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Some said we were crazy on Friday when we began “buying the blood” late in the afternoon like a bunch of crepuscular vampyres banging our fists at the front desk of the Red Cross Depository.

And maybe we were.

But there was a plan in mind, and one part of it was taking into account the massively oversold status of the metal in the near term.   The other was the support levels we were beginning to hit.  I thought we were ready for a bounce of some velocity.

That doesn’t mean I think this down-stroke is over.  Not altogether, at least.   Just like I don’t think this overall market bear cycle is over, and that we’ll get further down action there as well.  What I do believe is that we’ll get that nice rebound here, and then have to be out again for the next drop when we whack near-term resistance.    Note the following markup of the AGQ (double silver) weekly:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As you will note, the party should be over by $150 or so, and I’ll be out of much of that AGQ by then, if not sooner.  Because the weekly is showing that while the RSI is near-term oversold, the remaining stochs are pointing to further ruination.  What’s more, that long term trend line is beckoning (as per the chart above), and it’s very likely that we will see it one more time (at sub $100) before we see new highs again.

What I don’t think, however, is that we get another deflationary event like we did in 2008.  Not for a while now, at least.

Of course, this is a play fraught with risk, and I will have stops in place that will respect the volatilty of the double-ETF, while also accomodating my overall risk profile.   I implore you to do the same, and perhaps consider SLV as a replacement vehicle for this trade if you lean to the more risk averse.

My best to all of you this weekend.

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What Goes On at Jake’s Desk Whilst He’s Away
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What the hell goes on around here while I’m gone?  I mean, a man takes a couple of days to go on a top secret mission, and the place falls to wrack and ruin.   I come back and my desk is all askew… my papers molested, my fine Cuban cigars gummed and caked with salivatory drool.   What in the bloody blazes has been going on in my absence!?

What’s that?  Random Errand Boys stealing up to my desk and attempting to short the silver lode??   My impulsive young man!  Why not just go bounce on the high-tensile strength trampoline with a fistful of extra-sharpened #2 Ticonderoga Pencils??

Honestly, I just don’t understand the tendency toward self-immolation that pervades this site in my absence.  Why is it some many of you “traders” look to shower yourselves with butane and then engage in “roman candle horseplay” of the most ill-advised variety?   This is not an episode of “Jackass,” this is high-thesis investing!

Don’t you like money?

Why take the high risk trade?  For thrills, a la Beavis, et al?

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It’s nonsensical, I tell you.  If there’s one thing my compadre Gary Savage and I agree on… it’s this maxim: NEVER SHORT A BULL MARKET!

How many times must I repeat it, and still, like moths to the flame, Icarus to the sun and an Obama Voter to a Trans Fat protest march, you insist on ruining your fragile portfolios by playing with pinless grenades whilst cavorting in a cranberry bog.  And here you come again, your fingerless hand-stumps held out in silent imprecation, blaming me for your troubles.

Well, it’s true, I am here to help.   But you mustn’t be led astray again.  Remember, fading over-confidence in certain sectors of this site is almost as sure a signal as an overbought dollar.   Here’s the latest on that curmudgeonly currency, btw… note how we are advancing into significant zone of resistance on this weekly:

 

Note that I think the dollar can extend all the way back up to that0 $78.10 area, where both the 61.8% golden ratio fibonacci retrace and the rising trend line offer strong resistance.    So don’t be surprised if we pull back a touch more in both the markets and the commodities in the next couple of days as the dollar reaches that resistance level one more time.

After that re-touch, I predict that we will see one final glorious “plungerooni” in the dollar… down to the lows indicated on the above weekly chart.   At this juncture I expect the typical bull here will get drunk on cheap cherry wine and– in the the throes of sock-tongued inebriation– bury his face in the bosom of some local tavern wench.

This, I would contend, would be an ill-usage of your time.   I would rather suggest taking that period to phase out of your remaining long positions including, sadly, your precious metal miners (at least for the nonce), whilst battening down the hatchest with some choice shorts (like the Skiffles).

