Silver price correction?

[John_doe]

With the supply squeeze behind us, a lot are expecting a large price drop on silver, just wondering what your thoughts were. Also where do you think the market will find equillibrium?


I think we could possibly see 20 dollar silver again, although it will be in the upper 20's. Just my 2 cents.

[68Camaro]

Maybe, but I'm not seeing it. I don't see the supply side issues as anywhere near resolved, and while we could still see short-term trading dips below 30, and there is no telling what unforeseen world events could do, I think we are more or less at the new base and have been for going on 6 weeks now. I think it is back up from here, with the question really being when, not if. Just my 2 cents as well. You get what you paid for...

[neilgin1]

is the supply squeeze behind us?...as of this writing, 21 Jun, i'm looking at over 37,000 contracts still open in July. Which is not abnormal, but what happens next time?...same as in March? i never seen such brazen tomchicanery pulled in my life, albeit, said trading life 1981 till now.

that wasnt a "squeeze"...that was guys saying we want the silver, guys who had bought in the low 20's at the breakout, and were playing a strong hand, probably matched up against some pencil necked quant lodged at some mega bank, playing with OPM.

but see, here's the thing, the pencil necked quant has mighty big guns behind him, because the current Chief of Staff to the President of the US, guess where his last place of employment was?....lil banking concern called JP Morgan Chase. Now i aint saying the CoS is behind this, but when i see an aprocraphyl note, circulating the net, telling guys that are standing for March 11 silver delivery, that they have two choices, "either accept $50 FRN per ounce and go away, or continue to stand for physical delivery, and we'll just default, declare you an unsecured creditor, and you will be last to line to see ANYTHING, after three million lawyer hours billed, after three million headaches, you'll wind up with nothing....so take your pick".

that was the essence of that letter.....nice, huh? i remember as a mere lad, being awed on the trading floor, by seeing the big swinging dicks wearing this logo on their trading jackets, "Free Markets for Free Men"....oh, and i believed that crap, and i saw MANY a real squeeze. Used to be a real wild volatile market called "pork bellies" , back in the day. This was in the early 80's, and oh, how the Japanese LOVED to trade this mkt, and i watched as these walking talking stacks of [shucks], would just RAPE the Japs, every which way but loose. they pulled stuff like you wouldnt believe.

you know how traders will take a position, say based on techinical analysis, chart points?...so lets say these Japanese, and other unfortunate hapless sods, stupid enough to go naked long or short in the Bellies, would buy the market......ok?...coz the charts told them to, then they'd put in a stop loss order based upon. where the chart would tell them, going long is no good. But everybody's looking at the same damn charts, this was in the days before computer generated charts, they actually had guys, (or girls, big traders would employ their side action muffins, to do their charts during the day, y'know give her something to do, rather than sitting around the condo, his wife dont know about, painting her nails, or gossiping. and even some of these "chart analysts" would be "leasing" a seat, so she could get on the other side of some real hinky dink "gimme trades")

point being, everybodies looking at the same chart, same stop loss points, and guess what?...orders start to pile up in the pit with the order fillers, brokers that just fill paper, and these brokers were usually part of a group, meaning some BIG monster trader had the "deck", that is all the commission houses buy or sell orders went to this group, in every pit.

meanwhile, lets go back to the belly pit, and say the market is trading at 60.20. its kind of quiet, trading between 60.00 to 60.40, and the sell stops begin to pile up, down around 59.00, 58.90, 58.80...HUNDREDS of "cars", that's what we called a contract. Now do you think this fill broker would keep his mouth shut? After all, he does have a "responsibility" to hold and execute orders for the customers, and the brokerage house that entrust him with their business....right?......wrong.

the jag-off's responsibility is to be stealing with BOTH hands, so he gets to whispering to his master, and his masters cohorts, "locals", guys who trade for their own accounts, get the word out that stops are piling up down at 59.00, 120 points below the market, and you got to know what happens next.

some walking piece of human waste, gets to the top stair of pit, raises both his mitts,and shrieks, and i mean high pitched, "HUNNERD AT EVEN!!!! (offering 100 contracts for sale at 60.00).....absolute quiet....then; "HUNNERD AT NINTY!!!! (offering 100 at 59.90)...somebody squeaks out, "70 on 5" (bidding 59.70 on 5 contracts)...the human turdlet waves both his hands at him, "SOLD!!! HUNNERD AT SEVENTY!!(offering for sale another 100 at 59.70) then you hear two other [shucks] stacks, screaming, "HUNNERD AT A HALF" (59.50) ...."HUNNERD AT A QUARTER (59.25)...and then the fun starts, because some off the floor commission broker trading OPM, thought he was real clever placing his customer's sell stop orders at 59.20, and as you might know, once a stop loss orders price gets hit, it becomes a market order, which means, you fill it at WHAT YOU GET....but the "trouble" here is, there might be 500 to a 1000 contracts all on sell stops between 59.10 and 58.90.....these 1000 contracts become market orders. Thats when you saw the famous photos of guys in a pushing shoving screaming scrum match in middle of the pit.

