Tuesday, November 9, 2010

Telling Bar Patterns and Record Volume

This is going to be a quick post.  Silver is in a blow-off top stage, as mentioned in my previous post, and in commodities these are generally spectacular, immensly participated in, and that the subsequent crash is usually at least as breath-taking as the run-up preceding it.

Gold, Silver, and the HUI all had daily reversal bars today - quite a feat considering all 3 popped to significantly higher record highs right off the open.

Silver was an interesting case, holding on to more of its gains than its more valuable cousin.  That being said, the intraday trading range for silver was around $3.00 / oz, and the SLV ETF volume was a record-shattering 148.42 million shares traded on the day, just under $4 billion (this is equivocal to about 150 million ounces of silver, roughly 1/6 of the average worldwide yearly silver production for the past decade.  In a single day.)  The past two trading days on the SLV have ousted every weekly volume record for the ETF since its inception.  This appears to be a week to remember for silver.

A closer look at the intraday action reveals that, besides the overall wave of volume, the behavior was that of distribution and very strongly.  Volume spiked with each reversal and waned swiftly as the ETF attempted to regain lost ground.

Is this (finally) the start of the major decline in silver I have been calling for?  Right now, it is extremely difficult to tell - probabilistically silver is due for at least a significant correction, and it should find itself back within the confines of the channel, at a bare minimum, if it is to try another rush into a blow-off yet again.  If this is the start of the larger, more protracted decline, then silver should swiftly plummet below the $20.00 / oz mark and smash through a few significant support levels.

To further solidify the position of at least a near-term trend change, on final intraday correction and push lower is required tomorrow before an upward move of 1-2 days would take place.  If silver immediately turns in the morning and attempts a thrust upward, a break of  $26.96 on the SLV (27.81 COMEX futures spot) would indicate another rapid thrust higher to finish off the move.

If you are long gold stocks, silver stocks, or anything in the "paper" arena of precious metals investing, be extremely careful.  The volatility experienced in these markets was vastly more intense than that in the rest of the North American stock markets, and could be a precursor of things to come in the very near future.

Have a great week!


P.S. - A quick afterthough of some significance:  It appears, judging by the last several days of behavior, that the US Dollar has finally put in its low against the Euro and is quickly starting the largest part of its multi-year rally that began in 2008.  Forex traders long EUR be wary.

I am anticipating this pullback in stocks to accompany a run-up in the dollar, and then the final peak in the broad US indexes to accompany a higher low in the USD within 1-3 months, whereby markets will jive back up and start moving more in tandem.  I will post some chart hypotheses on this in the near future.


  1. In my last posting which tailed Derek's previous contribution, I referred to the need to be aware of the market' changes from the past, even quite recent past.

    Much has been caused by new technology, changes in rules and regulations, some brought on by the aftermath of the 'shock and awe; of 'bubbles; (balloons) that deflated, world political changes, (emerging nations) and you name it.

    We are in a totally different world from yesteryear, and we should avoid too much reliance on past action.

    As I have previously mentioned, even if a market is manipulated, it still has to reveal a trend. I refer to that trend in the markets as a whole (not individual stocks) .

    This will perhaps give some idea of the modern day market. Yesterday, the ETF GDX which is the key ETF covering the gold market (Gold miner's index) started the day on a real high creating a large gap at the open. It reached a high of 63,76. In the afternoon it closed that gap in a swift down dip and closed at 59.67 after hitting a low of 59.19. In the options on that stock which are highly traded, you could have TRIPLED your money in minutes. Option trading today with online brokers is cheaper than what normal stock trading commissions were not that many years ago.

    I do not tell you this to promote options, merely to get across changes in markets, and participants from the past.

    Day to day, minute to minute, activity can scare the pants off you (sorry any ladies out there) so we have to watch the trend. Do not anticipate its change with your money. The trend AS YET says we are in a raging upward trend in gold. There is nothing to be seen as yet that will change that. (that does not mean that there is not something 'hidden' going on behind the scenes. - and I believe there is)

    If there is, be assured truly BIG money will know what, and if negative for gold, will start moving its money out, and ALL BIG money today is not in the USA. There is vast wealth, new wealth in Asia. Today, you could trade the markets from the top of Mount Everest. (There is now a permanent 3G connection installed at the summit)

    No matter what causes change, the flow of money creates the trend. Trends by nature have to last some time. Change only when you see the trend develop (breaks old trend lines and holds the pattern.)

    I live in London almost on top of the International Date line, an ideal spot for monitoring daily
    markets. This morning, to me, Oil is still up, the dollar slightly down, Gold is up. The THREE (CABAL}LEROS' Oil at 87 and gold at $1400 (thereabouts) means the ratio of around 16 barrels of crude to one ounce of gold is spot on its average over many years.

    When/if that ratio changes dramatically, then it will send to me the real alarm bells.
    May the force be with you.. And, as Muldeer says – 'The truth is out there'.

