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Catch a falling silver knife - Notes on EJ's April 29 silver sell call

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  • Re: Catch a falling silver knife - Notes on EJ's April 29 silver sell call

    Originally posted by rogermexico View Post
    Thanks Bart
    Yes, thank you! And if I may ask, any chance you can show a graph showing the price of silver in USD overlayed with the Margin Hikes? The idea is to get a clear picture of what IS actually crashing the price of silver.

    Feel free to overlay other inputs if you suspect there's other major factors at play (i.e. USD index, Silver Options Expiration dates, silver supply/demand, Timing of Fed/Gov Stimulus plans (risk on/risk off). It would also be interesting to see a similar chart for gold, because the initial theory was (paraphrase) "gold will not be affected by margin hikes nearly as much as silver, because gold is in 'strong & lard hands' aka: central banks".


    I could see these type of charts potentially translating into a significant trading methodology into the next year or two. While it may be extremely difficult to project timing and size of future margin hikes, one thing is clear: There's some 80% left until margin = 100%, and there is no more leverage in the system. So if to get to ~17% margin we passed through 2 major margin hikes that crashed silver ~25 to 40%, then perhaps we can extrapolate that we are 1/5th of the way until we see 100% margin. In other words, at least several more major margin hikes are left. So perhaps silver ON AVERAGE until Q4 2013 may end up at below $30 as per iTulip, but a zoom in of what may happen may look something like the below (red line) which can offer additional trading opportunities. And if margin hikes are discovered to be the major catalyst pushing silver down, once we run out of margin hikes (i.e. margin = 100% = 1:1 silver price:contract), then why wouldn't price rocket up based on supply/demand or other fundamentals?


    NOTE: My red line in the top/right chart with 'real silver price' was hand drawn, and is not based on any real data... just trying to show very roughly how I suspect margin hikes will impact the price of silver going forward.

    Maybe that would tell us something, as it seems to me this jsut shows the CME playing catch-up to the 200% price rise.
    CME isn't necessarily just playing catch-up. Margin hikes are being justified based on excessive speculation that seem to be occuring over recent short periods of time, not from 2001 to 2008.
    Last edited by Adeptus; September 26, 2011, 04:36 PM.
    Warning: Network Engineer talking economics!

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    • Re: Catch a falling silver knife - Notes on EJ's April 29 silver sell call

      Ok I just found this Seeking Alpha article from a few days ago, that touches upon what I am talking about.
      SOURCE: http://seekingalpha.com/article/2948...-metals-prices

      Borrowed (and modified graph: orange elipses & green writing are mine) graph from above article.
      Note the impact of margin hikes on silver.... Now show me a "fundamental" that impacts silver more than margin hikes, and explain how iTulip's future silver projections consider margin hikes (whether directly or indirectly).

      Last edited by Adeptus; September 26, 2011, 04:28 PM.
      Warning: Network Engineer talking economics!

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      • Re: Catch a falling silver knife - Notes on EJ's April 29 silver sell call

        [QUOTE=Adeptus;210442]Now show me a "fundamental" that impacts silver more than margin hikes, and explain how iTulip's future silver projections consider margin hikes (whether directly or indirectly).

        If you believe in the fundamentals are you buying more then? Who is? Are new silver ETFs still being set up? Are the quantities of silver increasing in the silver funds now it's so cheap? Why don't you do a poll on itulip on who is buying?
        I am quite confident not many will be buying more silver (if they have any left) compared to those who may be adding to their gold positions.

        Finally with silver at 50 dollars an ounce what should the margin be in your opinion?

        Comment


        • Re: Catch a falling silver knife - Notes on EJ's April 29 silver sell call

          Originally posted by Adeptus View Post
          Yes, thank you! And if I may ask, any chance you can show a graph showing the price of silver in USD overlayed with the Margin Hikes? The idea is to get a clear picture of what IS actually crashing the price of silver.