let me just stop for a second, to help complete this fictious, non-fictious scenario. the day before, lets say Bellies closed at 60.10, in those days, limit was 2.00, which would make limit down in this scenario at 58.10...guess where most of these sell stop orders get filled?

thats right...58.10, and we know who got on the other side of the trade, all guys that been tipped, but wait the fun is just beginning.

now these guys are half loaded up with a low risk long position, cant go no lower than 58.10, that day, and they have a raft of Bellies bought at 58.10. Now you would think that the off the floor investors had enough, right?

wrong, because what their "charts" now show them, is that the markets done a "breakout to the downside".

(i'm laughing as i write, because it all too painfully true....everybody here has probably seen "Wall Street", with Mike Douglas as Gordon Gecko. member that scene in the gym's locker room, right after Bud Fox, played by Charlie Sheen gets hammered in his SECOND trade for Gordon, the first being where he gives Gordon inside info on the airlines his father works for. Gordon says, "you wonder why fund managers cant beat the S+P500?...coz they're sheep and sheep get slaughtered....bet ya stayed up all night analyzing that dogshit stock you gave me, either you're inside or your outside...the most valuable commodity i know of is information. i bet on sure things sport"..etc....that movie distills every ethos within the trading community...thats why every guy i knew, had every line memorized, they all thought of themselves as Gecko, and its the Gecko's who have put us in the global financial maelstrom we are today)

so back to our limit down Belly mkt at 58.10, as i said, you'd think these off floor traders would have had enough, picked up their marbles and gone home...oh no, the charts tell them....downside breakout......so the sell orders coming cascading into the limit down market, you hear brokers chanting, "200 at the limit"....100 at the limit"...now there's maybe 700 cars offered at the limit, and then really quiet, you hear , "buy 'em".."buy em", and within at most two minutes, the pool of 700 cars is quietly bought, then that shriek:

"QUARTER ON A HUNNERD!!!!" (offering to buy a 100 contracts at 58.25), and the pit just goes wild, as the price begins to climb.

now remember that these off the floor technicians had viewed 59.00 as "support"...well the "rule" of tech analysis, is that support once violated turns into resistance, so to make their doom really dread, they've placed orders establishing NEW short positions at 59.00, and in the blink of an eye, all these offers are snapped up...the market races.......59.50..........60.00.......60.75....61.50......up on the massive board, which was controlled by pneumatic air blowers spinining the individual numbers....."61.95"...the word "FAST" flashes on the board....until you see 62.10, which is now limit up locked.

these hapless off the floor investors are either chewing their nails to the quick, gobbling tranquilizers, or just outright having heart attacks, coz they're stuck short. Orders begin to fly into the pit to buy hundreds of car at the market, the number increases and increases, maybe 1,000 contracts to buy at the market.

the boys stand on the upper step, looking like lizards, or some form of raptor, self satisfied, and before the bell rings, quietly sell most of their 58.10 longs at the close for 62.10....each contract's profit $1600, and these guys have thousands of cars on....been a pretty good day for the guys in the pit.

guess how many Pork Belly contracts trade today?.....zero.

you might think i'm just sour grapes, coz i never was "one of the boys", never took a dime off that floor i didnt earn fair and square, coz i got lucky, blessed, i was hired as a lad, by a man, VERY wealthy, who was absolutely a square dealer, our firm was primarily a VERY large meat wholesaler, 2nd generation, as HIS father, started in 1915 with a pushcart and became THE egg dealer for the country, and he and his son expanded into pork products. After a spell, he entrusted me to run his trading desk, which i did, like a military operation, you did NOT [fluff] around MY desk. We also had another smaller meat dealer, which had several traders, who besides dealing in wholesale pork, also traded for clients, who were also involved in pork, and these traders were NOT sheep, they were primarily spread traders, which meant that they would, say buy Bellies and short sell Hogs against them, It was thru them, i learned to spread. These guys, who were like older brothers to me, saw that i wasnt a shitstack thief, and ran that desk like a clock, and began to entrust me with some pretty large dealings, and i learned quick, how to spread. I started trading the Hog/Belly spread, branched out into spreading Corn, Wheat, and eventually Crude Oil.

