Tinka Resources Continues To Expand The “Zone”– Traders Though Continue To “Play”

This post is in response to the numerous emails I received over the last couple of days inquiring about Tinka’s latest news.  Today was an extremely heavier than normal day for emails as the stock sold off sharply the day after the company announced positive results.  (I’ve seen this before and as I’ve mentioned before, so long as nothing changes fundamentally, these opportunities should be used to increase positions, not contribute to the selling).

First, I will re-cap yesterday’s news and then provide some analysis for any of you that might be concerned over the drop in today’s share price.

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APPLE SHORT INITIATED

PURCHASED 30 CONTRACTS OF THE APRIL $500 PUTS @ 1.62 … COMMENTARY AND ANALYSIS TO FOLLOW.  SCALING IN, BOUGHT ANOTHER 20 @ 1.40 ..

Update: Scaled again and purchased another 20 @1.27 to complete position.

POSITION: 70 contracts at average price of 1.46 - now we wait.  Analysis will be up this evening.

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Silver Should Now Work Towards Below $30.00

I was studying the silver charts last night after reviewing a superb analysis by our friends over at Screwtape Files, and while that LONGER term perspective does appear to make sense, I am of the view that the shorter term to intermediate term horizon will see silver trade below $30.00 in short order and perhaps make its way down to test the prior low of $26.15.

Here’s the chart… commentary will follow:

Note that Silver still remains in a significant down-channel since making the May 2011 highs.  It has failed on two occasions to break that upper trend line and in the meantime has put in two rising wedge formations that broke down. 

More recently though, two bearish pennants (pennants in a down-trending market) were formed with the first one breaking down and then the second one formed.  (Circled on the chart above).  Silver needed to break above $34.50 to negate the downside break according to my analysis but also needed to remain above $32.50 to negate the bearish potential of this pattern.  As we saw in the overnight, and as I predicted last week, any bounce would be a contra-trend bounce and not the start of a new move in the price of silver.  With equities looking frothy, there is a move a foot back to the US dollar (for the time being) and this will impact precious metals for sure.  In any event, the break of $32.50 should now see the resumption in selling on the even bigger head and shoulder pattern now formed which should see silver’s next support coming in at $29.00.  If that doesn’t hold, we could see $25.00 in no time.   If the Elliot Wave count of this being a c wave down is proven correct, this move down could be swift.

Note: The pattern can negate with a massive upward thrust in silver that takes it beyond $34.50 but there appears to be a lack of any real upside momentum.  Any buying is quickly faced with selling.  These shorter term corrections must take place before any real upside momentum can build.

I am continuing to hold my SLV April 25 puts.  This information is not intended to be a buy or sell recommendation but is for instructional purposes only.

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ALLEGED JPMORGAN WHISTLEBLOWER LETTER GOING VIRAL – I Have Doubts

The other day a letter was posted to the Commodities Futures Trading Commission (CFTC) from an alleged whistleblower who claims to work for JP Morgan Chase.  Suffice to say that this letter has been the subject of much discussion around the silver and gold sites and it even has Dennis Gartman wondering out loud in his newsletter whether or not there is some merit to it and to the claims made repeatedly by GATA. 

The following is the full text of the letter from the CFTC website.   Whether it turns out to be true or not remains to be seen. Again, without concrete proof we have to take the letter for what it is but we must caution that there needs to be some more evidence offered up because anyone can write an anonymous letter claiming that something untoward took place, especially of they got killed on the other side of a trade.  My comments follow the letter and all bolded areas are my own emphasized points.  I urge readers not to rush to any smoking gun conclusions about this letter.

