts has been immense and, as a result, the odds of a short covering panic have increased. The odds still favor higher silver prices.

Alasdair Macleod: Anatomy of a short squeeze: The short was closed out at about three times the share price of earlier that morning. The squeeze on the bear position had nothing to do with the company’s underlying value: it occurred because one big speculator got into an impossible position that had to be resolved. And that more or less is where gold and silver appear to be today.

This post by Carl Swenlin is almost stunning. He always seems like a mellow and thoughtful analyst.

Silver Still Soaring: … Parabolic and/or vertical advances … usually end badly, with vertical declines as steep and speedy as the ascent… However, there are reasons to believe that fundamental and technical conditions exist that will continue to be positive for precious metals… For those who bought at much lower prices, from a long-term point of view I see no reason to be concerned about any pullbacks. The kind of extreme financial crisis that precious metal advocates have long predicted is now actually upon us.

And his 2 charts are wonderful.

Comex partial backwardation — new backwardation on the front month.

A scenario: Silver rises to around 53 FRN’s / oz. Many who do not know the fundamentals sell and/or short. Price screams down for just long enough to satisfy the the astro turn date, let the new shorts high five each other and turn their attention to other things, and induce weak longs to sell. Then price starts up with alacrity, and entities scramble to cover and get long. The next big number might be 66.

I can’t come up with a reasonable fundamental scenario where silver goes down for years.

Update September 2, 2012: “…fundamental…” Ah, such wishful, yet, incorrect thinking. Yes, if a commodity is bought near the cost of production, and a long position can be held indefinitely, profit will follow… But I have never been able to time such things. Obviously. Instead, I now take a position, take partial profits, and let the rest run with a trailing stop.

March 29, 2011

Silver update March 29th

Filed under: Just Watching — Tags: , , , , , , — Jeff Fitzmyers @ 12:21 pm

An interesting tibbit…

Ed Steer: Silver’s volume netted out to about 55,000 contracts…which, for the first time I can remember, was a higher volume than was traded in gold… the deliveries in the March contract went right down to the wire…something that Ted has never seen before in silver, or any other commodity for that matter. He’s worked in, or studied these markets, for almost forty years…so he should know.

So entities finally coughed up some silver — but the fact is they led onto it pretty tightly until late in the game. SilverGoldSilver has noted for the 2nd time that SLV calls are in demand and SLV are not at all.

Current SIFO is done with backwardation…

Except the 12 month is still lower than the all the other months. I wonder if that basically means entities prefer near term silver rather than later term?
+ The 2008 silver plunge did not really start until after eh 12 month SIFO rose above the other months.
+ It seems like the final dip in 2008 silver created a lot of steady demand.
+ SIFO has stayed narrow and low for 2 years.

The overall COMEX backwardation has reduced to 74 cents.

March 4, 2011

Silver, backwardation – March 4 – facade cracking under pressure?

Filed under: Editorials — Tags: , , , , — Jeff Fitzmyers @ 10:53 am

(Having internet issues today so things are short. Will post full backwardation update this weekend.)

I’m not reporting on the COMEX inventory “numbers” anymore, nor the open interest numbers. They don’t seem to mesh, so I think they are all cooked. Others mentioning this: Harvey Organ, SilverGoldSilver, Ed Steer,”…the silver deliveries, there weren’t any to be found for the second day running. This is now beyond bizarre… and as Ted Butler told me yesterday, something is definitely amiss in with silver at the moment…as it is the most bifurcated market he has ever seen. The price, the deliveries, the physical tightness…and the backwardation situation are all way out of sync. Things just don’t add up…and it’s the resolution of these issues that he is waiting for.”

Exactly. Been waiting for the facade of deniability to be crumbling faster than can be repaired with spin.

Current LBMA SFIO comparison with 2008.

A bigger chart on 2008’s SIFO.

March 2, 2011

Silver update for March 2, slightly more LBMA backwardation, slightly less at the COMEX, and scarcity reports continue.

King World News interviews Rick Rule, “…one of the most street smart level-headed individuals in the business.”There is more silver called for delivery than there is silver to deliver. This has created backwardation in silver and this is an extremely unusual situation in this market. This occurs when there is scarcity of silver. Anecdotally, my sources tell me that demand for physical silver is outstripping demand for gold on dollar for dollar basis in European and North American markets.

Certainly what is of interest to me is the limited availability of new mine supply including byproduct supply in view of increasing demand. Meaning in addition to the near-term you could see explosive action in silver in the future. You could also see a sustained two or three year bull market in silver simply because supply isn’t sufficient to meet intermediate-term demand.

I don’t know how you solve a structural failure to deliver. I don’t know if regulators or exchange officials would allow a force majeure until markets could stabilize. What I do know is that set of circumstances would further destabilize the silver market and markedly increase speculative interest.