In the spirit of caution I of course must warn you:  should we break significantly past that $78 dollar index price marking our resistance, all wagers are off, and the window should be closed all the sooner.

My best to you, my Nuttiest of Professors.

 

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Not to be overBEARing, but it looks like the US Banquing sector is going to have a rough time of it in the next couple of days.  Why not take advantage of that turmoil by setting aside some silver and gold for your posterity?

Besides, who wouldn’t want to kick “JP Morgue” in the teeth by buying silver, or so the old wives tell it?
I’m not going to tell you to do anything I wouldn’t do, so I’m not imploring you to go out and swamp your local numismatic dealer with pleas for hard bullion and coin.  I think this should be a part of your overall portfolio, but I think there are adequate substitutes still available under our current very liquid market system.   Unlike our fellows above, I don’t believe SLV and GLD are “false flag” operations designed to trick one out of one’s natural incentive to purchase physical.

I could be incredibly naive, but I trust the current rule of law enough to believe the audits of these depositories are valid.  Why?  Because the idea is too much of a moneymaker to allow it to be waylaid by a lack of credibility.  Both SLV’s iShares and State Street (GLD‘s parent) have too much invested in barriers to entry here to screw up a good thing with a fraudulent audit.   I like to use Occum’s Razor when analyzing these situations, and in this case, the easiest path to big money is to establish a creditable physical substitute.  Why screw w. that?

As you know, I also believe that another liquid path to trading gains is in the highly leveraged miners.  I don’t have to remind you that the most highly leveraged vehicles in that sector are the royalty financiers to those miners — namely RGLD and SLW of gold and silver concentration respectively.

After that there are many names, but if you want to act quickly, you are best throwing dough at GDX, GDXJ and SIL, which are the large cap gold, small cap gold and silver miner ETF’s, respectively.   I point you to these names because liquidity will be king here, and there will be volatility on top of volatility in the coming weeks.

Be ready to snatch opportunity with these vehicles and yes, by shorting the banks as opportunistically as possible through SKF, and even FAZ if you dare.  Remember to keep an extremely tight leash on both, however, for they will turn and snatch out your gizzard in the blink of an unsuspecting eye.

Best to you all.

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It’s kind of an odd feeling, really. Seeing that I’ve been ranting about the U.S. unfunded liability overhang and its one logical solution, you’d think I’d be out there wagging my finger in peoples’ faces and doing a touchdown dance as our debt is (symbolically and politically, I know) downgraded from “pristine” once again, and the rout of the U.S. dollar is on in earnest.

Instead of taking great joy in $1,700+ gold and $40+ silver I’m seeing tonight, and preparing myself to buy others’ margin calls tomorrow morning, I’m sitting here more than a little bit numb.   This is still my country after all, and it’s still a punch in the gut to see it caught in a debt trap of its own construction.   Yeah, we saw it coming, and that’s why we’ve been building a fortress of gold and silver to shelter us.

But will it be enough?

I honestly don’t know.   For all I know, my miners will get waxed along with the rest of the market (if in fact the market doesn’t just head fake completely tomorrow).   My sturdy ETF’s might malfunction, my options might turn to gruel and even my physical might be tough to transfer if the President decides to go “Full Metal Franklin Delano” on us.    Let’s face it folks, it’s all fine and good to prepare financially, but we are entering into unchartered waters here, and it’s not like we’ve got Horatio Nelson at the wheel, here.

I really didn’t think we’d arrive at this hour this quickly — in 2011.  However, the combination of torpid growth and high unemployment have hit tax collections to such a degree that the current rates of spending have blown a hole in our debt capacity well before we expected in the mid 2000-teens.  There will be painful choices ahead that will make this summer’s kabuki theater play look like the first round of Let’s Make a Deal in comparison.

I don’t doubt they will include tax increases, and likely across the whole bulk of the citizenry.   There are just not enough wealthy people with taxable income around to bring us to any sort of solvency — even with massive cuts to the Federal budget.  No, we’re going to have to go back to the old ways — where everyone contributes at some level, and there are no more free-riders.  If you try to get this done on the back of “him behind that tree,” you will inspire nothing but enmity in the capital providers, which will in turn only drive our economy to darker depths.

