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The Goonch will speak now, and you will listen…

Mr. Jake has gone for his annual Feast of Bipeds Cheering for Quadrapeds.  Let me explain.   Mr. Jake goes to get drunk and forget about life for a while. (The Goonch heard these words from a magic box that was crammed with singing humans.  The magic box was owned by two fat fisherman who once were noisy above Goonch’s sky, but now make no sound in the Goonch’s belly.) 

The Goonch is cross with Mr. Jake.   Mr. Jake goes to watch delicious healthy quadripeds with funny names run around in a clockwise circle while he cheers and sips brown crazy water.  The Goonch feels this is a tragic waste of healthy delicious quadripeds and would much rather Mr. Jake lead said delicacies down to the shores of the Ohio River where the Goonch is waiting patiently.

No matter, the Goonch’s belly is full this day, anyhow.  Many many piles of silvery and gold pastries were strewn about the Goonch’s lowland parlours and the Goonch did not allow those opportunities pass by uningested.  Restraint is not the Gooch’s bag, for the most part.  

So today, the Goonch supped well on AGQ at $232.66.  It was delicious, if filling.  He also had his fill of AG at $17.47, and SLW at $36.30.  On the gold side, the Goonch was grateful for the bits of ANV floating at his meridien at $36.05.   Most propitiously, The Goonch was grateful also to chance on some scrumptious EXK at $9.56, between his usual fare of drowned puppies and kittens.   The Goonch thanks all dumpers, large and small.

Be assured, the Gooch still has ample appetites, and if you refuse to bring your small children, or your healthy brown quadripeds close to shoreline where I might show my lip, then I will be pleased to ingest more silver-that-is-not-fish. 

Most corpulent good health to you all.

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Addenda:  For those of you fretting about the CME increasing margin rates on the silver markets, I again ask you — why do you think they are doing this?  As the most astute Jesse from Jesse’s Cafe Americain points out — why didn’t they raise margin rates during the dot com bubble, or mortgage rates during the real estate bubble if they were so concerned for investor’s safety?  Is the CME some sort of sainted brotherhood looking out for the small investor?

Ummm, no.   As I’ve mentioned on these boards before, and Jesse, to his ever-lovin’ credit independently corroborates, it looks like those sneaky bastards are running out of silver.  

I just found Jesse’s blog tonight, while researching this unprecedented fourth (no! 5th!) margin raise in two weeks by the CME.   Tell me — who acts this crazily expeditious in such measures?  Can you imagine the Fed raising short term rates four (strike that, five!)  times in two weeks?

Is this not a sign of panic?  Occum’s Razor,  my friends, shave with it!

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Here I am off on a pleasant fishing trip, and some of you are already gnawing your neighbors’ fingers to the third knuckle in white-eyed panic.

Please, sirrah, leave aside your neighbor’s foreleg and listen here.  Have a shrimp cocktail.  Read a pleasant romance novel.  Present your spouse or beloved with a surrepetitous boss upon the lips and pronounce yourself arduous.   But for pity’s sake, let’s not loose our bowels here over a nasty couple of days draw down.

Noted, this speech is not for ye varicose vets who have been with me since we began back in May of ’09.   Most of you wise folke have stacked piles of coin in your garage and pantry to the point of bringing alarm to your neighbors.   Such would be true had you been moderately disciplined, and kept your core close whilst raising cash at opportune times when the rivers were high and the bloodlust roiling.

For those of you new to the scene (and it appears there are new folke popping up all the time on my site), I implore you to take care here.  Do not self immolate.  I would rather you slice, stack and eat 17 bologna sandwiches while you wait for this pullback (one in a long line now) to quiet rather than seeing you sell in a convulsive panic.

In the meantime, my own patience grows thin, and I was even audacious enough to begin adding to my AGQ horde again today.   What of it?  It was only some 20% of my peak shares and it was at $261.80 a share — a good $120.00 off the recent highs!   Might I get some more even lower tomorrow?  I sure hope so.  

I’d better be nimble though, as this thing has come so very far, so very fast.  Remember my silver commodity chart from last night?  Where I’d hoped for a tag of the 50-day EMA?  What haste we’ve made toward that goal just today:

What’s more this fast tracking has given silver’s double ETF — AGQ — a premature visit to the 50-day EMA already.  As a result, I’m not sure AGQ has much left to give here:

Will we hammer that 50-day one more time tomorrow?  Odds on, I’d say it’s likely.  But then again, I was never quick, so I’m just going to take this slowly, and with aplomb.

