What the hell was going on with my silver and gold plays today?   Something sneaky I thinks, my preciousss, yes…. verrrrrry sneaky, it is, yessss! <Gollum>!

A lot of people who watch these things were commenting on the PPT and elsewhere about the noticeable surge in end of day trading on almost every major precious metal play, both gold and silver.   What people may not have noticed, however, was that a similar surge — of similar length (timewise) was going on in the 10 a.m. to 10:30 a.m timeframe in those same names.   Let’s take a gander at today’s [[SLW]] 5 minute daily chart as our first example:

First, let’s note that there are 78 5-minute periods in a trading day.   In most of these examples we are talking about only 8 or 9 of those periods, because of where this buying phenomenon was taking place.   What was notable for me was WHERE these buys were coming in.   Conventional trading wisdom tells us that “the big money”  — meaning the institutional traders– will generally make themselves known in the very beginning of the trading day and at the very end.  

The first period of activity here is right at the 10 a.m. hour which is not literally the very beginning of the trading day, but perhaps marks the period where most seasoned traders begin to take positions “after the morning shakeout.”    Given that this is a Monday, and we had a relatively large negative futures position trading at the open, this explanation of “wait and see” makes some logical sense.   The uniformity across the sector also gives some indication of a coordinated purchase here,  as there were very few large well traded names in the precious metal sector that did not see some kind of activity in the 10-10:30 area this morning.

Note also the last twenty minutes of the trading day.   We can ascribe some of this scramble to short covering, of course, but large late day purchases generally bode well for tomorrow’s trading in these instances.   I believe that is so because institutions are clearing the way here for more explosive action in the next few days.    Keep in mind that the four five-minute candles (or, 20 minutes in total) we see make up only 5.13% of the trading day, but are responsible for 10% of the shares traded.   Again, I think this is significant not only because of the volume, but because the rapid ascent and the sharp upturn of the A/D oscillator shown in these last twenty minutes also indicates that most of that volume was buying at the ask.

Let’s look next at fellow Jacksonian Silver pick  [[PAAS]] :

If anything, the two moves in PAAS are even more significant in both price and volume, compared to the rest of the day’s trading.  The four five minute candles from 10:10 to 10:30 a.m. comprised 13% of the day’s trading and reflect a large buying program, as the price ascended rapidly.    The rest of the day consisted of light volume pullback until again, the last tweny minutes gave way to almost 20% of the day’s trading, and another rapide ascent in price.   All tolled, those forty minutes (10% of the trading day) of buying accounted for one third of the daily trading, and again seemingly almost all “on the ask”  — figuratively, if not literally.  

Let’s look last at New Jacksonian Holding [[SSRI]] :

SSRI shows a full half hour of buying in the morning, again, starting at 10:10 and concluding at 10:40.   While this morning purchase was not market by the same volume as PAAS, it again shows the rapid ascent characteristics of a persistant buyer or buyers behind the bid.    That half hour comprised about 11.6% of the daily trading (in about 7.7% of the time) and the “afternoon session” was limited to a brief fifteen minute period that was marked by increased volume and another very rapid ascent.     In that fifteen minutes (less than 4% of the trading day) we saw over 12% of the daily buying.   Again, I think it’s clear we are talking about a concentrated interest here in this final burst.

In the interests of saving time and space, I won’t go through the Jacksonian gold positions that saw similar patterns today.   Interestingly, not all of the golds — particularly the smaller cap names (like [[EGO]] and [[ANV]] ) — saw the 10 a.m. buying, at least not in the same consistent fashion.   However, they all saw the late day surge in purchasing with ANV seeing a full 23.7%  of it’s daily buying (along with a 4.5% price move) in the final 15 minutes!

We find the same morning and afternoon program purchases that we saw in the silvers above in Jacksonian pick [[RGLD]], with 10% of the daily trading between 10 and 10:25 a.m. and another 15.5% in the final 20 minutes of trading.   [[GG]] shows a very similar pattern, as do many other of the “big golds” like [[AEM]].

I guess in conclusion I’d posit that there’s something afoot here, friends, and that you should be attending to your PM positions, as I think we may see a more significant move here in the coming days.   Of course, we may not, and all of this coincidental analysis could be the result of  my rampant apophenia due to excessive exposure to William Gibson novels.    Nevertheless, I believe this action bears consideration and careful attention.

Be well, friends and enemies.

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Cadged from WFMU.org with my thanks.

 Twenty-Four Reasons to hope for a stock market crash in the new millennium
By Dave Mandl
Art by Bob Piersanti

 

Cheap TriBeCa real estate

No more discussions of the NASDAQ on sports call-in shows

Twenty-three-year-old former wunderkind founder of The Globe.com arrested for beating up a transvestite in West Hollywood

No more damn books about Warren Buffett

Startling revelation: Microsoft is no more than a slave labor camp for twenty-year-old white kids that sells hideously bad software at criminal prices; Bill Gates is a pudgy, semi-autistic dweeb whose mother still dresses him

Cheap SUVs

Eighty percent of the world’s biggest assholes stranded in the Hamptons without carfare to return to New York (Note: requires summer crash)

No more articles on investing in Family Circle, Allure, Entertainment Weekly, or Car & Driver Magazine

Computer programmers stop dressing like Oscar Wilde and dating supermodels, go back to watching Deep Space Nine and eating Munchos like they’re supposed to