Dear CFTC Staff,
Hello, I am a current JPMorgan Chase employee. This is an open letter to all commissioners and regulators. I am emailing you today b/c I know of insider information that will be damning at best for JPMorgan Chase. I have decided to play the role of whistleblower b/c I no longer have faith and belief that what we are doing for society is bringing value to people. I am now under the opinion that we are actually putting hard working Americans unaware of what lays ahead at extreme market risk. This risk is unnecessary and will lead to wide-scale market collapse if not handled properly. With the release of Mr. Smith’s open letter to Goldman, I too would like to set the record straight for JPM as well. I have seen the disruptive behavior of superiors and no longer can say that I look up to employees at the ED/MD level here at JPM. Their smug exuberance and arrogance permeates the air just as pungently as rotting vegetables. They all know too well of the backdoor crony connections they share intimately with elected officials and with other institutions. It is apparent in everything they do, from the meager attempts to manipulate LIBOR, therefore controlling how almost all derivatives are priced to the inherit and fraudulent commodities manipulation. They too may have one day stood for something in the past in the client-employee relationship. Does anyone in today’s market really care about the protection of their client? From the ruthless and scandalous treatment of MF Global client asset funds to the excessive bonuses paid by companies with burgeoning liabilities. Yes, we at JPMorgan that are in the know are fearful of a cascading credit event being triggered in Greece as they have hidden derivatives in excess of $1 Trillion USD. We at JPMorgan own enough of these through counterparty risk and outright prop trading that our entire IB EDG space could be annihilated within a few short days. The last ten years has been market by inflexion point after inflexion point with the most notable coming in 2008 after the acquisition of Bear.

I wish to remain anonymous as of now as fear of termination mounts from what I am about to reveal. Robert Gottlieb is not my real name; however he is a trader that is involved in a lawsuit for manipulative trading while working with JPMorgan Chase. He was acquired during our Bear Stearns acquisition and is known to be the notorious person shorting in the silver future market from his trading space, along with Blythe Masters, his IB Global boss. However, with that said, we are manipulating the silver futures market and playing a smaller (but still massively manipulative) role in manipulating the gold futures market. We have a little over a 25% (give or take a percentage) position in the short market for silver futures and by your definition this denotes a larger position than for speculative purposes or for hedging and is beyond the line of manipulation.

On a side note, I do not work directly with accounts that would have been directly impacted by the MF Global fiasco but I have heard through other colleagues that we have involvement in the hiding of client assets from MF Global. This is another fraudulent effort on our part and constitutes theft. I urge you to forward that part of the investigation on to the respective authorities.

There is something else that you may find strange. During month-end December, we were all told by our managers that this was going to be a dismal year in terms of earnings and that we should not expect any bonuses or pay raises. Then come mid-late January it is made known that everyone received a pay raise and/or bonus, which is interesting b/c just a few weeks ago we were told that this was not likely and expected to be paid nothing in addition to base salary. January is right around the time we started increasing our short positions quite significantly again and this most recent crash in gold and silver during Bernanke's speech on February 29th is of notable importance, as we along with 4 other major institutions, orchestrated the violent $100 drop in Gold and subsequent drops in silver.

As regulators of the free people of this country, I ask you to uphold the most important job in the world right now. That job is judge and overseer of all that is justice in the most sensitive of commodity markets. There are many middle-income people that invest in the physical assets of silver, gold, as well as mining stocks that are being financially impacted in a negative way b/c of our unscrupulous shorts in the precious metals commodity sector. If you read the COT with intent you will find that commercials (even though we have no business being in the commercial sector, which should be reserved for companies that truly produce the metal) are net short by a long shot in not only silver, but gold.

It is rather surprising that what should be well known liabilities on our balance sheet have not erupted into wider scale scrutinization. I call all honest and courageous JPMorgan employees to step up and fight the cronyism and wide-scale manipulation by reporting the truth. We are only helping reality come to light therefore allowing a real valuation of our banking industry which will give investors a chance to properly adjust without being totally wiped out. I will be contacting a lawyer shortly about this matter, as I believe no other whistleblower at JPMorgan has come forward yet. Our deepest secrets lie within the hands of honest employees and can be revealed through honest regulators that are willing to take a look inside one of America's best kept secrets. Please do not allow this to turn into another Enron.
Kind Regards,
-The 1st Whistleblower of Many

The writer of this letter said that “this most recent crash in gold and silver during Bernanke's speech on February 29th is of notable importance, as we along with 4 other major institutions, orchestrated the violent $100 drop in Gold and subsequent drops in silver”.  Playing devil’s advocate here, would you not think that if this was a true whistleblower that not only would he come clean about his organization orchestrating the violent drop in gold/silver but would advise the CFTC of exactly how they took down the market?  If he head knowledge of the “manipulated” take-down, you would think the whistleblower would have provided the CFTC with evidence to hang the alleged perpetrators. 

