Higgenbotham wrote:
"Relief rally in stocks" just means an upward correction. Stocks have lost 10% from the May high and there will probably be a rebound. Doesn't have to be, but it's likely.
When even people in this group think stocks can go up it is really time for a crash.
Good point - I agree with that. I think how soon is the only question. I just went short again from 10 points higher. The market shouldn't be running that fast under normal bullish conditions.
vincecate wrote:
Higgenbotham wrote: I still see US bonds as a "least worst" alternative that look better in the face of rising European yields as John has been posting in the news items (now Italy has broken the 6% barrier).
If all the paper currencies are being printed at high speed, the least worst is gold and silver.
In such a case, silver will generally outperform or at least go up and silver's outperformance was tremendous and very well in line until that changed near the end of April. Bonds anticipated this change 2 months in advance. The action of the bond market is telegraphing a deflationary crash and who am I to argue. The chart of TLT vis a vis 2008 has that written all over it in my opinion. That's why gold has been going up and everything else has been going down. Gold is the ultimate safe haven when default fears rise to the surface but silver is not.
vincecate wrote:
Higgenbotham wrote:
Finally, in looking at the silver chart, I see a potential technical setup where there's a place it could be shorted with fairly good risk to reward. It may not get there. If it does get there and continues higher, I should be able to get out with a small loss.
Last time it went from $42 to $48 very fast and from $48 to $42 even faster . So to me it seems there is "no resistance" in this range and it could go from $42 to $48 very fast now.
Instead of looking at the chart and thinking about silver, it might help to pretend it's the Dow Jones. That might put things in a different perspective. I'm not predicting anything but this is a classic short setup for a crash in silver given everything that's going on and the divergences in the metals (failure of silver to make a new high with gold). If it stalls out near the dip between the double top or underneath it in the next 2 weeks, that would be a high probability short.
While the periphery breaks down rather slowly at first, the capital cities of the hegemon should collapse suddenly and violently.
Higgenbotham wrote:I'm looking to short silver. Heavily. Haven't done anything yet.
I had a look at the relative strength of gold versus silver:
Last 3 months almost no difference in percentage growth
Last 1 month silver up 22% gold up 12%
Just as a matter of technical analysis I think that there is a reasonable possibility that silver could double quicker than anything else.
If the stock market gets wacked harder than I am anticipating, and I am seeing 10500 for Dow in the medium term, then of course gold and silver will be wacked too.
I am long on both gold and silver with stop losses in place. I am not brave enough to short either; I would prefer to be in cash if I wasn't long.
Richard
Higgenbotham wrote:I'm looking to short silver. Heavily. Haven't done anything yet.
I had a look at the relative strength of gold versus silver:
Last 3 months almost no difference in percentage growth
Last 1 month silver up 22% gold up 12%
Richard
The gold/silver ratio has risen from a low of 32 in late April to 40 this morning. The intraday low in the ratio was about 30 on April 25.
Silver is down 16% from the low in the gold/silver ratio while gold is up 11%.
The last 2 charts are courtesy of Kitco but all the comments on the charts are my comments, not those of Kitco.
While the periphery breaks down rather slowly at first, the capital cities of the hegemon should collapse suddenly and violently.
Higgenbotham wrote:The gold/silver ratio has risen from a low of 32 in late April to 40 this morning.
Higgie, this is totally out of my league.
I wish you great luck and enormous profits, but I'm really not brave enough to short silver. I am impressed by your steel nerves.
There's panic starting out there and flight into safe havens - the European Financial crisis, global debt out of control, currency wars brewing, deteriorating USA and European economies, etc, etc.
Richard
I remember the February 1991 and February 1993 double bottom in silver like it was yesterday. Gold deteriorated as silver showed strength and gold finally made a low in March 1993 after silver bottomed and moved higher. In March 1993, I bought into South African gold stocks - Western Deep Levels and Vaal Reefs. My stock broker thought I was some kind of a goofball. They tripled in under a year and I sold out. When gold broke its 1993 low in the late 1990s, silver held the 1993 low. I just looked at my old paper charts of silver from the 1990s. The actual chart low on silver was in February 1991 whereas it took gold another 10 years to make its low. As this activity was occuring, I was buying silver. The gold/silver ratio was near 100. People thought I was nuts to be buying silver.
The opposite situation is occuring this year. As silver double topped in late April, gold continued higher. Now as silver is making another attempt at its late April high, gold is zooming yet higher. And all of this is occuring on the 18/19/20 year cycles which lends more significance to this market behavior.
It's not time to attempt a short on silver yet in my opinion. My preferred time window at present is August 16-18. If the gold silver ratio approaches or breaks through its post April high and silver is still lagging, then it may be time to short silver (with very tight control of risk and minimization of losses). If silver breaks through $50, it could REALLY run.
Last edited by Higgenbotham on Thu Aug 04, 2011 10:13 am, edited 1 time in total.
While the periphery breaks down rather slowly at first, the capital cities of the hegemon should collapse suddenly and violently.
Higgenbotham wrote:The action of the bond market is telegraphing a deflationary crash and who am I to argue.
The Fed is manipulating the bond market. They are still holding interest rates down, even if they claim QE2 has ended. So you can't think that what the bond market is telling you is the result of normal market forces. For the moment it says what the Fed makes it say.
This can not last. The way they hold bond prices up and interest rates down is by printing money and buying bonds. This works short term but can not work in huge amounts over the long term. I think we are getting to the long term.
Higgenbotham wrote:The action of the bond market is telegraphing a deflationary crash and who am I to argue.
The Fed is manipulating the bond market. They are still holding interest rates down, even if they claim QE2 has ended. So you can't think that what the bond market is telling you is the result of normal market forces. For the moment it says what the Fed makes it say.
This can not last. The way they hold bond prices up and interest rates down is by printing money and buying bonds. This works short term but can not work in huge amounts over the long term. I think we are getting to the long term.
These are deflationary forces at work - the same forces that have dropped oil 25% in 90 days. There are hundreds of billions going into US bonds from many sources. The last 2 treasury auctions were over subscribed 4 times.
While the periphery breaks down rather slowly at first, the capital cities of the hegemon should collapse suddenly and violently.
Higgenbotham wrote:There are hundreds of billions going into US bonds from many sources. The last 2 treasury auctions were over subscribed 4 times.
The Fed is loaning to banks short term at 0.05% and then the banks are buying Treasuries at 1.2% for 5 year bonds. I am sure that in another couple years inflation and interest rates will be so high that these bonds will be losing money big time. But the bankers get bonuses this year and they have been deemed "to big to fail", so they don't even have to worry about their jobs.
But it is really the Fed's newly printed money that is funding the Treasury. Governments that try to print half the money they spend cause their currency to drop in value fast. It will happen to the US too.
Higgenbotham wrote:There are hundreds of billions going into US bonds from many sources. The last 2 treasury auctions were over subscribed 4 times.
The Fed is loaning to banks short term at 0.05% and then the banks are buying Treasuries at 1.2% for 5 year bonds.
When the Fed hands money to the speculators, they can do whatever they want with it. They can buy oil or short oil, they can buy silver or short silver, etc.
I would suspect many were actually short bonds on the debt downgrade idea and got caught.
Making liquidity available to financial institutions can actually deepen a deflation and make it more intractable if the institutions lean in that direction. That's my theory anyway and I think that's why there were overshoots in 2007/2008 and undershoots in 2009. The bubble was larger and the subsequent bust was larger. More water and bigger waves.
While the periphery breaks down rather slowly at first, the capital cities of the hegemon should collapse suddenly and violently.
