It was only a few hours ago that I was cruising through a lovely
early-autumn Friday afternoon preparing for one of the last weekends at the
marina for the 2019 season when I came across the much-heralded (and often
misinterpreted) COT report. I was on the way up the eastern shoreline of Lake
Simcoe when I saw that, for the COT week ended Sept. 24, the Commercial
Cretins, seeing the usually wrong Big Money managers drunkenly piling into
carloads of December gold contracts (29,845 contracts to be sure) hand over
fist, decided to "fill 'em"—and they happily supplied all of the
paper gold needed to crush the advance at the exact, precise peak of the
advance, which ended Tuesday at $1,543.50.
The rest (of the week), as they say, was history, and in more ways than
simply the passage of time. December gold lost over $50 as option expiries,
futures expiries and general Bullion Bank shenanigans all conspired to
vaporize any semblance of investor optimism. It puts to bed the notion, as I
have been warning for weeks now (amid blogosphere ridicule and investor
anxiety), that the "Forces of Goodness" had finally and forever
vanquished the banking cartel and its symbolic putrefaction.
My worst recurring nightmare of the past forty-five years has me sitting
in a final exam room during my graduation year of university completely
unprepared and totally in need of a passing grade to receive my diploma. It
actually did happen to me but, as it turned out, the professor was a hockey
fan and cut me a much-needed break, a C+ in Statistics and Data Analysis,
arguably the most boring class I have ever taken.
The second recurring nightmare is one that has only cropped up in
recent months, and it is that the precious metals markets revert back to
pre-June behaviors, with COT reports calling the shots and commercial traders
once again slapping the managed money CTAs like rented mules.
From the August 2016 top to the May lows, I successfully avoided five
massive drawdowns by trading with the bullion bank criminals, choosing
to fade all rallies in gold that accompanied their aggressive shorting
activities. It worked until the June 20 breakout, after which all bets had to
be cancelled and strategies reexamined. However, in the past three weeks, it
appears that investor complacency in the precious metals community allowed
the Bullion Bank behemoths to quietly creep back in the control room where,
in a matter of a few short weeks, they have inflicted immeasurable pain on
the newborn bulls that were taking victory laps on Sept. 4, "long leveraged"
to their back teeth, with champagne flute in hand.
The silver COT was far more friendly than the gold COT, but month-end
shenanigans may wreak havoc upon both metals with the bottom later in the
week. After the Twitterverse became inundated with bullish pronouncements
from bloggers around Sept. 4, the space is now eerily silent, with bullish
tweets being recalled and the fuzzy-cheeked trading wizards all hiding under
their desks.
Conditions like this, while normally bullish, are not going to disappear
overnight, because just as "Hell hath no fury like a woman
scorned," "Hell hath no fury like a Bullion Banker burned." so
the vengeance being inflicted on those who failed to heed Santanyana's
finger-wagging rebuke (something about people ignoring history's famous
mistakes being doomed to repeat them in the future) are now being fully
educated on the meaning of the term "wrath." To be sure, $50 drops
in gold and $2 drops in silver can soften stardom and end marriages, not to
mention foster an alcohol addiction and high dives from skyscrapers.
Another way of looking at the COT is through the eyes of a professional
money manager ("Large Speculator"). This chart clearly illustrates
the manner in which the Commercials lie in wait as the Large and Small
Speculators, comprised of money managers, CTAs and the public, get completely
fleeced by the Commercials, comprised of Bullion Banks supposedly acting on
behalf of "clients" hedging future production. (If you believe the
cartel bankers are acting only on behalf of clients, I have 100 acres of
quality farmland just outside of Chernobyl to sell you.)
From June until mid-September, most of the skirmishes went to the Large
and Small Speculators. This has recently reversed with a "déjà vu all
over again" creeping back into the Crimex pits. We know that the
"creature" shown in the graphic is really the central banking
cartel, and when the jaws of extreme positioning widen, a downturn is
inevitable—and that is what we are now witnessing as we move into Q4.
This correction in gold (and silver) is the natural outcome of excessive
greed, where newly anointed participants suddenly discover a long-awaited
uptrend and come piling into the market, ignorant beyond all comprehension of
the dangers lurking below the surface and well-off the radar.
Old-timers (like me) saw the rush to judgement coming late last month and
began scaling back and taking profits, and only just began replacing
positions late last week. The 50-dma (daily moving average), at $1,502, has
now fallen to the Evil Axis of Market Manipulation, with $1,434 and $1,377
holding the fort at 100-dma and 200-dma levels of solid support.
Mind you, those with any cranial cells left are now looking with
agony-filled eye sockets at the $1,525 level, where, back in 2013, its defeat
ushered in thirty more months of dental surgery sans novocaine. Healthy bull
markets tend to shrug off attacks such as this, so while the stalwart bulls
will feign indifference to a $1,485 gold price because of the much-daunted
"$1,375 breakout," I do not want to see a print anywhere
close to $1,434, or even $1,450. We need a solid turn in the precious metals this
week or else my second-worst nightmare may become a reality.
I completed the buybacks of the senior and junior miner ETFs late last
week, and although both are a tad weaker today, the GDX/GDXJ dynamic duo will
probably (hopefully?) resume their uptrends by the end of the week, after the
institutional money flows return to normal. The GSR, at 86.6, is still well
below my short entry level of 92.40, but it is also a far cry from the 78.9
level it touched on Sept. 4. Silver itself is now a full $2.55/ounce below
the 52-week high of $19.75, and well below the 2016 high north of $21/ounce.
I thought that $17.50 would be the "line in the Sand," but
obviously, the Commercial Cretins thought otherwise, and but for month-end
malarkey, this week "should" mark the turn (back up) with the
operative word being should.
A great many e-mails, phone calls, tweets and text messages have bombarded
me in the past few days, all with the same inquiry: "Is the bull move
finished?" My reply is emphatic: "Not on your life." Long
before the price explosion in June, I was writing about the growing mistrust
permeating the global debt arena, and that, my friends, has not ceased
and desisted, nor will it any time soon. I think that the $1,566.20 and
$19.75 price points for gold and silver might have been the highs for the
year, but with global debt levels exceeding $246 trillion (as of July 15),
that number is 320% of global GDP and an unarguable floor of support for gold
and silver ownership.
Debt is going to be the undoing of not only this global stock market
obsession; it is also going to be the Great Unraveller of standards of living
around the planet. So, with Fido once again hiding in the crawl space under
the tool shed and my domestic partner currently residing somewhere in the
next county, and with dart boards of Jerome Powell and Mario Draghi
pockmarked with ordnance holes, conditions are now ideal for a return of the
precious metals' uptrends. The only thing missing is a quote machine sailing
through the air in search of a Bullion Banker forehead, but that may not (or
may) be necessary during this go-around.
May your nightmares be brief.
[NLINSERT]
Charts provided by the author.
Michael Ballanger Disclaimer:
This letter makes no guarantee or warranty on the accuracy or completeness of
the data provided. Nothing contained herein is intended or shall be deemed to
be investment advice, implied or otherwise. This letter represents my views
and replicates trades that I am making but nothing more than that. Always
consult your registered advisor to assist you with your investments. I accept
no liability for any loss arising from the use of the data contained on this
letter. Options and junior mining stocks contain a high level of risk that may
result in the loss of part or all invested capital and therefore are suitable
for experienced and professional investors and traders only. One should be
familiar with the risks involved in junior mining and options trading and we
recommend consulting a financial adviser if you feel you do not understand
the risks involved.