Pardon me for being cynical at things like this but the subject mattter of this letter sounds very similar to the comments that have been floating around the internet over the last 3-4 years regarding Silver’s manipulation and for all we know the letter could be real or could very well be, as I mentioned earlier, a fictitious letter by a permabull caught up in the entire JPMorgan conspiracy theory.  It could be a regular investors caught up in the manipulation soap opera that took a beating in his own portfolio (Note the comments: “There are many middle-income people that invest in the physical assets of silver, gold, as well as mining stocks that are being financially impacted in a negative way b/c of our unscrupulous shorts in the precious metals commodity sector”) This is why I want evidence. 

If I went to the police about a crime on an anonymous basis I would not say that my gang of thieves robbed a gold depository and I wanted to come clean.  I would tell the police just how we did it so that they have something to actually build a case on.  That’s the only problem I have with that letter and the only difficulty I have in accepting the genuineness of it.  There is no motive given for the take down … believe me, if was a move simply to generate money for JP Morgan then whose to say that they could not have manipulated the price upwards?  Silver and gold both had significant momentum and it would not have taken much to get the prices to sky-rocket.  They chose to go short according to this complaint.

Again, without dismissing the letter completely, the section of my letter noted above got my guard up. The fact that the alleged whistle-blower claimed that JPM and other institutions orchestrated the price drop without providing information as to how leaves me scratching my head.

REMEMBER… the CFTC Publishes all letters of alleged manipulation like the one published today from Stepheno Gambino of La Cosa Nostra (mafia):

From: Stepheno Gambino
Organization(s):
Cosa Nostra

Comment No: 57048
Date: 3/16/2012

Comment Text:

it has come to out out attention that M Blomski has been manipulating the cake market. On recent occasions he has been seen to take down the whole fresh cream cake section of the local coffee shop.
We are concerned if he carries on this behavior there will be a 100% rise in cake prices at coffee shops across the world.
Blomski manages to consumer cakes at a rate of 1 per second. Why is he not fat? something needs to be done. Cakes should be for everyone.

Until I see evidence of the actual manipulation and how it was orchestrated (which again I emphasize would have been in a true whistleblower letter) then I have to dismiss the letter as sour grapes.

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Downside Protection Critical, No Matter How Bullish You Are (Trading Tip)

I’m pleased to say that I’ve had an absolute blast the last two days hanging out with my wife and kids during this very mild spring break here in the greater Toronto area.  Believe me, nothing calms the mind or should better than some time with those that are closest to you.  We get so busy with our lifestyles, work and commitments that we often forget that the most important commitments are the ones between the walls of your home. 

I just got in from partaking in my favourite hobby next to playing the guitar, photography.  We had beautiful morning light to work with and while my wife was busy window shopping, my boys and I were taking some urban and street photography. 

Having returned home for lunch and a break before we go out later this afternoon I figured it would be a good time to go over a couple of things and to advise you of a new position I opened using orders placed yesterday.

No matter how bullish you are on the long term prospects for your gold and silver holdings, I cannot emphasize how critical it is, even in a rising market, to have some form of put protection against those holdings.  If the last 10 months of this silver market haven’t taught you the value of hedging your bets then I quite frankly don’t know what will.  

Position Opened

I was of the view yesterday that Silver was a critical phase and that if it broke support at the 200 day moving average it could tumble quite quickly. As a result I went deep out of the money and managed to get filled on orders yesterday and this morning.  Call me crazy I don’t care, but I went long 600 contracts of the April $25.00 puts on the SLV at an average entry price of .07 cents. That’s a $5,000 bet (after commission) on silver’s continued downside move.  It’s peanuts compared to the hedge against the long position I have with my boxes of physical silver still marked “$8.00 – $10.00”.  (I package my silver in boxes according to the price I paid for it for easy inventory and math).  Most of of my physical silver and gold was sold back in the fall as I pointed out in my posts at the time but I still own a considerable amount of the cheaper stuff from years ago when I got into collecting Maples.

