Thursday, February 16, 2012

Upside Reversal Positive Proof Paper Futures Market is Losing its Grip on Silver

Live New York Silver Chart [ Kitco Inc. ]Guest Post From SD reader FW:

An upside reversal as seen today was almost unheard of 12 months ago and on back through the start of this bull market a decade ago. What you are seeing is proof positive that the paper market control over physical is slowly dying.
Live New York Silver Chart [ Kitco Inc. ]

In early January I noted we'd likely have little friction until the cartel stepped on the breaks more forcefully in the mid-30s area for silver, and they indeed showed up to halt touching $35, and then, tightened to kill moves over $34. Now, lease rates have gone negative for a period and they cut COMEX margins to pull in more money. Today was likely the first test of the next round of their favorite game: "running the stops." They play with the momentum money traders like a cat toys with mice. But the mice are less significant now given the smaller participation on COMEX in a post MF Global world and rising physical demand worldwide.

I believe between today through Tuesday we'll see probably two more facilitated down drafts and lots of additional break tapping on upside moves, but this will be met with at least half as impressive upside reversals and/or reasonable support as we saw this morning. Then, on Wed and going into expiration (Feb 23), we're going to probably move higher (above $34), contrary to nearly all other COMEX options expiry periods. Finally, from the week of Feb. 27th on into the first two weeks of March, we'll be talking about testing $40.

Blythe, 2012 will mark the greatest failure in your career. Be proactive. Get out early. The coming explosion in silver is going to surprise almost everyone - but not you. We're going into the triple digits far sooner than even 95% of the bulls perceive.