[Gmvkgkmn]

I like lows because I can buy lots more for my money. I like highs because I feel more secure. But these sudden moves in price of Silver scares me. I get the feeling there's something really unstable. Much like a wheel out of balance that's about to come flying apart...

Anyone know what's up? What's causing it?

[boizzones]

i wouldn't worry about it...when you start seeing days with $4-$5 moves, then start wondering what's going on...

experts were saying the low dollar moves ($1-$2/day) would likely become the norm. they aren't entirely wrong, so far...

[defenderfors]

I like lows because I can buy lots more for my money. I like highs because I feel more secure. But these sudden moves in price of Silver scares me. I get the feeling there's something really unstable. Much like a wheel out of balance that's about to come flying apart...

Anyone know what's up? What's causing it?

Fiats worthless, maybe its just fiat jumping around.......fiat is going to crash and burn

[Liaiskelile]

It didn't just pop up a dollar. It might have just broke a dollar for the trading day, but not a one bucky pop all at once.




I would guess that Ag is following Au today considering indexes and oil are down and USD is up.

[pupyississido]

I like lows because I can buy lots more for my money. I like highs because I feel more secure. But these sudden moves in price of Silver scares me. I get the feeling there's something really unstable. Much like a wheel out of balance that's about to come flying apart...

Anyone know what's up? What's causing it?

Meh. Wake me when it crosses $50.

[Badyalectlawl]

It went up cause the news just reported that Spain is slathering at the door for the next handout and a lot of people saw the monopoly money machine start chugging...........

[vasyasvc]

I like lows because I can buy lots more for my money. I like highs because I feel more secure. But these sudden moves in price of Silver scares me. I get the feeling there's something really unstable. Much like a wheel out of balance that's about to come flying apart...

Anyone know what's up? What's causing it?

Some fund manager just rotated a big chunk of money out of some other sector into silver. This is what happens in all big market movements. It may or may not be triggered by a specific event. When it's not, it's a fund manager doing what you and I do, i.e. deciding that he may not get a better buy price so he's taking the plunge now. When it's this big of a move, it is sometimes a "feeler" to see if other fund managers (also looking for a better price) will follow suit and jump in (driving the price higher), or not. Since silver is a relatively small market, one fund manager can move the price.

Rather than other funds following suit, another fund manager might actually test the mettle of the first fund manager by putting in a big sell order at this higher price, driving it back down. A third fund manager might see this, and try to screw the first fund manager by following suit of the second fund manager, driving the price further, and seeing if the first guy will panic and sell out, driving it down even further. This might cause fund managers #4 and #5 to think that it's time for their buy move.

This is how price discovery works. It's like a game of chicken amongst the big players, with the rest of us along for the ride. Every single one of those fund managers might think that silver will ultimately be $50 again, or even $100, but how they play their cards along the way determines how we get there. The wheels only fall off if there is a change in fundamentals.

If you want to know more, here's an explanation of how market prices move in distinct cycles...

Fund managers collectively move prices in four stages:

1) Accumulation. When the price of something they value is relatively low (like silver at $25), they will slowly accumulate it, careful not to raise the price until they have accumulated a sufficient amount.
2) Mark Up: Once a sufficient position is accumulated, they start buying in high volume (further increasing their position) causing the price to steadily rise. The intent here is to get the retailers (suckers like you and me) to jump on the price train.
3) Distribution: Once the retailers are on board, the fund managers will slowly stop buying, letting the momentum of new retail buyers drive the price up. At some point as the price rises (much higher than their own buy prices), the fund managers will use the retail demand to slowly start selling, or "distributing" the shares they have accumulated. The new excited retailers will soak up these shares. The fund managers will slowly accelerate their selling to match their supply with the retailer demand, essentially maintaining a stable high price as they slowly unload their shares. At some point, once the retail buyers start to run out of dry powder to deploy, the price will begin to drift downward. This leads to...
4) Mark Down: The fund managers have made their biggest profit, so they begin to unload all their remaining shares furiously in order to drive the price forcefully downward. At some point during mark down, retailers panic and start to sell their shares as well, which drives the price down even further. By then, the fund managers have unloaded all of their shares, so the continued downward price is primarily driven by retail sellers. Once they've done all their selling, the price flattens, and the fund managers start accumulating again.