The last 10 months in the metals market should have taught you by now that you must not take anything for granted in this market.  If you own a lot of physical then it would be wise now and then, when the charts are screaming at you to prepare for lower prices to hedge some of those bets you made with your physical purchases.  If he market screams lower you made some money and you can take those profits and buy more metal if you wish or simply use that money to pay some bills. However, any failure to protect oneself is only asking for trouble. 

The amount of money that investors have lost if they bought metals in the $40.00 or higher range is astounding.  Some of those losses could have been minimized using put protection.  Remember, when silver broke $40.00 it became harder to find at bullion shops implying the public, as is always the case, was late to the party. 

In the many years of investing in metals I find no other time other than the current where there is real risk to a continuation of falling prices. I’ve been writing about it for months now in the hopes that people would see that the party in the precious metals was coming to an end, or just perhaps taking a much deserved intermission break.  Sure it means risking the wrath of many staunch longs but at the end of the day, ensuring one is protected for these downside moves is critical.

The tips provided herein are not an recommendation to buy or sell and note that options are extremely volatile.  I trade for quick in and outs and if we get a massive snap back rally I will close the position.

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Post Script: Gold & Silver

I have finished studying my charts. The 200 day moving average should form formidable support for both gold and silver.

If I'm right, we could see a sharp reversal/bounce back to the 1710-1720 range for gold and $34.50-$35 range for silver. I do believe the longer trend is down. If the 200 day fails, both metals headed much lower.

And by the way, Ron Paul is just getting smoked. His associations with the "Alex Jones'" of the world certainly didn't help.

Going to get some rest and enjoy another busy day with my family tomorrow. Happy trading. I am currently flat but long Tinka and Argentium looking to accumulate more of the latter and buying dips to the former.

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Tinka Continues To Provide Investors With Reasons To “Stay Long”

First mentioned on The Fundamental View and then picked up by other various outlets, I’m proud to report that today’s news from Tinka Resources gives investors many reasons to stay long and to accumulate more stock (if they so wish) during this downturn.  Long term prospects for the company as a whole remain very strong bearing in mind that initial resource estimates and valuations were made using $10.00 silver.

Today’s news further confirms what I’ve been saying for the better part of two years … Tinka remains my favourite silver junior.

Tinka Drills 92.7 m of 92 g/t Silver, Including 10 m of 299 g/t Silver At Northern Extension Of Zone 1, Colquipucro Project, Peru

VANCOUVER, March 13, 2012 /CNW/ - Tinka Resources Limited (the "Company"), (TSXV - TK; Frankfurt - TLD; Pinksheets -TKRFF), announces the results from a further drill hole testing the northern extension of Zone 1 on the Company's wholly-owned Colquipucro silver-zinc-lead property, west-central Peru. The hole was drilled on the westernmost line of the known resource.

Mr Carter said: "We are extremely pleased with these results as it is the first hole on the westernmost line of the northern extension and substantially increases the area of mineralization to the north of the resource. Drilling is continuing at Zone 1 testing the northern extension."

The hole intercepted oxidized, banded, "zebra-stripe" sandstone and progressed into the underlying sedimentary breccia, greywacke, siltstone and fluidized sulphide unit. The hole intercepted the high grade veins/faults/gossan zones within the sandstone roughly perpendicular to the dip of the hole, while the intervening fracture-controlled mineralization in the sandstone was intercepted at about 45 degrees to the inclination of the drill hole, on average. The orientation of the mineralization within the underlying sedimentary breccia is not clear, however, narrow zones of intense oxidation suggest that the mineralized structures in the overlying sandstone may penetrate the underlying unit.

Significant mineralized intervals, using a 15 g/t Ag cut-off, are shown below:

Hole #	Easting (m)	Northing (m)	Elevation (m)	Azimuth (deg)	Dip (deg)	From (m)	To (m)	Interval (m)	Ag (g/t)
CDD21	332593	8847975	4369	180	-60	14	108	94*	92.4
including						42	52	10	299.4
						114	116	2	108
						122	124	2	77

* includes a 1.3 m interval with no recovery for which a zero (0) value is assigned.