made good money, sometimes i'd get hammered, but by and large, did well, made friends, had a good reputation. in 1999, after a lot LOT of looking at the Oil market, trading between 16 to $19 a barrel i determined it was going first to $70 a barrel and then $120 a barrel. I had come into the knowledge of Hubberts Peak...Peak Oil, and ascertained that it is a reality. Peak Oil is real, and at $17 a barrel, crude oil was undervalued. "70?....120?!?...your nuts, what you been sniffing?"

i just laughed, and no offense brother, but this thing is just getting started in the Silver........a retracement down to the 20's?

we should be so lucky.....no, first real stop is $100, on its way to $400 an ounce.

so these lil turds can play their games, the exchange can do its thing, i've seen that before, but Silver is headed WAY HIGHER.

[Kurr]

Niel, brother, I'll read your book if you write it!

[shinnosuke]

Agree. Fascinating stuff. I wish I could have been looking over Neil's shoulder real-time.

[PennyPauper]

Niel, brother, I'll read your book if you write it!

Put me down for a few copy's too.

[68Camaro]

is the supply squeeze behind us?...as of this writing, 21 Jun, i'm looking at over 37,000 contracts still open in July. Which is not abnormal, but what happens next time?...same as in March? i never seen such brazen tomchicanery pulled in my life, albeit, said trading life 1981 till now.
...
so these lil turds can play their games, the exchange can do its thing, i've seen that before, but Silver is headed WAY HIGHER.

If I can restate... So you're saying that you've seen it before, and the big boys are just playing similar games now. Just doing it electronically instead of manually, and maybe with some extra muscle to get them past some tough spots. But if people will calm down and step back a bit, the market will do what it wants to do naturally, eventually, no matter what games they play short-term. Right?

[Market Harmony]

Best post of the month, Neil. Thanks for the great read.

[AGCoinHunter]

Yes Neil, great post. Thanks for the insight.

[Mossy]

Thanks, Neil. I suspected that technical analysis had serious problems, but thought it was statistical artifacts (though they are probably in there as well).

[coppertone]

Next chapter please!!

[barrytrot]

Great post by Neil. Thanks.

I've always told people "do not use Stops" and this is a great reason why

[pennypicker]

..the most valuable commodity i know of is information.

Best post and best sentence I've read since joining this board six months ago.

[Thogey]

Not only was that a great story.

I believe Neil could write it in Korean.

[68Camaro]

I had come into the knowledge of Hubberts Peak... and ascertained that it is a reality. Peak Oil is real, and at $17 a barrel, crude oil was undervalued. "70?....120?!?...your nuts, what you been sniffing?"

i just laughed, and no offense brother, but this thing is just getting started in the Silver........a retracement down to the 20's?

we should be so lucky.....no, first real stop is $100, on its way to $400 an ounce.

so these lil turds can play their games, the exchange can do its thing, i've seen that before, but Silver is headed WAY HIGHER.

Where do you think we are with regard to peak silver? Peaked and starting down? Any insight into price vs rate of supply drop?

[beauanderos]

I had come into the knowledge of Hubberts Peak... and ascertained that it is a reality. Peak Oil is real, and at $17 a barrel, crude oil was undervalued. "70?....120?!?...your nuts, what you been sniffing?"

i just laughed, and no offense brother, but this thing is just getting started in the Silver........a retracement down to the 20's?

we should be so lucky.....no, first real stop is $100, on its way to $400 an ounce.

so these lil turds can play their games, the exchange can do its thing, i've seen that before, but Silver is headed WAY HIGHER.

Where do you think we are with regard to peak silver? Peaked and starting down? Any insight into price vs rate of supply drop?

