Thursday, February 2, 2012

Guest Post: PM Sentiment Remains Bearish- Look for Massive Rally in Q1

From SD reader FW:

At the risk of sounding like I'm bragging, I would like to point out that the likely best time to buy silver is when your brain makes a logical case on fundamentals but your stomach would have you in lock-down mode.
Do you all remember how astoundingly bearish sentiment was in December through Friday, Jan. 6th -- the Friday of the gold lease rate spike down? Even the strong long-term silver bulls on this site were forecasting a silver dive for the week of Jan. 9th. Meanwhile, dolts that rely on technical analysis without balance from other methods were up-chucking their positions and bears were looking for a total crash.
Well, whenever sentiment gets that skewed in the context of fundamentals that are turning even more bullish, it's time to sit-up, take notice, and likely - to buy.
I made that case and explained many of the short-term factors that would turn the market UP during the week of Jan 9th. I was pretty much the only one here making that case. For my original analysis and comments, see:

A couple of days later, once the scenario I forecasted started to play out, I noted:

"The manipulators had their round. They're going to have to wait a while before creating a sustained pull-back because the momentum is shifting back into the PMs. We'll probably get to the mid-$30s in silver before we see another big cartel attack but that attack will push us down to a price above where we are as I type (at almost $30/oz right now).

What this now suggests is that unlike most on this blog fear, manipulation attacks in the next few days to a week or so is not likely. Instead, the rascals will make a bigger effort closer to options expiration later this month."


It turned out that options expiration was bullish - very rare. Silver went up, and against my bird-dogging that period as higher risk for decline. But I got the mid $30s call right. The cartel stepped up suppression efforts to slow the leap over $34.

You might say, "OK, now what smart a$$?" :-)

Well, precious metals bearishness remains excessive in the Western financial markets and the titanic money flows into physical (and shrinking of the paper edifice thanks to MF Global, etc.) contributes to the forces that will keep this momentum moving higher. It's going to be a wild ride and the cartel will act with force from time to time. But the odds of crossing $50 THIS QUARTER are pretty good and I see prices over $40 as virtually certain by quarter-end.