Every day is sale day at Barney’s

Born-again day-trading “genius” Barbra Streisand and her evil sidekick Donna Karan lose it all

Inane commodity-prices ticker at Shea replaced with Jerry Koozman monument

Price of Trump Hotels stock actually falls below zero

So long forever to Smart Money, Upside, Worth, Fast Company, and Cigar Aficionado; more room on newsstands for SweeTarts

Parade of TV market pundits swear they’ve been 80% in cash all along

New York magazine special issue: “Staten Island: The Undiscovered Gem in New York Bay”

CNBC Market Babe Maria Bartiromo back working in Nellie’s Pizza on Bay Ridge Avenue

Online brokerage firm E-Trade, its stock price under intense pressure, branches into dry-cleaning business

Web-page-designers begin to lie when asked what they do for a living

Re-emergence of OTB as a viable gambling venue

No reservations necessary at Nobu, even on Saturday night

Federal government drops its proposal to invest Social Security funds in stocks, decides to put the money in a huge stamp collection instead

Amazon.com stock certificates replace Pokemon cards as latest kids’ trading craze

Top-rated TV game show: Who Wants to Win a Roll of Quarters?

(Highlights mine.)

Will attempt to get a weekend update up about the S&P and the Jacksonians between wedding festivities.  Silver and gold and their miners still looking very stable here, which is important.  Ciao* for now.

________________

* (in a good way)

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This post was supposed to come out yesterday sometime, but I kept losing it to “failed saves,” so the following is a foreshortened version.  

While not yet at the level of a “Jacksonian Core Holding,”  Pan American Silver Corp. (NYSE: PAAS) is my only other silver miner holding besides Silver Wheaton (SLW), even though I believe silver (the metal) has better prospects than even gold right now.  Again, we go back to the overall crappy management of these names to explain my trepidation.  That doesn’t mean an HL or a CDE can’t become  a hot pick when these things really start to move in unison (which I think will happen by this summer).   I just don’t consider them holds for anything more than a swing trade.   PAAS, on the other hand, could see triple digits if the underlying metal takes off as I expect it will.

PAAS is still “baking” here, but I have been accumulating it since the $14’s.   You can see my near term targets on the following daily and  weekly charts, but let it be known I will be holding this one until my silver (and overall PM) thesis is disproven.   Any sales will be money management related only, and likely involve a covered call strategy like I discussed in my UPS post.

 

 

Obligatory Disclosure:  If you insist on pursuing a purchase of PAAS, it’s highly likely you will wake up one morning encased in a magenta Easter egg, Franz Kafka-style.    If that’s not warning enough, well — you may lose money, too.

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A reader asked me about Silver Wheaton (SLW) on the pull-back today, so I figured I’d take a second to show you why I like silver here for the “secular bear run.”   Let’s start out with an interesting chart  {$SILVER:$SPX}  which plots silver against the S&P 500 since the start of the dot-com meltdown:

  As you can see, silver has been on a bull run since about April of 2002, when it crossed over the 200-week moving average.  Even through the subsequent four year bull cycle of 2003-2007, it continued to outperform the S&P 500 on a trending basis.   What’s more, this ratio has never become oversold on an RSI basis (below 30), with only two trips in that period below 40.  The ratio is also showing a possible turn (vs. the $SPX) on the slow stochastic as well.  Silver is also cheap compared to gold, with gold currently priced at 73 times the price of silver (as of 3:00 today).  The traditional “classic” gold/silver ratio was that held from the 17th to the 19th centuries was 16 times, and in 1980 the ratio at their respective heights was about 17 x, when silver spiked to $48 an oz, and gold to $850.   Inflation adjusted, we’d need to get back to $129  and $2,200 an oz. respectively to re-acquire those heights.     At double the 16 ratio (ie, 32x), however silver would still trade at almost $28 an oz. even with gold remaining at it’s current price! 

Now to a silver mining stock dear to my heart.   Let’s face it, most publicly traded silver mining companies are run by inbred families of feuding Romanian dwarves more interested in “Friday Night Rasslin'” and trading silver shaving for Natural Light 30-packs than they are those boring “balance sheets” and “income statements.”     As a result most silver mining companies tend to frustrate investors even in good times for precious metals.   

Silver Wheaton is different.  It’s run by the same cockney Canuckistanian cads that brought us Wheaton River Gold, the successful gold startup that eventually took over Goldcorp (GG).    The Wheaton River Gold guys have done what they’ve said they’d do now for almost ten years running, which in precious metal mining circles is the equivalent of a weekend full of “36, Winnah!”s on the roulette wheel in Vegas.   It so much doesn’t happen that I’m researching the theory that they are in fact, Raelians sent to make those of us worthy enough (and who purchase the proper sneakers), rich.    Ack! Ack! Ack-Ack!

See the annotated chart below — where SLW has finally filled that gap that’s been driving me crazy for weeks:

CAUTION!  Investing in Precious metal miners is NOT for the faint of heart.    While I think that SLW and PAAS are two of the best out there, that’s like saying I find the Phillipino black mamba and the South Rhodesian Stuttering Asp  the most appealing of deadly poisonous snakes.  I recommend a basket of miners in both gold and silver, as well as a core position in SLV and GLD, and the “fizzical” metals themselves.   These are shelters in the storm, but they must also be watched.   Build positions judiciously, and sloooowly.   I will go over additional miners as we move forward with the Silver Surfer.   Best to you all.

__________

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