I am hoping this shot across our bough will be enough to drive our politicians to a serious assessment of our national dent — both on and off-balance sheet.  If instead this opportunity is squanderd and the pols decide it’s more electorally profitable to scare old people into believing they’ll be left high and dry at the prospect of any reform, God help us all.

In an event, we should have a good day in the gold sector tomorrow.  I will be looking very closely at the action not only on the physical metals themselves (gold, silver, platinum), but also at the $HUI to keep an eye on the miners, and on AUY in particular.  It seemed to take a much lighter hit last week on the pullback, and that may mean it’s getting ready to really take off after that long consolidation.

Good luck to us all.

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The Witch Tells All, at Last

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As I write this, silver is up another buck.  You review the above and you have to say to yourself — “What if all this bullshit about JP Morgan is really true?”

I said to the Monsieur tonight that I had largely discounted all the rumours (sic), all the tall tales.   But, my gosh, what the hell is going on here?   Silver has all but broken free from it’s traditional dollar anchor. 

What’s more, silver’s broken free of it’s golden companion.  This is very interesting… but is it sustainable?

Truly, I know not, to be honest with you.   I know that silver has been historically undervalued, most recently as a result of the great photograpy scam.  If you follow the industry news, the effect from a switch to digital photography has been largely absorbed.  

So is this the final breakout we’ve been anticipating for so long?  I dunno.  I’m leaning towards “no, not yet.” 

But this is why we are holding on tight to the core.  Prices are out of synch, and the dollar is near bounce levels.  We’ll know soon enough whether we ought to shed anything. 

Right now, it’s a day to hold your tickets and enjoy the show, no matter the direction.  I continue to like everything I’ve already mentioned, and more.

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Relax, have a smoke with a glass of fine bourbon, over rocks.    Yes, I realize that the price of silver was up almost 5% today, despite both U.S. and Canadian stock exchanges being closed for President’s Day and Family Day, respectively.

Yes, I realize that, were those markets open today, anyone holding AGQ would be running around, madcap-style, kissing their latest brokerage statements in adulatory dis-belief, handing out shiny new dimes to children and mendicants as is the right of all wealthy individuals.  

But savvy AGQ veterans have seen this kind of thing before and so, rather than spending the night on the Best Buy website outfitting their newly excavated man-cave with 126″ laser-guided 240 mhz 1080dpi 3-d LED moon-scaped wall displays, they are instead hunkering down and preparing for a temporary blow off spike in the precious markets, which may join equity markets in a pull-back tomorrow, no matter what the U.S. dollar does.

I will likely wait unti 10 a.m. to do anything at all, which would include eating a number of samiches (sic), lightly salted, lightly peppered.    As yesterday’s SLW illustration showed, I am expecting a run for that stock back to the old highs, and then a pullback, either at, or slightly higher than those levels.  If  we break old highs, I expect the pullback to be shallow, if we are turned before breaking to new highs, I expect we may find ourselves right back at Friday’s close when all is said and done.

You will find that if you watch these things over many years, you will get a sense for their trickery.   One would think that in a relatively consistent bull market like we’ve had for the last ten years in PM’s, riding this trend would be relatively simple.   Nothing could be farther from the truth.   They are evil wood sprites, as a rule, and they take pleasure in your pain and indecision.

They really love leaving you behind as well.  Yes, I am talking to you, PM skeptic.   If you have been watching this blog for any amount of time, you have no doubt kicked yourself enough times to form a large callous on your own buttocks.   Do not be chagrinned, I carry a similar leathery ass, and it’s simply the lot of all PM investors and traders.   The wood sprites are simply too crafty to allow you to take every trade profitably.

That is why I have urged you to always “keep a core,” and trade around that nucleus like the best Fermi Level Physicist in the CalTech Senior Laboratory.

Tomorrow we shall observe with anticipation and trim like expert barbers if necessary.   For now, we enjoy the anticipation… along with a finely rolled Dominican Cigar and only the best bourbon money can buy.

Best to you all.

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