  2. Thanks Ray, now go away!

  3. What If,

    Bernake and the FED decide to save themselves and their miserable reputations and let outside forces take the blame for the US economic woes ?

    An article link below suggests such a scenario.
    Just copy & paste into web browser.


  4. hi Derek,

    when $800 price on Gold will be?

    Beginning of this year you predicted fall in gold price to $800 i remember.

    Sergey, Ukraine

  5. Hi Derek,
    I would really like to know your thoughts on where you think this correction in the PMs may procede to.
    Bob in Ottawa

  6. Crash JP MOrgan Buy Silver! 500 dollar Silver

  7. Derek,

    I was encouraged by your 11/8 post in which you project the Ag decline to $20/oz., followed by swift descent through subsequent support levels. I bought puts at $20 strike and April 16, 2011 expiration on 11/7. Your further comments on this type of play would be most appreciated.

    Fran Mirabella

  8. Mike Maloney was recently in Europe working on his next top-secret project. While passing through France, Mike got the chance to visit with the one and only Max Keiser.

    Intelligent, witty, and never bashful, Max Keiser is pure financial entertainment. With over 25 years of experience with markets and finance, Max often draws from first hand experiences when providing his listeners explicit insights on how the financial markets truly operate.

    He has been described as a film producer, a journalist, and as JP Morgan and friends are now finding out, an activist investor with powerful ideas on how the masses can help themselves in taking their financial power back.

    Without further ado, let's check in with two of the most brilliant minds on the gold and silver scene, Max and Mike:

    Late last week, Max Keiser was heard on The Alex Jones Show, brainstorming a brilliant idea which activist investors can aim at commercial banks who hold large concentrated short positions in silver commodity markets (JP Morgan currently has three class action lawsuits filed against them which allege the firm's manipulation of the silver market).

    "Crash JP Morgan. Buy Silver. We can in fact crash JP Morgan. JP Morgan is one of the biggest financial terrorists in America today, probably even bigger than Goldman Sachs. If the American people can take this on and put that company under, take that stock price down to zero… that would be a major victory!" - Max Keiser

    Max's Bulletproof Idea -> A Catchy Call To All

    Yes you out there! Are you sick of too big to fail banks? Their endless black holes of debt, their enriching power ranks?

    Mimic Max's cry out by taking offense in a silver delivery rout. How fitting it might be, silver the anti-corrupt banking-bacteria metal of our society!

    We will never stop mining, using, and valuing silver. Since the dawn of civilization, silver has played part in mankind's modernization. Stockpiles now lost to our past two-century's ingenuities. Nearly all silver ever mined, completely vanished, offline.

    Yet the world remains vastly unaware, physical investment grade silver is extremely rare. We majority invest in silver bullion even over gold. Really, it's about fifty times cheaper to hold!

    Mirror, mirror on the wall, how you prove silver to be the greatest reflector of all. It too is the best conductor of heat and electricity, an essential precious metal commodity; super cheap and in short supply, such an investing abnormality!

    Fiat currency lovers won't find this fact funny; silver is and always will be money. Silver is set to take its stand as today's myopic monetary system crash-lands. Silver is going to out endure, every bank whether or not it's FDIC insured!

    How lucky are we?

    Turning fiat paper currency decrees into real physical silver monies.

    A keystroke or two, a wire transfer and a wait, walla! Silver coins and bars at your gate!

    With physical silver bullion running roughly $30 an ounce, any and all can take part in this fraudulent bankster trounce!

    Perhaps now's the hour to take back some power? It is time to join a peaceful revolution of silver coin!

    We promise more content on this front no doubt.

    Max's momentum building mantra, an incredible and bold call out: Crash JP Morgan! Buy Silver!

    - Mike Maloney


  9. Derek,

    Please weigh in, a lot is happening. No correction in silver makes me think that the commercial shorts see the writing on the wall and are covering. As much as I was waiting for a correction all summer long, I now think the price will continue to climb and start to go parabolic before a deflationary wave much later. Its very weird but there is practically no good physical to be had. The premium for an American Silver Eagle is over $5.00 per coin! I could easily see it make a new high on this run to $50+

    Update on Rates? Do you still see them climbing? I think it may be a head fake,and as I stated earlier, I think TBT at $25 would be a great entry. I am in the process of refinancing my home mort again, need to decide lock now or hold for lower rates. Any thoughts?

    Ed in Jersey

  10. Dear Ed,

    Technical analysis correct 51% of the time and is wrong 49% only if you know the true entry points of each wave.

    WHAT DOES YOUR OWN GUT TELL YOU? Trust yourself. What do you think will happen in the next 12 months? Once YOU answer these questions, then you can invest.

  11. Shelby was right about gold/ silver. We need him here.

  12. We need Ray, he was the only one who told it as it is without religious frills. Come back Ray

  13. This blog has become a waste of internet space.