As I was stomping around the house looking for my cowering Labrador yesterday afternoon, I think I was mumbling something about "no good rotten ba$tards" in reference to the blatant price control exerted yesterday in Europe and North America in stocks, Forex, and, of course, the precious metals because, after all, they simply couldn't allow stocks and the Euro to crash and precious metals to soar in response to the murders perpetrated in Brussels on Tuesday. You will note that I did not use the words "terrorist attacks" or "suicide bombings" but the more accurate description of what occurred: People were MURDERED—period. The perpetrators are "murderous bastards" as opposed to "Islamic Fundamentalists" or "terrorists."
I don't know whether I was mumbling to myself more in disgust with the market interventions or with these senseless killings that are slowly desensitizing us all to the horror of these acts and the madness gripping the perpetrators. What is important to us in the trading arena is that a sharp advance in gold and silver was halted and reversed with a masterfully executed buy program in the Dollar-Yen, which triggered an entire armada of HFT/Algo-driven computers into buy-side action in the USD and stock futures and sell-side action in gold, silver and the VIX.
So this morning, in a move that actually began last night, the PMs are now doing exactly what the COT reports have been suggesting for the past three weeks and the miners will most certainly roll over today with the HUI opening down nearly 5% to 172. This is what I have been fearing for the past four weeks since the Commercials moved to "net short" 161,000 contracts and finally topping out at 195,000 contracts on March 11. I got very weak-kneed on Friday and moderated my bearish stance by launching a "guess" that this week would be an "UP" week but the fact that the Brussels horror failed to attract sufficient spec buying to maintain upside momentum has forced me to do a much-loathed "flip-flop".
I was calling for a 135-140 HUI and a $1,160 gold price earlier but after being afflicted with a large bout of "performance anxiety" causing my short-term bearish call to go rather "limp" in the face of the awesome volumes in the GLD and gold miners ETF's, I began talking to myself and listening to all of the "It's different this time"/"Screw the Commercials!"/"Follow the trend!" which is ALWAYS a mistake because, as we have all witnessed for what feels like an eternity, these Commercials RULE. They have once again picked the pockets of the Large Specs who have now gone "all-in", IN SIZE, balls-to-the-wall, gold, silver, and the miners above $1,250 gold, above $15.75 silver, and above 180 in the HUI. And that huge "island" where you see "GAP" in the chart below is going to be a wall of resistance when and if they rally it.
I'll keep this short this morning and follow up tonight with a recap but to those of you that responded to my flip-flop on Friday I apologize; I should have stuck to my guns for the near-term call. The good news is that I said I was holding on to my hedges and I did and they are up sharply this morning (especially the GLD April $120 puts) and since I flattened all of the GDX above $20, I only need to add a few puts on the GDXJ to completely skate through this short-term correction protected on all fronts. I added some GDXJ May $25 puts on the opening at between $.85 and $1.10 looking for a pullback to the $20-22 level in the GDXJ and $3.00-5.00 in the puts.
Now—if I get yet another massive reversal to the upside by tonight, don't expect anything out of this author until some time in June after I return from the De-Tox Centre and my usual sixty days of primal scream therapy at my Arizona "fat farm"…also, do NOT worry about Fido—he's gone missing since he heard me cursing out the Cretins shortly past midnight…
The more things change….
Originally trained during the inflationary 1970s, Michael Ballanger is a graduate of Saint Louis University where he earned a Bachelor of Science in finance and a Bachelor of Art in marketing before completing post-graduate work at the Wharton School of Finance. With more than 30 years of experience as a junior mining and exploration specialist, as well as a solid background in corporate finance, Ballanger's adherence to the concept of "Hard Assets" allows him to focus the practice on selecting opportunities in the global resource sector with emphasis on the precious metals exploration and development sector. Ballanger takes great pleasure in visiting mineral properties around the globe in the never-ending hunt for early-stage opportunities.
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All images/charts courtesy of Michael Ballanger