I also bought back some more EXK today, at $9.89.  I’m back to a 75% position in that stock from my core of 50%.  You see how this works?  It’s a little sloppy, a little messy, but in the end, it makes for great gains.   I also grabbed more AG today, at my early price of $18.01 (again, on a GTC order in place for two weeks now) and later a little more below that in the upper $17’s.  I’m near to a full position in that stock a well, but have one more “lunker bait” order in there in the lower $16’s.  

One gold stock I love, despite it’s recent oxygen robbing action, is ANV.   I’ll let you guess where my orders lie for this one, tomorrow:

Cast your nets upon the waters, friends.   Captain Bernanke has promised many fish, via multiple dynamite stick detonation.  Sure it’s not fair, but should we turn up our noses at free cod?

All the best.

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Please, do not believe the propaganda.  Yesterday’s Wall Street Journal report regarding the possible rise in rates due to “the end of QE2” is just so much hog swallop over the septic tankard. 

How do I know this?  Because I took a gaggle at this morning’s Case-Shiller Housing Price Index, which — unsurprisingly — continues to suck giant rare Tibetan albino gorilla-monkey balls.   Why unsurprisingly?  Because the Fed has been using your fake money to sterilize bad mortgage debt securities for the last two years now, which has basically hidden the problem of overinflated real estate.  That in turn has prevented the market from deflating in the more precipitous fashion it would take in a more natural setting.

Therefore, we are experiencing the slow hiss of the deflating tire while Bernanke and Co. continue to paste their hastily chewed Wrigley’s Spearmint gum over the hole in the form of reams and reams of newly issue Benjamins.  Patch-by-Benjamin, however, is a crude form of assisting the real estate market, however, and it will almost definitely end in over-inflation of the other asset markets — including most commodities. 

We’ve already been seeing that in cotton, oil, coal and certain industrial metals and agricultural food items, but this bubble will not give our Fed and Treasury masters pause.   They are in thrall to the banks, you see, and when the third or fourth largest banking market in the country is experiencing an eleven year loss in housing equity value, that means the banks are still on the table, with their chests cracked…

And the paddles are out.

Silver and gold are already recovering today.   Be not afraid of “the Shakers.” 

Let them be afraid. 

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You all be well.  I will be on my way south again today and this evening, so I will try to check in via Crackberry.  You know the drill.

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Today was rough for me,raging metal bull that I am.   Despite all my sell downs, all my hedges, and all my short ETF’s, I was still up 1.3%today.  I could hardly believe my eyes when I looked at the end of the day.   But my pain is the deep distress of opportnuties lost.   I did a quick back of the envelope and realized that, had I had my full compliment on (i.e., the pre-January 2011 allocation), I would have been up some 4+% today.

So all I did all day was fret over the direction of the dollar.  As you are well aware, it continues to melt like a stick of bacon fat in a San Bernadino forest fire.  I keep thinking that the evil Bernanke buck has got to bounce soon, even if just for a little jaunt higher, so I can dispose of these cumbersome hedges and swing back into the market like Tarzan yelling for his elephant brethren. 

Luckily for me, around three o’clock today, I had other distractions to take my mind off the market, like a possible bluebird deal flying in my door from the lovely state of North Carolina, and– oh yeah —  Mrs. Jake calling to inform me she was in an auto accident.  I think this was maybe her (second? third?) intersection collision.  I really am starting to believe she thinks she’s driving a Bradley Fighting Vehicle instead of a well turned out Eddie Bauer Excursion.  Fortunately, this one’s getting a little long in the tooth anyway, and the minor damage she did is reparable.    Things will hold out until her birthday, I figure, and then I can surprise her with an IED-resistant Humvee or something in that “safe for all” category.  I believe my older sons will enjoy swinging the fifty cals back and forth in efficient cover arcs.

To get to it before it gets too late, I think we’re on the cusp, here.   We broke, if ever so slightly, the great bogey barriers of 12k on the Dow and 1,300 on the SPX.  That means we run like salmon for the fish barrell, or we mark a nice rounded top, whereafter we plunge into  deep despair. 

Well,  you at least.

[How could I ever despair, after all, when I’m working on my brand new laptop, with special “soopah secret” fingerprint scanning technology, so I can get into my blog-posting area and The PPT without ever uttering a single “Open Sesame?”   Aye, with only thelightest  swipe of a forefinger?  It’s a James Bond world we live in, I tell you, and I think my index print has been forwarded toErnst Blofeld for use in his underwater lair.]