All diamond drilling has been performed using HQ and NQ diameter drill rods. All core has been logged and split on site under the supervision of Tinka geologists with sampling done on two metre intervals. All the samples have been transported by Company staff to SGS Laboratories in Lima, Peru for ICP analyses using multi-acid digestion. Analytical standards and blanks were routinely introduced in the sample suites sent to the laboratory, and samples that exceeded their respective threshold levels for Ag, Zn and Pb were re-assayed by specific atomic absorption techniques.

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Federal Reserve Makes No Mention Of Easing: Metals Remain Bearish

As has been the them of late since last October on my blog, I remain bearish on both gold and silver given that anyone expecting the Federal Reserve to further print money via quantitative easing was become less of a possibility.  Silver has remained in a falling trend since the highs of 2011 and Gold has also remained in a falling channel since the double top formation of this past autumn.  I suggested in many pieces since then that investors have to be very mindful of the fact that both metals may have seen a top for quite some time.  Of course, I will continue to take heat for that stance and will probably continue to generate some hate mail or negative comments pointing out that historical charts seem similar to the current ones and that silver and gold are forming explosive corrections that could very well vault the metals to all-time highs.  I doubt that stance very much.

On February 29th I wrote that nobody really knows what lies ahead and pointed out the descending price channel (trend).  

On February 3rd I wrote about the report on ZeroHedge discussing Kyle Bass’s recommendation as to why investors should not sell gold.

One of more contreveversial pieces was on December 22, 2011 wherein I urged investors to take a look at the “other side of the coin” when it came to the metals.  One of the hypotheses I raised in that piece was laid out in my question to readers:

The question that I have for readers to analyse and keep in mind is a simple one. Could the final pushes that saw gold rise $400.00 in 4 months to reach the $1,923.70 high and the move in silver’s price from the 3rd quarter of 2010 where it moved over 100% have been the speculative blow-off tops in both metals signalling the end of their respective bull markets which, as we noted in the first two charts above, essentially mirrored each other?

Boy did the aforementioned post garnet a ton of hate mail and replies. Note, the don’t phase me … I continue to ignore the noise and continue to trade the obvious data presented to me.  I also added in that post:

However, if we subscribe to the notion that bull markets usually end with parabolic blow-offs, then it would serve investors wise to consider the $400 move from June to August of this year in gold, and the move from $26.00 to $49.82 between late February and early May earlier this year as potential blow-off tops. In hindsight, given the price performances of both metals over the course of the prior 10 years, could those moves have signalled the end?

If I may offer some more advice; Don’t only get your information from the likes of Sinclair, King News, GATA or Schiff. This is not a slam on those outlets or fine people that provide commentary or them. They are all very smart people. However, as you very well know, they have always been precious metals bulls so you pretty much know what to expect before you even click on their links. I have often quoted their material here…it is good material. However, proper research involves looking at the other side of the argument and I want to ensure that readers do some homework and add some other perspectives to their daily readings. We all know that the United States has gone through two massive QE phases. Yet, wasn’t that supposed to be a catalyst for the metals … the charts will tell you otherwise. This is what I want readers to turn their attention to. Just like that Canadian Silver Maple or American Eagle you may own, the gold and silver argument also has two sides to it. Become familiar with the other side. Don’t dismiss the bearish arguments. Only by properly analyzing both scenarios can you make an educated decision on your investment strategy.

Finally on December 13, 2011 I urged readers to speculate on whether the gold bull market has indeed ended. That piece also caused quite a stir but I maintain that my commentary conveyed in that piece is unchanged.

Barring any geopolitical event that creates a need to rush to safety, it does not appear that the United States is in any rush to continue easing.  As such, I urge readers to strongly consider the fact that the precious metals might be in a protracted cooling off period and that while we may see rallies, in my view they are simply contra trend rallies within a falling market.

Just yesterday, perma bull James Turk (who buy the way has something to sell you … bullion) told King World News:

“I wonder where the silver is coming from to satisfy the demand at these levels. People have to understand there is a big difference between the vast amount of paper trading in these silver markets and the relatively small amount (by comparison) of physical silver trading hands. While last week’s shakeout may have taken out a lot of the paper longs, it didn’t impact the strong hands owning and accumulating physical silver.