          Originally posted by bart

          Perhaps it's quite a number of factors that caused the relative crash, margin hikes being only one... and the factors change in relative importance. At least that's my take.

          Here's the chart:



          Feel free to overlay other inputs if you suspect there's other major factors at play (i.e. USD index, Silver Options Expiration dates, silver supply/demand, Timing of Fed/Gov Stimulus plans (risk on/risk off). It would also be interesting to see a similar chart for gold, because the initial theory was (paraphrase) "gold will not be affected by margin hikes nearly as much as silver, because gold is in 'strong & lard hands' aka: central banks".

          There are of course many other factors, but all that I'd produce would be a spaghetti chart that would be very hard to read, and I'd also be giving away quite a bit of my "secret sauce".

          I'd love to see a similar chart with gold margin myself. I recall seeing the data in the last week or so but don't recall where. Perhaps someone else recalls it and has the link...
          http://www.NowAndTheFuture.com

          Comment


          • Re: Catch a falling silver knife - Notes on EJ's April 29 silver sell call

            llanlad2 asked:

            If you believe in the fundamentals are you buying more then?
            Yes, possibly in a couple of days: after tonight's margin hike implementation + tomorrow's Options expiration
            I will also buy more gold. My target was $1650 to buy the dip... that's where we are roughly at now (in fact much lower in Canadian dollars). But will also wait a day or two.
            I think the biggest upcoming impact is WTF is Europe going to do. Plenty of speculation/rumours abound that EU/EBC is going to do a massive bailout any day now.... which would mean PM prices jump right back way UP. If they don't, we'll see a massive crash#2 along with the stock markets. Today's stock market rally (2-3%) I believe was primarily based on
            EU Bailout rumours.

            Are new silver ETFs still being set up?
            Good question. Not sure about in the West, but in Asia, they are on the verge of opening up Silver to be traded in their newly open exchange (Q3/Q4 2011).
            This does not answer your ETF question. I don't know. Perhaps somebody else can chime in. I suspect the answer may be no or at least nothing significant, and that is a valid point, as that has been a significant method for the masses to invest in and speculate on PMs. There are however, many other methods to trade PMs: Physical, Options on existing ETFs, Bullion Vault & equivalents, Chinese gold saving accts, Unallocated/Allocated Bank Certificates, whatever else they come up with that I can't imagine.

            Are the quantities of silver increasing in the silver funds now it's so cheap?
            Are you referring to NAV? I haven't looked to be honest. My expectation is that NAV will have decreased, making it a good time to buy - as compared to a few weeks ago.

            Why don't you do a poll on itulip on who is buying?
            Well, I'm not sure that would be representative of the broader market. In fact, I'd expect it to be quite skewed since some X large % of people on here are following EJ's suggestion that silver will remain depressed for years to come (below $35 till Q4 2013?).

            I am quite confident not many will be buying more silver (if they have any left) compared to those who may be adding to their gold positions.
            What makes you "quite confident" about this? I agree, gold is the safer option of the two. I'm buying more gold for my mother, but no more silver for her. For me, I am buying more silver soon as well as gold, and possibly oil if we see it go into the mid $50's.

            Finally with silver at 50 dollars an ounce what should the margin be in your opinion?
            How do you figure an asset price is tied to margin? My understanding is that margin is raised due to excessive speculation (i.e. large trading volume increases resulting in higher or lower price). If we get to $50 over 3+ years, then that may be achieved without any significant volume spikes, and so no margin hikes may be justified for such a price growth trend.


            FYI, for anybody following this thread please note: I'm rasing a lot of questions here for one reason, I am an amateur at this... and more specifically a part time amateur (I have a real day job ~40hrs/week + lots of overtime to boot)and am just trying to understand what's going on to a degree that makes me more comfortable... precisely because I am not very clear (yet).
            Last edited by Adeptus; September 26, 2011, 05:45 PM.
            Warning: Network Engineer talking economics!