Now, the cycles don't always appear smooth because their are lots of fund manager decisions contributing to the collective movement. That's why there are price dips and spikes (like today) embedded onto the longer cycle movement. They're playing chicken.

[defenderfors]

Trader Dan's Market Views

Market Insights and News




























Sunday, June 24, 2012

Deciphering Silver

The internet has been awash with comments recently about the downdraft in silver and the strong increase in Open Interest on last week's big down day. As usual, the chatter is about an orchestrated attempt by JP Morgan to smash the price of silver lower so that they can cover their "losing short position".

Let me first state that I am a firm believer in the view that the US government has a vested interest in controlling the price of gold. Being a good friend of GATA, we both have ridden through the ups and down of this together for the last decade. However, that being said, not every move lower, particularly in the Silver market, is the result of efforts by Morgan.

Part of the problem that some of the authors have, authors whom I might add see every single move lower in silver the result of price capping by Morgan, is that they do not understand how traders, particularly large traders, react to changes in sentiment and how they will adopt defensive strategies to cushion themselves against further losses until they can better sort out what they want to do next. These would do well to understand the nature of spreads and the ability to use spreads as part of a strategy to cushion against losses while in a defensive posture.

Take a look at the following chart of the CCI, the Continuous Commodity Index, versus the price of Silver. I mentioned not all that long ago, that silver was not going to go anywhere until the chart of the CCI turned solidly bullish. Why? Because Silver, for all of its history as a monetary metal in many places around the globe, is still regarded by large hedge funds and other large investors, as a RISK ASSET; one that performs strongly during periods in which INFLATION is the main concern.



Look at the solid black line which is the CCI. Notice how it has been moving relentlessly lower ever since it topped out near 700 back in April 2011. Now look at the solid red line, which is the closing price of silver. It topped out that same month near $50 and has been headed relentlessly lower also. Why? Because traders increasingly became convinced that the global economy was slowing, being impacted by woes out of Europe as well as near stagnant conditions across the US and elsewhere.

As a matter of fact, the chart patterns between the two, are very similar and have been almost identical since September of last year.

Now take a look at the following chart detailing the Commitments of Traders report.





I have noted the various categories of traders on the Legend below the chart. Look particularly at the blue line in the positive section of the graph. It is important to note here that this is the NET LONG position of the hedge funds. Note how it peaked and then turned lower in September of last year, then moved solidly lower until the beginning of the year when it began to turn higher once again. What was that all about? Once silver peaked near $50 the sentiment shifted across the entire commodity complex and soured all the way into the end of last year. Then, at the beginning of this year, traders began to expect action in the Euro Zone from the ECB with some help from the Fed. They thus started to rebuild long side exposure to the entire commodity complex. That buying drove silver prices $10 higher to start the first two months of this year pushing it to near $37.50 in February. That was it - from then on, it has moved steadily lower on a monthly basis tracking the CCI nearly tick for tick.


What does not show up on this above graph however, is the actual NAKED SHORT POSITION of this same category of traders. For that, take a look at the following graphic. Can you see what is taking place? Hedge funds are building short side exposure to silver. I have only included the last 18 months worth of data but as you see, a mere month ago and this category of traders has been as bearish as they have been in a good while.




If we draw out the chart a bit longer, it becomes quite insightful. Notice back to the summer of 2008 when the credit crisis first erupted. The outright short position of the hedge funds is now even larger than it was at that point.



If you combine this with the fact that even as hedge funds are LIQUIDATING long positions in silver there is at the same time, some funds in this category whom are now building SHORT positions, it does not take much market understanding to realize why the price of silver is moving lower. It DOES NOT TAKE JP MORGAN 'smashing silver' to knock the price of silver lower. If anything MORGAN is using this hedge fund activity to actually cover their NOT LOSING short positions as some of these commentators keep telling us, but their EXTREMELY PROFITABLE SHORT POSITIONS.

