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the price down 3%, and instead of immediately going out and
trying to find a bunch of false or offered correlations as to what's
going on.. Correlations that that are often totally disconnected
I want you to stay connected and look at what the primary pricing
mechanism, the most important factors that influence price.
Last week, we discussed HFT and algorithm trading.
As a recap, I don't think that speed, electronics, or computers are
necessarily a bad thing, but when you combine self-regulation
with a for-profit exchange like the CME, that's a recipe for
disaster, and that's actually where we are. Algos arent necessarily
a bad thing either. High frequency traders (HFTs) have evolved
from a special privelege. This special class of algorithm trader are
represented by the commercial traders on the Comex. The Comex
is owned by the for-profit Chicago Mercantile Exchange or the
CME.
HFTs have access to exclusive information and the ability to move
or put the price wherever they want. They use key technical
indicators as their target. And the daily moving average price is a
primary one in the silver futures market.
We will touch on the other technical indicators, but the key one is
the moving average. I think that's probably a pretty good segue
into diving into really the core today I want to talk about.
Silver price and technical analysis.
Again, I think the main one is the moving average, but what is
technical analysis? Technical analysis is really a method. It's a
method of forecasting that's based primarily on price and volume.
It's been around for nearly 200 years. I know that's not forever,
but it's been around for a long time. There have evolved from it,
models and our trading rules and our charts and patterns. These
charts and patterns have existed the longest, because they were
around before we had computers that could crunch numbers and
create all these statistical data sets.
We have indicators now that are really just mathematical
transformations of where price and volume are. There are
techniques that have evolved from technical analysis. Many of
you know or have heard these before: Candlestick charting.
There's the Elliot Wave theory, there's the Dow theory. These are
techniques.
Many traders use some combination of all of these. Some of the
patterns that I'm sure you've heard of are head & shoulders,
double top/bottom reversals. There are support and resistance
channels and flags and pennants. These things that you can kind
of read when you look at a price chart over a period of time, you
can see these patterns evolving, like patterns in tealeaves.
Some of the indicators, these mathematical indicators are up and
down volume, the RSI which is the relative strength indicator, the
moving average convergence and divergence, the MACD or the
moving average, which I think is the daily moving average, I
believe is the most important one. Of those moving averages, you
have the 10, 20, 50, 100. There are others, but the 50 and the
200, really the 20, 50, and the 200 are the key ones. The 200 is the
one we are flirting with right now.
This is where kind of we've been over the last week, we've seen
kind of a nice little rise in the price.
We moved through the 50-day moving average very quickly up to
the 200-day moving average. I think Monday we crossed over and
then went below. Tuesday we went through it. Yesterday we
stayed above it. Now today we're way down below it. We're not
Q&A
commentary that usually follows like ... I haven't seen any of the
stories yet, but you'll see them come up. Someone will say, "Oh,
yeah, the silver price is down because we have deflation. China is
not producing. Greece is going to turn over again," and all these
really sort of loosely-connected reasons, when the trade ... You
can see the trading actually happen in the data.
I think that's why it's important to kind of keep people sane. Some
peace of mind. Even for long-term investors, because there's
really no way to turn all of this off. The information is out there.
It's so easy. You can turn on your computer and it's right there,
whether it's the price or a commentary about the price. I feel like
many people become disillusioned on this journey and forget
about really ... Again, it's a veil. This all puts a veil over really the
underlying fundamental supply and demand reality.
.
I'll add here that there is a legal precedent for intervention in
these markets, at least in gold, for example.
If you follow any of GATAs (gata.org) work, you can go through
their essays. There has been a legal precedent for intervention in
the gold market for years, primarily through the exchange
stabilization fund (ESF), which was created at the end of World
War II.
I haven't seen a legal precedent for involvement in the silver
market, but we've gotten to the point where the regulators are
completely captured. The fox really does guard the hen house in
these markets. There's not going to be any regulatory
intervention.
If you take the combined budgets of the CFTC, the department of
justice, the SCC, the GAO, all of them combined don't even come
close to the money power behind even one investment bank, like
the JP Morgan for example. Any kind of lawsuit or suit will just go
on forever.
Chris asked the question about signs of shortage.
That's one of the factors that I think will eventually break the back
of paper trading. I haven't heard anything brand new this week.
More of the same. There's certainly controversy. I've heard some
people say they can find silver, or there's a slight delay - but only
for certain products like the American Silver Eagle. Premiums, I've
seen people report from 20 to 50% premiums on Eagles, but
normal premiums for rounds or junk, small bars, for example.
There's definitely something going on. The US Mint continues to
report significant demand. We've seen it out of Perth also. On the
surface, the fact that this demand exists, is incredible given the
overall sentiment.
Even if you move beyond sort of hearsay from the retail demand
side, but if you look at like US Mint Reports or what's coming out
of Perth, the fact that we are so down in the dumps in terms of
sentiment overall ...
Nobody sees this market, and yet demand has been so strong.
That goes against human nature. Either Ted's right that there's
major intervention by someone who knows better, or we're small
but collectively there are enough of us that see this as an
opportunity.
I don't know if I believe that. I think that even people that
understand the opportunity still can't get over what they see in
this price, this illusory price that's created by these points that I've
been bringing up.
We certainly haven't seen or heard any more evidence of that
particular retail shortage developing into a wholesale shortage,
although if you look at what Ted Butler brings up every week, (to
which no one makes much comment about,) is the very visible
and frantic into and out from silver COMEX warehouse
inventory.
No other commodity is exhibiting this kind of massive turnover.
That's huge, but only time will tell if that develops into a
wholesale shortage.
If you know the story and you see lower prices, then many people
look at it as a buying opportunity. Especially for a long-term
investor.
As I reflect on who we're talking to or who you guys are and as
time goes on, Ive witnessed an interesting phenomenon. You've
seen this go on and on. We've seen swings from single digits to 20
back to 8, up to 50, back down to where we are now.
If you're brand new and you have an open mind and you can see
the fundamentals clearly enough or objectively enough, then
many see manipulation as a gift, an opportunity not to be taken
for granted.
However, I don't think that's fair for most of us who have been
here for a long time, many people who want to retire, who have
been waiting for this. It seems like the writing has been on the
walls for years.
Maybe that's the definition of long-term investment, but many
people see this as, Wow, here's another opportunity to buy low.
I think when we moved to the 200-day moving average, and given
what we know is likely about the positioning that transpired as we
got there, it would been prudent, if you were thinking of buying,
to wait until we get pushed back down, which is the normal
pattern that's developed.