Paul Mylchreest, Gresham’s Law Squared – gearing up for
Game Over:
David Morgan on shortage in the wholesale silver market: 21 February: “But the real key is are we short on the commercial side, the 1,000 oz. bar size. And I spent a great deal of time this morning talking to the top of the pile, you might say, on the wholesale side… it looks as if we are now in that situation. I don’t want to get everybody over-excited but it seems as if, from really good sources, and I source it in two places, one in North America and one in Europe, there is more demand on the commercial bar side than they are able to produce currently.

A friend of mine stood for physical delivery of a small number of contracts in the December 2010 silver contract. He paid a visit to the (very large) bullion bank to find out when he would receive his metal since it was already paid for. The employee of the bank said that my friend was not permitted to enter the vault and (very interestingly) that the bank was no longer allowing the employee to enter the vault either. Now why would that be? My friend was told that in order to take delivery of his silver, he would need to fill out a form which would then have to be processed through the bank’s compliance department. It was supposed to take a week, but that was more than five weeks ago. [plus a lot of interesting history]

Ed Steer: I have some interesting news from the Royal Canadian Mint. It seems that their new 1-ounce silver coin, the grizzly bear, is missing in action at the moment. All the major suppliers in both Canada and the United States have their orders in, but the scuttlebutt yesterday was that the mint was having trouble getting the silver to make them…and the suppliers were going to be allocated much smaller amounts than they had originally ordered when they finally are made. The suppliers I’m talking about are the likes of Tulving and A-Mark

The following 2 charts from Mr Steer’s post suggest that any near term interest rate rises in short dated debt will be immediately expensive.

The main change at the LBMA is the 12 month dipped lower and is quite a bit lower than the other months. The current backwardation relative to the 12 month SIFO is now 2 days longer than 2008’s and still twice as deep.

Open interest for yesterday is reported at 2,251 contracts or about 11 million ounces — 25% of COMEX’s reported available ounces.

COMEX silver still in partial backwardation. $1.08 between front month and Dec 2015. The contango of the front months is slight but has extended out 1 more month to July.

If the price pattern is similar to 1979, it’s reasonable to expect silver to continue rising for the next 2 months.

James Turk on King World News: I think the major message in silver is that every dip is well bid for. The shorts and other big players may gun for stops from time to time, but they can’t change the underlying trend, or the very bullish fundamental picture… When the gold and silver markets start becoming disorderly, then we will know the metals are going to take a breather. But everything at the moment says we should be focusing on higher prices for both gold and silver.

References
+ Silver, backwardation update on March 1: LBMA 13 days, COMEX (partial) 19 days

March 1, 2011

Silver, backwardation update on March 1: LBMA 13 days, COMEX (partial) 19 days (corrected)

Filed under: Just Watching — Tags: , , , , , , , — Jeff Fitzmyers @ 12:44 pm

Ed Steer: The CME’s Daily Delivery Report shows that 120 gold, along with 42 silver contracts were posted for delivery tomorrow. This is the second delivery day in the March silver contract…and to only have 294 contracts posted for delivery out of the current 4,250 contracts still open in March, is truly incredible.

Silver analyst Ted Butler had this to say about it in his weekly review to clients on Saturday…”Offsetting the relatively small number of open contracts in March [4,250] is an even smaller number of contracts offered on the first notice day of 252 contracts. [Of special note is that JPMorgan didn’t issue any silver deliveries, unlike their pattern over the past two years.] This is about the smallest number of contracts tendered in my memory for what is usually the heaviest day for deliveries in any physical commodity, including silver…as it makes little economic sense for those shorts intending to make delivery to delay beyond the first delivery day…this is another indication of wholesale physical tightness.”

Mr Steer also reports the US mint sold 9,662,000 silver eagles in the first 2 months of 2011. That is 25% of what the COMEX supposedly has available for delivery.

SilverGoldSilver just pointed out an Eric Sprott interview: (The article has a number of large inaccuracies. Like “In the silver market, there is enough silver..” True for any market. The question is ‘at what price?’ But one interesting tidbit is supposedly solar panel construction used 64,000,000 ounces last year. That’s a lot!)
+ Took 10 weeks to take delivery of 15,000,000 ounces Ag and some of the bars were just 2 weeks old.
+ For the first 2 months this year, the US mint sold the same dollar amount of silver coins as of gold coins.

UPDATE March 3: I have some mistakes on the chart. This one is correct. The following 2 not correct. A similar price rise for 2011 targets 38 $/oz.

Still looking for an effective way to present this data… Just the fact that the mid points almost match (at least so far) is interesting.

Another try in data visualization

The COMEX partial backwardation continues with the front month 1.17 $/oz more expensive than December 2015.