What I expect here, Eric, is a resumption of the short-term uptrend by the end of the week. Silver will be testing overhead resistance between $34 and $35. We have been watching the chart of silver (below) develop for several months. You can clearly see the attempted breakout last week and the subsequent move back down to test support.

But the important point is a breakout above $35 is imminent. I still think it can happen this month. Hopefully this will be the breakout that matters. By that I mean the one that will send silver to $68 to $70 within two to three months from the date of the breakout.

Turk is again trying to convey the message that he wonders where the silver is coming from to satisfy the demand at these levels.  Well Mr. Turk, it may be time to acknowledge the fact that there IS plenty of silver available to satisfy demand at these levels. Either demand is weak or supply is ample. Either way, Instead of warning investors that silver may indeed be entering a downward slope, he continues to maintain that an important breakout above $35.00 is imminent, as early as this month, which in his mind will take silver to $68-$70 within two to three months of the breakout.  Again, I ask questions when I see these figures and I always scrutinize.  Is he pulling these numbers out of a hat because surely the patterns, momentum and absence of further monetary easing are surely factors that will provide headwinds to this prognostication, unlike back in 2011 when all those factors served as the wind in silver’s sail.

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Silver Put Position Closed

Spring is in the air, the children are on spring break and even though we are staying in the city, I have promised to devote at least 3 days away from the office to spend with them for some much needed family time.  As a result, given that the March 31 puts on the SLV expire later this week and given that we are playing with the house’s money (if you managed to trade them like I did) I don’t want to be caught unavailable to make a move over the next few days as my time to observe the markets will be greatly limited.  I used today’s weakness to exit the remainder of my position.

The last of the position (300 remaining contracts) was sold today at .14 cents a contract.  Total return on investment before commissions on this trade was 44%. 

I will be unavailable to watch the markets as closely as I would like to and given the time factor I will not be initiating any more trades until most probably, next week.  Of course, I will try to share the ideas that I feel have the best chance at some decent returns only, not exposing my entire portfolio.  Watch the FED’s statements tomorrow .. I’ll be watching my children … as they definitely deserve more of my attention than the markets.

I will try to keep the blog updated with the most important news when I find time over the next few days but you might find things a bit quieter than normal.

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Greek Opposition Fires Warning Shot, Threatens Re-igniting The Crisis

It’s only been two days since the Greeks technically defaulted (although to keep the positive mood we will play along with the Greek Finance Ministry and other Eurozone finance ministers who prefer to use the word “restructured”, but the official Greek opposition has criticized the deal sending signals that a general election may be closer to a reality in Greece.

As I write this 'I’m compelled to go off track for a moment and state for the record that I despise those involved using the word “re-structured” when it comes to Greek debt because it is such a lie and misrepresentation of what really took place, which was a clear debt default.  Back on track…

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Silver: A Look Ahead To The Coming Week

Silver has surely had a wacky two weeks.  In fact, if you count the rally from the December 2012 lows, it has had a wacky 2 months.  In this post I attempt to provide you with some key areas to watch for heading into this all important week for the metals.  Remember, the FOMC meets Tuesday.  We will see what they have to say.  Anything they say regarding potential easing will move the metals, up or down depending on their tone.  I’m personally still leaning to the latter.

The Line in the sand for silver appears to be the 200 day moving average indicated by the red line moving across the chart. We’ve had 3 stabs at it that all failed until it shot over it last week only to be flatly rejected.

Interestingly the action in silver has formed a potential bearish head and shoulders pattern and again, we are close in the right shoulder to hitting that 200 day moving average that stands at $34.90 SPOT. Elliot Wave analysis showed a stopping point for the silver rally off the sell-off lows between $34.00 and $34.50 and it reached that potential stopping range last Friday before reversing and really failing to advance higher.

This is critical week. The FOMC meets Thursday and any word or hint about QE3 will send the dollar down and the metals up. However, I am of the view that the US dollar has started a rally that should take it to 84 on the dollar index which spells bad news for precious metals. I think that volume always precedes price which is why we need to still respect the high down-volume day highlighted on the chart.  In my current opinion, the 200 moving day average is going to be the battle ground but, as early as Tuesday we could get a major move down in silver if the FOMC says that they will not be printing money.