The incremental increase of mining production related to lower grade ore-bearing veins now worthy of mining, due to increased spot pricing, should continue to be eclipsed by the ongoing, burgeoning uses in industry that exceed both annual production and scrap recycling combined. The deficit will continue and grow in size. Have we reached Peak Silver? Yes and no. Production may be able to grow just a smidgeon for a few more years if price acts as a catalyst to bring back previously unprofitable mines back on line, or it may be that we can't rise above a plateau. Certainly, in the sense that the "Peak" theories propose... we have already mined all the "easy to access" silver lodes. What remains is lower grade veins, and mines in countries subject to nationalization (think Evo Morales and others). Silver pricing escalation, thus, might not seem to visably exacerbate the deficit issue... but it will act clandestinely to accelerate the depletion of physical resources. What will occur will appear as an extended plateau with a cliff at the right margin, rather than a gradual descent. That is, at a certain point, not too far in the future, supply deficits are likely to grow by large, and increasing amounts, with pricing - due to demand - that will finally mirror the true scarcity of silver. Despite the shenanigans of those whose games distort the true price, supply and demand fundamentals do not exist within a vacuum and will eventually trump da boyz. What we ARE experiencing right at this moment, though... is Peak Gullibility. The public is gradually awakening to the paper price suppression schemes employed by TPTB. More and more, sheep are starting to wander away from the herd, which is grazing on fiat, to feed on the blades of precious metals growing on the other side of the fence (where the grass IS greener). Whether it be movements like those advocated by Max Keiser, or the advent of mass awareness contributed to via media such as youtube, or just anyone with a few brain cells who does independent research and learns how PM's have kept pace with, and exceeded, the nominal increases (if any) in other investment classes... and which continue to surpass the true inflation rate (not just as safe havens, but as actual producers of genuine wealth)... we have reached peak gullibility, and never again will the masses be misguided by arguments of bubbles existing in silver and gold... when the actual bubble is inflation caused by excessive currency creation that commodities are priced in.

[neilgin1]

first response to all the encouragement you guys gave; wow!.....for a writer, among peers, in a certain area, to recieve ENCOURAGEMENT, is probably, one of the greatest gifts, one person can give another..indeed, such praise, not sought, but freely given, is the kind of fuel, that keeps a writer's boiler stoked, and his heart encouraged, and i thank you all, for such a good gift. Means so much to me, as this is a forum, i really respect the acumen and heart of ya'll in the trade of metals.

when i wrote the post, i didnt 'start' out to write as such; i just wanted to answer the posit, "do we retrace to the 20's?"....and it just flowed from there, as memories came back. Since the mid 90's, i've been 'bits and piecing' such a work. maybe a play, templating an Old Testament story and bringing it into the pits...two brothers, vying for the father's blessing, etc. But as a play is fairly easy to write, the execution and mounting of it, can be a frigging nightmare; especially if you do it, in the city its set....but a book?

now you men got me thinking. What a lot of would be writers dont realize is rules one, two and three of any endeavour in the arts, NEVER BE BORING, you GOT to keep the audience WANTING to turn the page, or kept in their seats, awaiting the next scene, eagerily, that strike zone is small, and you better bring your best pitch to the park.

the problem that i have, is that i did love that world, the idea of open outcry mercantilism, and when you love something, deeply, whether it be an idea, or a woman, and you see it going REAL wrong, its like a knife thru the heart. That's why i held off for a couple of decades.

But something's happened, and we all know what it is...its a virus, and its spread way behind the insular community of futures trading, its crept into every financial institution in our nation and the globe. Been seeing that virus since 2006, it picked up steam in 07, and in 08, the chickens came home to roost...and here we are today, everything we've been told that is solid and straight, is not. Trust has fled out of every financial institution, exchange, govt overseer's...the whole lot...and for one, that breaks my heart and makes me angry.

..and when i get angry, the only weapon i have is the pen. I DO love this Great Experiment, we call the United States of America, and whats happening goes way beyond mere politics, left or right, such terms have little utility, its that virus of "greed is good", which is just really a repudiation of one of the Royal Commandments, "love your neighbor as yourself".

and the thermometer that shows how high the virus has brought this temperature is indeed, the price of precious metals, as well as base metals. There are some very astute men on this board, who correctly have determined, their course, in their dealings and accumulations.

...and, as i said, i'm angry, because we have been given so much, as nation, and its the thieves, and those men of lesser nobility, that have brought us to this very day, and in the spirit of Thomas Paine, my pen is my only real weapon against the lies and false mythology spread. Maybe it IS time, to take that dirty laundry, run it on a clothesline for all to see.

Yeh...maybe its time.

on a lighter closing note, i enjoyed when you 68Camero (a fine ride) asked about "peak silver"....to which i would have to say, "i dont know", but in stepped my dear buddy Ray with the answer. thats why i cherish this little corner of the net....in this "pit", the traders are genuine and real...noble, which is the highest compliment anybody could give to another trader.

and i close this post, praying for ya'll, that God grant you the wishes of your heart, and the wisdom to see, its not the silver or gold we accumulate that protects us, its Him, God just blessed us with the wisdom to know the times, and to act accordingly in our commercial dealings, so as our families can be shielded in a dark time, thats my prayer for everyone of you, and if so led, i covet your prayers for my pen, that i may do the right thing, neil

i'll close with one of my favorite songs, as i now am a country boy:
http://www.youtube.com/watch?v=D0sYnro_3Rc

this is to ya'll...enjoy and keep stacking.

and