References
+ Silver backwardation update on Feb 28th: LBMA 12 days, COMEX (partial) 18 days, both about the same

February 15, 2011

Ed Steer and Ted Butler support the idea that it was bullion banks covering shorts not miners hedging

Filed under: Just Watching — Tags: , , , , , — Jeff Fitzmyers @ 10:28 am

As a followup to Main stream media is having a more challenging time painting silver negatively, Ed Steer with Ted Butler posted,

Alasdair Macleod at FinanceAndEcnomics.org “The FT story [about 100 moz silver forward sales] implies the transactions were initiated by the mining companies. I think this is unlikely, there being a greater likelihood that it was initiated by one of the big commercials, such as JPMorgan. Bearing in mind these are forward transactions, they do not appear in the public domain, and can be completed at any price, giving the bullion bank the opportunity to do a very special deal with a nice fat premium for a possibly reluctant miner. And what better time to do this, when the price has fallen and there is uncertainty in the market… So my guess is that it one of the Big Four [JPM?] covering its shorts, because there is no other way of doing so and the timing is opportune.”

The FT story is misleading in some respects, because it insinuates that all of these forward sales had just occurred during the first six weeks of 2011, when silver prices were at their peak…then heading lower. That was not the case at all, as most of these hedges were placed many months prior to the end of 2010… Of that 100 million ounces, the standout was the 70 million ounces sold forward by Mexican silver company Minera Frisco…in which Mexican billionaire Carlos Slim has a huge position. These hedges were placed at $18.82 the ounce…and the last time we were that low in price, was back in the third week of August 2010…so that’s probably when it happened…

This is what Ted [Butler] had to say about it in a note [headlined “Hedging Insanity”] to his subscribers yesterday…”I don’t think I have ever seen such a dangerous hedge book [and I’ve seen plenty]. By my calculations, the company is already in the hole for upwards of $600 million on all its metal hedges…with silver accounting for $300 million of that total. Its additional exposure will be many times that amount if prices move higher, as they are expected to do.”

This sound exactly like what happened to Apex Silver many years back…and they ended up filing for bankruptcy. It’s also similar to what happened to Ashanti Gold…and AngloGold had to come along and take it over because their hedge book had become toxic. And let’s not forget a Canadian gold company called Cambior. As Ted went on to say…”The hedging experience [also] cost Barrick Gold $10 billion in total.”

Based on what happened to all four of these companies, I doubt that Minera Frisco will survive long enough to pay out its hedge book…and I also doubt that the owner [billionaire or not] will have deep enough pockets to cover his company’s ever-increasing losses.

Well, dear reader, I wonder what bullion banks were the ones that did the deals on all these forward sales? Without doubt, virtually every ounce was hedged in the OTC market…so all this happened without causing a ripple in the silver price… As Ted Butler pointed out, the Minera Frisco deal alone is equivalent to 14,000 Comex contracts that JPMorgan might possibly have been able to cover in the OTC market.

Feb 16: James Turk explained the possible hedging very well:

In a typical hedge, a bullion bank borrows physical metal, which it sells into the spot market in exchange for dollars. The bank then lends these dollars to the hedger. So hedging depresses the spot price. That’s why gold had so much selling pressure placed on it in the late 1990s and early 2000s when hedging by many gold mining companies was the rage. But look at what is happening to the spot silver market now.

There is no pressure on the spot price, as evidenced by the fact that spot silver has jumped more than $4 higher over just twelve days while these hedges were supposedly taking place – and of course silver is still in the extreme backwardation that I mentioned when it first happened last week…Click Here

In fact, the backwardation is steepening almost every day. The 13-cent backwardation to Dec 2015 I mentioned previously has now widened to 32-cents, meaning physical silver is becoming even more scarce – and the shorts are in an even more difficult position.

So even if a bullion bank is borrowing silver to sell spot to complete a hedge for a mining company, the important point is that the spot market is absorbing everything the bullion banks can throw at it, and even more importantly, silver remains in extreme backwardation which itself is growing. All of this is very bullish, but here’s another even more bullish interpretation of this hedging.

A milestone: the system is seemingly accelerating faster than one can keep up

Filed under: Systems — Tags: — Jeff Fitzmyers @ 10:09 am

It’s my understanding that as systems approach the tipping point both the frequency, and amplitude, of change can accelerate rapidly. Ed Steer today,

I have so many stories in my in-box I just don’t know what to do with them all. Just running through the headlines over the last three days, I can tell that the world is going to hell from one end to the other. It’s wall-to-wall bad news. The situation is so fluid…and so dynamic…it’s almost impossible to post a story that captures what’s happening, as the situations are changing so rapidly.

Is this going on? Where’s the big bust? Is the new system growing faster than the old one is crashing?

The difference between those who have force…
Federal deficit on track for a record this fiscal year: Government debt to exceed U.S. economy
…vs those who don’t…
Wisconsin National Guard Preps For Worker Unrest After Governor Unveils Emergency Budget
…which leads to saner entities entities opting out…
South Carolina lawmaker wants separate currency for state (3,793 Comments!!!)

References
+ Where’s the big bust? Is the new system growing faster than the old one is crashing?

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