Remember the clues are all around us if you look for them. On February 23 I advised you that Federal Reserve Dallas FED president Fisher said in plain English that any thoughts about QE3 were “wishful thinking” and a “Wall Street Fantasy”. Bernanke pretty much confirmed those words on the day silver and gold took major hits by offering no comments about QE3. It is unlikely he will mention it this Tuesday either given the improving state of the US economy.  Remember, this is an election year… whether we believe the data coming out of the US is real, Obama needs to head into the election showing that inflation is in check. Don’t expect any QE3 announcement in an election year.

The only positions I have on are 300 free contracts of the March $31.00 SLV puts. You will recall we opened those on the rally following the crash day and they doubled in 1 trading day. We used the 100% gain to take our capital off the table and are now riding free options.

I do think that silver breaks lower this week. The contra trend rally has in my view ended and we should see silver break to the downside again this week… that is, unless the 200 day is breached with conviction and if spot can get past $37.58 taking the H&S out of play. The neck line is $32.50 and if it is breached, we will see sub $30.00 silver in no time at all.

If we take a look at the 1 year chart in silver you can see that silver still remains in a downtrend.

It has tried to break above the top line of he down sloping channel but has failed to do so, making lower highs and lower lows in the process.

Until the 200 day MA is taken out with conviction, we may see the bearish head and shoulder pattern that is taking shape, identified on the chart 1.  I placed question marks in the first chart because the shoulder, while clear, is still taking shape.  You can chose to place your positions now speculating that the pattern will formulate or you can wait for a clear breach of the neckline only making a move on confirmation of the break.

There you have it.  Two scenarios are still in play and I do believe they hinge on what the FOMC says this Tuesday.  The pattern sure looks like it has formed itself with that meeting in mind because by Tuesday we should see a break down or a bullish break above the 200 day MA.  The gaps put in place have now been filled so we need not worry about those.  In particular, I am talking about the Monday gap that opened silver below the 200 day MA and did not get filled intraday. 

As for the U.S. dollar, I see a potential “bullish” inverse head and shoulder shaping up that could indicate a move up in the dollar is shaping up.  We will need confirmation.  However the RSI is turning up and the MACD still shows upside momentum.

Forget what people are telling you about the smashes and the perceived manipulation.  Play the actual news (not the spin on it) an use the charts as a tool (guidance).  Nothing is ever certain. This goes for technical or fundamental analysis but with a look at everything, including the real news, not the interpretation of it, you can try to stay on the right side of the markets more often than not.

Keep your eyes and ears open for hints about what central banks say regarding the potential for more easing but bear in mind as well that this IS an election year and the government must confirm that the economy is improving in order to keep Obama’s second term in clear site.  A strong dollar, low inflation and the portrayal that things are getting better is what the administration needs (even if it is only an illusion..most Americans aren’t bright enough to see the big picture).  For the time being, those signals alone may keep silver in a tight range (as all other commodities).

Regardless of your views on fiat currency, remember, in a world of “horrible” fiat options, the U.S. dollar still remains the best of a bad lot.  It can be used anywhere in the world with little effort.  Until a significant break above the down-sloping channel for silver, it may be difficult to make a strong conviction buy on the metal.  Do not for one moment ignore the relevance of the major sell volume that occurred when Bernanke last spoke.  The rally off that crash has been less than inspiring so this week will give us clearer direction on which way silver in particular is going to move.  Watch the aforementioned indicators for additional insight.

This information is not intended to be a recommendation to buy or sell and is for information purposes only. Disclosure: Short via March $31.00 puts on the SLV.

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Moody’s Rules Greece Has Defaulted

I had previously indicated that the rating agencies should start to come out with their official ratings following the credit default swaps triggering following the decision by Greece to utilize their CACs to get enough subscription participation to get their bailout.  (Reuters)

Moody's Investors Service considers Greece to have defaulted per its default definitions. The announcement comes despite Athens reaching a deal with private creditors for a bond exchange that will shave €107 billion from its €350 billion debt.