For the sake of time I am not going to put up a chart of the Commitment of Traders of Copper, but suffice it to say, that hedge funds have begun building short copper positions in there this year also. Note the Copper peaked in February of this year, the exact same month as Silver peaked. Was JP Morgan "smashing copper lower to cover their losing short bets"? The answer is obvious - of course they were not - the hedge funds are taking copper lower just as they have been taking silver lower. Why? Because Copper is also viewed primarily as a RISK ASSET, just like silver, and a harbinger of the rate of growth expected in the global economy.



Silver has been finding good buying near and just above the $26 level from some big players. This buying has been of sufficient size that it has been able to absorb this speculative type selling originating not from Morgan, but from the hedge fund community in general. As long as these buyers continue to see this level as a good VALUE, silver will hold. If they pull back for any reason, hedge fund selling is going to take this market lower. It will not be Morgan that does it.

The conclusion to all of this is simple - as long as the environment persists in which traders are more concerned about slowing global growth and/or deflationary pressures, both silver and copper for that matter, will find it difficult to mount any sort of sustained upside activity. Note that I said, "Sustained". That means that we can and will get occasional upside moves higher when sentiment temporarily shifts and traders expect Central Bank actions to be of sufficient size and scope to counter the deflationary forces building in the global economy or economic data looks positive in some instances. But until we get something that occurs that will ACTUALLY produce a more lasting impact in that regards, hedge funds will be selling rallies.

Once again, the ball is firmly in the court of the Central Banks.

http://traderdannorcini.blogspot.ca/...ng-silver.html

[Gmvkgkmn]

I take it there must not be many contrarians like me - I buy all I can afford when prices are down, then I clam up when prices are high. So if the retail market is people who buy when prices are high, and sell when prices are down or going down, why hasn't the retail market already gone bankrupt. How fucking stupid can you be?

[wasssallx]

I take it there must not be many contrarians like me - I buy all I can afford when prices are down, then I clam up when prices are high. So if the retail market is people who buy when prices are high, and sell when prices are down or going down, why hasn't the retail market already gone bankrupt. How fucking stupid can you be?

You can't go bankrupt if you only buy what you can afford, stupid!

[Gmvkgkmn]

Depends on the logic of the buyer. Some might blow the rent money or car payment money on silver. Ever been tempted?

[nintenda]

Depends on the logic of the buyer. Some might blow the rent money or car payment money on silver. Ever been tempted?

spending rent or car payment money on silver is not logic, it's retarded.

[nerkvcbtre]

Don't ask me what this picture means.

[nerkvcbtre]

This message has been deleted by beefsteak.

ReasonFinally figured out HOW TO BLOCK/IGGY XIZANG PROVOCATEUR! WHEW!

Ask beefsteak what this reply means.

[Kilsimpaile]

spending rent or car payment money on silver is not logic, it's retarded.

The verbiage used was 'tempted'.

[Liaiskelile]

The verbiage used was 'tempted'.

who gives a shit about the verbage?

are you Xizangs alter ego?

[Kilsimpaile]

who gives a shit about the verbage?

are you Xizangs alter ego?

I will not deign the latter question with a reply, that will only encourage your bad behaviour.

As for verbiage - it is one thing to be tempted, it is another to actually to act on a foolish impulse. Furthermore, if one reads the previous posts, it appears that Xizang said that some buyers can go bankrupt if they start 'leveraging' by misappropriating rent and gas monies.

[nerkvcbtre]

I'm trying to grasp a proper physical example of this action.

Close as I can come is a silver trash compactor with a golden ramrod.

GoldCompactor copy.jpg

What occurred there was when you back up you get that little reflex action where the trash strikes back.

[BamSaitinypap]

$26.50 is a rock solid bottom. It keeps bouncing off of it. If it ever breaks through get ready to load the boat.

[nintenda]

The verbiage used was 'tempted'.

Depends on the logic of the buyer. Some might blow the rent money or car payment money on silver. Ever been tempted?

huh.