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            • Re: Catch a falling silver knife - Notes on EJ's April 29 silver sell call

              Thanks Bart :-)
              Warning: Network Engineer talking economics!

              Comment


              • Re: Catch a falling silver knife - Notes on EJ's April 29 silver sell call

                Originally posted by tastymannatees View Post
                Depends on the context you use - I would be more impressed If he had called the 20% drop in gold as I have 25% of assets in silver and 75% in gold. Was gold overbought(bubble) relative to the current economic environment? If so then he missed the gold call completely.

                http://www.zerohedge.com/news/shangh...lver-margin-20

                Multiple margin hikes this year on both gold and silver especially with a margin hike with silver well off the highs along with discussion of actually closing the silver market makes it seem less of a fundamental market call and more of a call on market manipulation.

                Perhaps the silver supply is not there? Ever increasing measures to control the price "to protect the investor" suggests to me the market is breaking down.
                Does this chart address your concern?

                Ed.

                Comment


                • Re: Catch a falling silver knife - Notes on EJ's April 29 silver sell call

                  Originally posted by Adeptus View Post
                  llanlad2 asked:

                  If you believe in the fundamentals are you buying more then?
                  Yes, possibly in a couple of days: after tonight's margin hike implementation + tomorrow's Options expiration
                  I will also buy more gold. My target was $1650 to buy the dip... that's where we are roughly at now (in fact much lower in Canadian dollars). But will also wait a day or two.

                  You said possibly and yet you are sure the price is cheap. I am just trying to point out that buyers are needed in large quantities to drive prices up to new highs. If believers like yourself are doubtful where are the buyers coming from? The laggards(general public buying at 5 dollars over spot on E-bay at the peak price) have been and now been taken to the cleaners. Where are the new buyers to drive prices higher?

                  Are new silver ETFs still being set up?
                  Good question. Not sure about in the West, but in Asia, they are on the verge of opening up Silver to be traded in their newly open exchange (Q3/Q4 2011).
                  This does not answer your ETF question. I don't know. Perhaps somebody else can chime in. I suspect the answer may be no or at least nothing significant, and that is a valid point, as that has been a significant method for the masses to invest in and speculate on PMs. There are however, many other methods to trade PMs: Physical, Options on existing ETFs, Bullion Vault & equivalents, Chinese gold saving accts, Unallocated/Allocated Bank Certificates, whatever else they come up with that I can't imagine.

                  Are the quantities of silver increasing in the silver funds now it's so cheap?
                  Are you referring to NAV? I haven't looked to be honest. My expectation is that NAV will have decreased, making it a good time to buy - as compared to a few weeks ago.

                  Sorry if I wasn't clear. I meant are people buying in at the new "low"prices and thus increasing the amount of silver?

                  Why don't you do a poll on itulip on who is buying?
                  Well, I'm not sure that would be representative of the broader market. In fact, I'd expect it to be quite skewed since some X large % of people on here are following EJ's suggestion that silver will remain depressed for years to come (below $35 till Q4 2013?).

                  It may be worth while. Many expressed disbelief it would crash so hard and said they would buy back in if it did. It would be interesting to see if they still would now it has crashed. Such a crash can really put people off buying and sorry to harp on but without buyers there is no quick return to new highs.

                  I am quite confident not many will be buying more silver (if they have any left) compared to those who may be adding to their gold positions.
                  What makes you "quite confident" about this? I agree, gold is the safer option of the two. I'm buying more gold for my mother, but no more silver for her. For me, I am buying more silver soon as well as gold, and possibly oil if we see it go into the mid $50's.

                  Why are you buying more gold for your mother but not silver?
                  The gold fundamentals haven't changed. The people who matter are hedging currency risk with gold not silver.