­The agency pointed out that even though 85.8 per cent of the holders of Greek-law bonds had signed to the deal, the exercise of collective action clauses that Athens is applying to its bonds will force the remaining bondholders to participate.

Eventually, the overall cost to bondholders, based on the present net value of the debt, will be at least 70 per cent of the investment, Moody's explained.

"According to Moody's definitions, this exchange represents a 'distressed exchange,' and therefore a debt default," the US rating firm said. "This is because (i) the exchange amounts to a diminished financial obligation relative to the original obligation, and (ii) the exchange has the effect of allowing Greece to avoid payment default in the future."

Ahead of the debt deal, Moody's had already slashed Greece's credit grade to its lowest level, "C," and so there was no impact on the rating.

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The Global Government Conspiracy

A reader sent this to me in an email.  I hereby share it with you …

The “internationalist” conspiracy

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OFFICIAL: ISDA Confirms a Credit Event Has Occurred & Triggers CDSs

News is just hitting the wires now. The decision was unanimous. .  From Business Insider:

The International Swaps and Derivatives Association determined today that Greece's bond swap has triggered a credit event. That will lead to payouts of credit default swaps—essentially, securities contracts on holdings of Greek bonds—that investors purchased to hedge against the risk of holding Greek sovereign debt.

Provocation of a credit event has been a contentious topic in Europe during the last few months. On one hand, sovereign CDS contracts are the only securities that allow investors to hedge and speculate directly against governments. Because the market is so opaque and because many financial institutions are on both sides of this trade, credit default swaps have compounded concerns about the contagion that would occur as a result of a financial shock.

While the market for Greek CDS is relatively small, some traders and officials had been fearful that a credit event was still not fully priced in, and could have some negative consequences.

Now we wait for market reaction.

FULL STATMENT:

EMEA DC Statement
March 9, 2012

In light of today’s EMEA Determinations Committee (the EMEA DC) unanimous decision in respect of the potential Credit Event question relating to The Hellenic Republic (DC Issue 2012030901), the EMEA DC  has agreed to publish the following statement:

The EMEA DC resolved that a Restructuring Credit Event has occurred under Section 4.7 of the ISDA 2003 Credit Derivatives Definitions (as amended by the July 2009 Supplement) (the 2003 Definitions) following the exercise by The Hellenic Republic of collective action clauses to amend the terms of Greek law governed bonds issued by The Hellenic Republic (the Affected Bonds) such that the right of all holders of the Affected Bonds to receive payments has been reduced.

The EMEA DC has resolved to hold an auction with respect to the settlement of standard credit default swaps for which The Hellenic Republic is the reference entity. To maximise the range of obligations that market participants may deliver in settlement of any such credit default swaps, the EMEA DC has agreed to run an expedited auction process such that the auction itself will take place on March 19, 2012. In light of this expedited auction process, market participants should submit any obligations that they would like to include on the list of deliverable obligations to ISDA as soon as possible.

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Attacks in Syria Continue Resulting In More Civilian Deaths

While we all concentrate on the Greek financial crisis and the complete lunacy of the reverse loan shark tactics employed by Greece, we should not lose sight of the fact that attacks in Syria continue with reports today indicating that 31 people have been killed today alone including 10 demonstrators hit by mortar rounds in Homs which has been one of the major hot zones in this conflict between opposition forces intent on ending President Bashar Assad's dictatorship and government forces attacking the opposition in an effort to quell the unrest.

The Baba Amr district was besieged and shelled for a month before rebels fled and government troops moved in.

"Thirty tanks entered my neighborhood at 7 a.m. this morning and they are using their cannons to fire on houses," said Karam Abu Rabea, a resident of the Karm al-Zeitoun district in Homs.

"There is gunfire and they are using rocket-propelled grenades," he said, adding that the streets had emptied in his district and people were taking refuge in their homes.

Source

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The Greek Debt Info Graphic

I love pictures don’t you? Especially when they tell most of the story.  The following info graphic was put together by the Telegraph and illustrates the Greek bond swap.  The graphic was made by data compiled by openeurope.org.  The info graphics on the Telegraph site are interactive if you do chose to zone in on any particular section by the way.

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