Today, the whole enterprise of JakeGint Consolidated Commodities lies on the edge of a knife.   Will the dollar bounce, or continue to plummet?  Perhaps our chart from the other night can shed some light.   The following is pretty simple, either the dollar holds this line of defense, or it’s off to the races, at least for the PM hawgs and other such wolverines.  Attend to the trend:

Not dissimilarly, or coincidentally, silver is at the same juncture as the greenback, save opposite for effect.   If it continues to break out here, I will have no choice but to recommit, in large tusked porcine fashion, to all my silver longs once again.   The only thing I’ve bought recently has been SLW, and that was on a buy stop at $29.05.   If nothing else comes to Papa, then Papa may have to go to it.  Here’s your target:

  

You have your orders… carry on.

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Unsurprisingly, gold and silver are not done bottoming, as per today’s evidence, and to my favourite Kansas Cityan’s temporary chagrin.  And like the dollar reflects the value of gold and silver as it crashes, so gold and silver serve as lodestone for the direction of the dollar. 

See, gold taking a bloody digger like it did today is not consistent with a plunging dollar.  Quite the opposite.  And remember that daily silver chart from just a few days ago?  Here it was:

Those were the predicted directions.   Now, let’s look at the same chart as of close today:

Wacky, no?  We reversed almost completely the pop we had the day before, and gold did worse, achieving recent near term lows for 2011.

It might get even worse, so hang on, and deploy capital sparingly.  I have added to my ZSL  about two hours before the end of yesterday’s session.  I felt a pained fool at the time… “but I got better.”

Here’s what I’m really getting at.  Take a look at this very large Fibonnaci Retrace on this almost three year dollar chart :

Now I realize the above chart is a bit busy, almost akin to the Punch Buggy Post we had the other night.  However, you need only take into account a couple of things.  First, we are hovering almost exactly at the Golden Ratio — the 61.8% retrace of the  large dollar move from the depths of the last Bernanke dollar destruction in March of ’08, to the peak in early March of ’09, when the market bottomed.   This is a significant resistance point for the dollar, in my opinion.

Second, we are also very close to the rising trend line in the dollar.   I believe the dollar is far too oversold to break the longer term trend at this time, unless of course Bernanke just starts shooting Benjamins out of cannons on K-Street tomorrow afternoon. 

So, if by chance that very strong Fibonacci line does not hold tomorrow, then I believe the uptrend line will in the next few days.

Whichever the case, we should get a snap back in the dollar, no matter how brief.  I think we see at least a 5-7% correction out of  that dollar, which will likely include our miners.  I may lay some more DXD, QID, and SDS at that point.

I also think our miners will rebound first, so be ready to start collecting.   Best to you all.

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And by the early sixties, so was the Lone Ranger
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Enjoy your frapjous day, and bank your daytrade capital returns, bottom callers, for you called the bounce correuctly (sic).   Silver was oversold today, and as a result, the metal enjoyed the slightest of rebounds along with gold (more muted) and even some of the larger cap market.  

Behold the egregious oversoldedness (sic) and note what my crystalline bawls tell me  of the future:

The odd thing is,  the crapulous dollar continued to struggle on, not quite selling off, but definitely not rising like the phoenix either.   It appears besides making soothing statements, Chairman Benjamin is loosing pillowcases of feathers upon this market, excoriating it to “Fly! Fly!”

Alas, a passel of loose feathers doth not make a winged bird, or even a flightless apteryx.   No, it looks like the dollar, too, is oversold, and perhaps seeking a final dip before strapping on it’s BAR for a slog back up the hill:

 And EXK was purchased today by some (though not by me)– a nice pickup at $5.40 if you got it there.  I think it could even go to $6.00-$6.20 on the second day of a bounce.  I will sell more of my stash there, if it gets to that point.   Silver stocks, too, will take on a familar sheen if the dollar rebounds here, as scheduled.    And while I felt comfortable today grabbing some of the much more oversold (and higher quality) SLW at $29.03-.05,  I still contend that  EXK must complete its journey:

Keep this intuition in mind:  one does not buy the metals happily after an egregious pullback.   Rather, one buys them grimacing, and with chitinous trepidation. 

When you feel that grippe, then let it rippe.

Be well.

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