                  Finally with silver at 50 dollars an ounce what should the margin be in your opinion?
                  How do you figure an asset price is tied to margin? My understanding is that margin is raised due to excessive speculation (i.e. large trading volume increases resulting in higher or lower price). If we get to $50 over 3+ years, then that may be achieved without any significant volume spikes, and so no margin hikes may be justified for such a price growth trend.
                  True but silver was trading with a lot of volatilty prior to the April 20. Shouldn't they have changed the requirements to dampen speculation.

                  I guess time will tell. But if it does recover to new highs a la the 1970s I for one will look forward to shorting it as the crash following the peak in the late 70s was truly spectacular.

                  Comment


                  • Re: Catch a falling silver knife - Notes on EJ's April 29 silver sell call

                    Originally posted by bart View Post
                    The basic reason I made the chart is to show that there are very real facts behind margin changes (which ZH and others don't always cover), not to say that there aren't any "special moments" with margin changes.
                    I have read this sentence a few times and I am not sure I understand it. I too am asserting that there are "very real facts" behind margin changes. It sounds like you are agreeing with me that there are fundamental and rational reasons for margin increases and they relate to both price and volatility.

                    My main questions are:

                    Are the margins changes motivated primarily by manipulation on the behalf of insiders or government price suppression?

                    If yes to #1, is it likely that this will be the primary driver of prices in the long run or even in the intermediate term? And by primary driver, I mean that it is more important than the fundamentals we have discussed ad nauseum? For example, would it be the dominant variable in an ANOVA test of the variance in price over time?

                    If yes again, is this actionable by the average investor, such that one can reliably trade on it?


                    I have no idea if I disagree with you on silver or on margin, as I can't tell from your 10 month chart or your statement about "very real facts" what you think.

                    Maybe take off the tin foil hat to let the thoughts escape : )

                    Speaking to everyone and no one:

                    It seem to me a person who insists that silver is a great investment and also that there is powerful and efficacious price suppression going on should be SHORT silver! Why on earth would anyone be invested in something where the principle driver of value is price manipulation downward?

                    Or are the silver bulls who believe margin hikes are powerful saying that when the suppression is lifted (or fails?) that silver will inevitable rebound profitably? Seems like there are better risk/reward bets in the investment universe, though.
                    My educational website is linked below.

                    http://www.paleonu.com/

                    Comment


                    • Re: Catch a falling silver knife - Notes on EJ's April 29 silver sell call

                      Originally posted by Adeptus View Post
                      I could see these type of charts potentially translating into a significant trading methodology into the next year or two. ....

                      And if margin hikes are discovered to be the major catalyst pushing silver down, once we run out of margin hikes (i.e. margin = 100% = 1:1 silver price:contract), then why wouldn't price rocket up based on supply/demand or other fundamentals?
                      My apologies as it looks like you have answered my question, at least in your case, about what silver bulls who believe in the efficacy of price suppression via margin hikes believe will happen.

                      But are you serious?

                      You propose that the more susceptible silver is to manipulation, that is, the more margin hikes are able to suppress the OTHER FUNDAMENTALS, and the more efficacious the price suppression downward, , the higher will be the ultimate price in response to those easily overridden fundamentals?

                      What is the coiled spring that will drive silver to a 400% gain from here when there is no leverage at all allowed? How in the heck will silver become that bubblicious with a 100% margin requirement?

                      How can silver have fundamentals so weak that the price can be so effectively suppressed, yet simultaneously the fundamentals are so strong that it must rise hugely when not being suppressed?

                      Does that really make sense to you? Honestly, this sounds like massive confirmation bias from someone who owns silver.

                      Even concluding that margin hikes are a fundamental driver of silver prices (rather than the other way around, that silver volatility is the primary driver of margin hikes) is likely fallacious.
                      My educational website is linked below.

                      http://www.paleonu.com/

                      Comment


                      • Re: Catch a falling silver knife - Notes on EJ's April 29 silver sell call

                        Originally posted by rogermexico View Post
                        I have read this sentence a few times and I am not sure I understand it. I too am asserting that there are "very real facts" behind margin changes. It sounds like you are agreeing with me that there are fundamental and rational reasons for margin increases and they relate to both price and volatility.

