The Battle At The Bridge - Gold and Silver

The Battle at the Bridge.
Gold trading at $1405.

How many of you recall the cult movie classic, "Monty Python and the
Holy Grail."

Jim

Jim,

Silver will lead, so I am watching it closely. When once resistance becomes support, it will confirm Three Taps and Out of the 2001 upper trading channel resistance. As I have said before, when resistance becomes support, the gloves come off at the battle at the bridge.

Silver ETF (SLV):


JP Morgan has been reading the message(s) from the silver market.

Headline: JPMorgan cuts back on US silver futures

JPMorgan has quietly reduced a large position in the US silver futures market which had been at the centre of a controversy about its impact on global prices for the precious metal.

The decision by JPMorgan was an attempt to deflect public criticism of the bank’s dealings in silver, a person familiar with the matter said. The person added that the bank’s position in silver would from now on be “materially smaller” than in the past.

Source: ft.com

Welcome Back, Bull Market

Devaluation, not hostile takeovers and IPOs, has caused the stock market to rise. Those that cannot discriminate between the effects of devaluation and not, the difference between a nominal bull and "real" bear market, will inevitably get their pockets picked.

Welcome back, bull market? I don't think so. Most investors/traders, however, embrace the convenience of the obvious interpretation. It’s simply easier. Market forces rarely follow the consensus interpretation and always exact a steep price for this ignorance.

U.S. Large Cap Total Return Index (LCSTRI); S&P 500 Total Return Index to Gold Ratio:

Like the swallows returning to San Juan Capistrano signal the start of spring, the return of hostile takeovers and one-day IPO doubles heralds a return of the bull market to Wall Street.

Two years ago at this time, it was "Get me out of IBM at any price, stat!" Now Chinese dot-coms are jumping 150% before the coffee cools, and corporate boards are hoisting the Jolly Roger to prey on wounded rivals.

SOurce: finance.yahoo.com

WEATHER: 35,000 DEATHS FEAR IN NEW ARCTIC BLIZZARDS

Cold/Wet cycle in place.

DEATH rates are set to soar “scandalously” this winter as a new Arctic blast batters Britain with temperatures on a par with Siberia.

Experts predict a dramatic increase in cold-related fatalities as we suffer the bitterest winter in a century, causing 12 deaths every hour.

Source: express.co.uk

From Bob

Timing And The Patience To Wait For The Inevitable Loss of Confidence Will Be Challenging

Currency Induced cost Push Inflation is with us now.
This is the foundation of Hyper Inflation.
There is no longer any PRACTICAL solution.
Hand on because here we go!

Jim

Jim,

John certainly knows his stuff. Timing (and the patience necessary to wait for it) can be quite challenging in this business.

If hyperinflation were around the corner, leveraged money flows in stocks, bonds, and other key markets by connected players would foreshadow such an event.

Smart money has been repositioning on the long side since October.

Stocks

S&P 500 and the Commercial Traders COT Futures and Options Equity Diffusion Index (DI):


S&P 500 and the Nonreportable Traders COT Futures and Options Equity Diffusion Index (DI):


Smart money is repositioning on the short side since the summer of 2010. The failure of another neckline illustrates the weakness of the technical position. The top in bonds will likely be a process, so patience and discipline will be required.

Bonds

US TBd (20 Years +) and the Commercial Traders COT Futures and Options Stochastic Weighted Average of Net Long As A % of Open Interest:


US TBd (20 Years +) and the Nonreportable Traders COT Futures and Options Stochastic Weighted Average of Net Long As A % of Open Interest:


Regards,

Eric

John Williams: Hyperinflation Will Start in the Next Couple Months


Source: youtube.com

Natural gas bulls were as scare as good judgment at a drinking contest

Do you think "operations" are limited to the currency markets, i.e. the Euro takedown? Natural gas bulls, as little as a couple of weeks ago, were as scare as good judgment at a drinking contest.

The leverage money flows have been suggesting accumulation for months. Accumulation will give to mark up once the “experts” begin to turn bullish en masse. Is this a coincidence? Coincidences tend not to repeat, but classification of events tends to be immaterial when playing the “game” correctly.