                        Originally posted by bart

                        Apologies for the lack of clarity. My primary intention was to point out that margin changes have actual financial purposes (and a probable and varying element of price control attempts too). Margin is raised when it gets below 5-6%, and when either volatility or absolute price changes per day gets way higher than the actual margin amount.

                        It's those two elements that are seldom if ever covered by the extreme bull or manipulation crowd, plus they tend to ignore that margin changes by definition can't come before large up or down moves - that would involve prediction of the future.
                        My main questions are:

                        Are the margins changes motivated primarily by manipulation on the behalf of insiders or government price suppression?

                        Originally posted by bart

                        They're amongst the primary factors, but I don't believe they're always #1 or #2. That would give no credence to many other important things like fundamentals or fear or greed or profligate money printing or inflation or interest rates or TA, etc.
                        If yes to #1, is it likely that this will be the primary driver of prices in the long run or even in the intermediate term? And by primary driver, I mean that it is more important than the fundamentals we have discussed ad nauseum? For example, would it be the dominant variable in an ANOVA test of the variance in price over time?

                        If yes again, is this actionable by the average investor, such that one can reliably trade on it?

                        Originally posted by bart

                        I'm personally not a big fan of ANOVA and similar, especially when used alone. But I'm sure you could find folk who like using it and similar tools.

                        As far as "actionable by the average investor", there are certainly ways to reliably trade silver etc., but in my experience the most successful ones use their own system that's been built over the years. And one of EJ's targets is certainly the average investor, as shown by some damn good calls over the years.

                        Just in case, I'm not trying to avoid the questions or be oblique. Its just that there is no "holy grail" or anything that always works. In my case, my successes over the years has been more to do with behind-the-scenes elements or things off the beaten path like manipulation than any other single elements. I use any tool that helps.
                        I have no idea if I disagree with you on silver or on margin, as I can't tell from your 10 month chart or your statement about "very real facts" what you think.

                        Maybe take off the tin foil hat to let the thoughts escape : )

                        Originally posted by bart

                        *rimshots* :-)

                        I shot as straight as I know how. It's far from a simple subject, and feel free to ask on anything else unclear.
                        Speaking to everyone and no one:

                        It seem to me a person who insists that silver is a great investment and also that there is powerful and efficacious price suppression going on should be SHORT silver! Why on earth would anyone be invested in something where the principle driver of value is price manipulation downward?

                        Or are the silver bulls who believe margin hikes are powerful saying that when the suppression is lifted (or fails?) that silver will inevitable rebound profitably? Seems like there are better risk/reward bets in the investment universe, though.

                        If the suppression was truly efficacious, then silver wouldn't have gone from $5 to $25 or $50. Fundamentals always win eventually, regardless of suppression efforts.

                        Just to be clear, I've been both short and long silver since 2003. I'm not a perma-bull, and was short and then some from $48 down to $34, and other times too. I also believe that silver has far far more upside than downside in the next 3-7 years, and have been on public record since 2005 for a minimum high of over $125 (privately and since 1981, much higher... and I sold 97%+ of my silver about 3-4 days before the last peak in Jan 1980).

                        If you think there are places that have better risk/reward than silver, then go for it - seriously, and with no criticism intended. There are few commodities that are more volatile or more difficult to trade than silver.
                        Last edited by bart; September 26, 2011, 08:07 PM.
                        http://www.NowAndTheFuture.com

                        Comment


                        • Re: Catch a falling silver knife - Notes on EJ's April 29 silver sell call

                          Does this chart address your concern?
                          Not really as first drop in April was preceded by something like 5 or 7 margin hikes in span of about a week. Latest drop was preceded by a another margin hike and perhaps some game playing by the majors. My view of the above chart is that gold is down 20+ some % from it's high for the period and silver is off 34.5% from it's high for the period in discussion.