Natural Gas ETF and the Commercial Traders COT Futures and Options Stochastic Weighted Average of Net Long As A % of Open Interest:


Natural Gas ETF and the Nonreportable Traders COT Futures and Options Stochastic Weighted Average of Net Long As A % of Open Interest


Headline: Natural Gas Prices May Advance in 2011 on Lower Production: Energy Markets

Natural gas prices may rebound next year as producers cut output for the first time in six years amid record stockpiles and an expanding U.S. economy.

A 21 percent drop in prices this year will contribute to a decline in drilling for the fuel sold to factories, power plants and homeowners, the Energy Department said in its monthly Short- Term Energy Outlook on Dec. 7. Output will average 62.01 billion cubic feet a day in 2011, down from a record of 62.09 billion this year, the department estimated.

Source: bloomberg.com

Euro - Absolute flushing of the "marks" by the sharks

A mistake for who? There is only one side of the trade here - right side. Success or failure will be determined by market forces, not bureaucrats.

While certain "groups" will always setup the mark(s), their operations will never alter the secular trends. The Euro will reverse as the dollar inevitably weakens when the specs and retail money have been herded (for slaughter) to the other side of the trade.

Markdown will soon give way to accumulation.

Euro and the Commercial Traders COT Futures and Options Stochastic Weighted Average of Net Long As A % of Open Interest:


Absolute flushing of the "marks" by the sharks. That's the kind description.

Euro and the Nonreportable Traders COT Futures and Options Stochastic Weighted Average of Net Long As A % of Open Interest:


Headline: Don't bet against euro - German finance minister

Europe's single currency is here to stay and those who bet against its survival are making a mistake, German Finance Minister Wolfgang Schaeuble said.

In an interview to appear on Sunday in Bild am Sonntag newspaper, Schaeuble said leaders of all the countries that share the currency agreed -- the euro worked toward their common good and a return to national money would be a mistake.

Be Right and Sit Tight

A lesson from Jesse Livermoore, "Be Right and Sit Tight", Reminiscences of a Stock Operator.

" There I was, short five thousand shares of UP (Union Pacific). on a hunch. That was a much as I sell in Harding's office with the margin I had up. It was too much stock for me to be short of, on vacation; so I gave up the action and returned to New York that very night. There was no telling what might happen and I thought I'd better be Johnny-on-the-stop...

The next day we got news of the San Fransisco earthquake. It was an awful disaster. But the market opened down only a couple of points...

I was short five thousand shares. The blow had fallen, but my stock hadn't...

He told me: "That was some hunch, kid. But, say, when the talent and the money are all on the bull side what's the use of bucking against them? They are bound to win out."

"Give'em time," I said. I wouldn't cover because I knew the damage was enormous and the Union Pacific would be one of the worst suffers. But it was exasperating to see the blindness of the Street...

I wasn't not betting blindly. I wasn't a crazy bear. I wasn't drunk with success or thinking that because Frisco was pretty well wiped off the map of the entire country was headed for the scrap heap. No, Indeed.

They'll tell you that it was because the first dispatches were not so alarming, but I think it was because it took so long to change the point of view of the public towards the securities market. Even the professional traders for the most part were slow and shortsighted.

Livermoore's essential message of “Be right and Sit Tight” as described by the impact San Francisco’s Great 1906 earthquake on his short position in Union Pacific draws a close comparison to that of the Great failure of the OTC derivative market in 2008 and the price of gold. For gold holders, it is exasperating to see the blindness of the Street to the damage incurred. Foreign debt held by foreigners and international investors as a percentage of GDP (national income), shown below, has climbed above 28%. The magnitude and acceleration of this trend is both staggering and dangerous.

The Street, nevertheless, following historical precedence remains largely blind to message contain with the trends. While professional traders for the most part are slow and shortsighted, history suggests that they will react swiftly when blindness transitions to sight. If you thought “Be Right and Sit Tight” is easy, it’s a lesson that many will never learn.

The equilibrium price of gold continues to rise to unbelievable levels.

Federal Debt Held by Foreign & International Investors As a % of GDP (FDHBFINGDPR) and the London P.M. Fixed Price of Gold (GOLD):