                          Pick another time slice - compare from 2008 to present and you see silver handily outperforms gold over a 3 year period even after the crash 25 number or say from Jan 1st. to April 28. For me the question is what is the real market price or potential price without manipulation, with short supply considerations my bet is higher when the game ends.

                          http://silverdoctors.blogspot.com/20...reporting.html
                          http://silverdoctors.blogspot.com/20...extricate.html

                          Now this all may coincidental to your April 29 call but a good argument is made here on the manipulated market with margin hikes combined with the general market take down we just experienced. Gold and silver moved to the downside in tandem so silver call was was spot on, 20% + drop in gold was missed not that it matters to me as I am long on both and quit my day trading ways in 2008.

                          I would like to see the supply/demand issue with silver addressed if you can find the time.
                          Last edited by tastymannatees; September 26, 2011, 09:11 PM.

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                          • Re: Catch a falling silver knife - Notes on EJ's April 29 silver sell call

                            This can't be good for prices.


                            http://www.wealthwire.com/news/metals/1922

                            Divers Discover 240 Tons of Silver in Sunken WWII Ship

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                            • Re: Catch a falling silver knife - Notes on EJ's April 29 silver sell call

                              Originally posted by bart View Post

                              If the suppression was truly efficacious, then silver wouldn't have gone from $5 to $25 or $50. Fundamentals always win eventually, regardless of suppression efforts.

                              Just to be clear, I've been both short and long silver since 2003. I'm not a perma-bull, and was short and then some from $48 down to $34, and other times too. I also believe that silver has far far more upside than downside in the next 3-7 years, and have been on public record since 2005 for a minimum high of over $125 (privately and since 1981, much higher... and I sold 97%+ of my silver about 3-4 days before the last peak in Jan 1980).

                              If you think there are places that have better risk/reward than silver, then go for it - seriously, and with no criticism intended. There are few commodities that are more volatile or more difficult to trade than silver.

                              Thanks Bart

                              I swing trade opportunistically at the margins. Mostly SPY, oil, UST, Copper, what have you via futures. It has never accounted for more than a few % a year of my returns, but that is enough for walking around money ; )

                              My system is deeply unsophisticated. With no sarcasm intended, it's buy low, sell high (or vice versa). I can't put it in writing any more than I could "show my work" doing story problems in third grade math. Right answer, but teacher not satisfied with "I did it in my head, the answer is obvious..."

                              I'll keep an eye on silver as a potential target but I am not anxious to give back the "house money" from the sale in April, so will be pretty conservative.

                              I appreciate your thoughts. They are more sophisticated and informed than my own, but otherwise concordant.
                              Last edited by rogermexico; September 26, 2011, 10:09 PM.
                              My educational website is linked below.

                              http://www.paleonu.com/

                              Comment


                              • Re: Catch a falling silver knife - Notes on EJ's April 29 silver sell call

                                Originally posted by tastymannatees View Post
                                Gold and silver moved to the downside in tandem so silver call was was spot on, 20% + drop in gold was missed not that it matters to me as I am long on both and quit my day trading ways in 2008.
                                Since the time of the April 29 call, gold is UP 7% and silver is DOWN 34%. Doesn't sound like tandem linkage to me. "In tandem' means contemporaneously linked and similar in magnitude and direction, right?

                                What really happened is that EJ "failed" to call the spike from 1500 to 1900 in gold, not that he failed to say gold would only be up 7% and not up 25%.

                                I think that only an accounting dating since the date of the call really makes any sense. Why does the bonus you got of being saved from a bloodbath in silver require that you also be alerted to a pop in gold to 1900 from 1500 ( that later corrected)? I don't see the connection.

                                Would it have benefited you more to be alerted to nothing, in order to preserve some sort of symmetry?
                                My educational website is linked below.

                                http://www.paleonu.com/

                                Comment

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