Before we get started, I encourage you to go visit Trader Dan. He’s written a terrific piece regarding the action yesterday.
I would also add that the timing was no coincidence. Option expiration for the May WTI contract is tomorrow. At $113, Tungstenman probably had huge losses and they needed to get crude back under $110 for a few days. Additionally, who do you think was taking the other side of all those sell orders yesterday? Someone was? Tungstenman, perhaps?
Also, I found this to be a rare moment of truth from The Fed. Clearly, Hoenig feels unleashed because he is retiring this fall and he needs to clear his conscience before he fades into obscurity.
And this is interesting as it discusses several of the miners that we follow here:
OK, onto the charts. We’re at a rather important juncture. The charts clearly show some support and resistance levels. These will be handy in that clearing them in either direction will give us reason to either get excited or book some profits and wait for a re-entry point.
Let’s start with silver. The open interest in the May contract is about where you’d expect it to be with so little time remaining before “first notice” day, the 29th. Basis Monday, the May silver OI was 64,629. On 2/10/11, the OI in the March contract was 62581, about the same. Well, you all should remember how that played out. Lots of angst regarding Comex default led to a wild, wild end of February. I don’t know about you but The Turd made a lot of fiat in just a few days. I’m expecting the same scenario to play out this month. Next week will be fun. The week of the 25th should be a blast!
In the short-term, we need to watch 39.20-40 as important support. A move UP through 41 can give us confidence that a test of the old highs near 42 is coming.
Now note that 39.20 also lies in the general area of “trendline #2” on this chart. I would be very surprised if silver breaks down through this area. Very surprised.
IF we have more carry trade unwinding or more Tungstenman BS and silver does break 39.20, look for it to move toward the old highs of 38.20. This would place it near the “trendline #1”. I would be a very aggressive buyer of silver if this were to come to pass.
In gold, the selloff stopped right at 1445 yesterday. Aren’t these charts amazing? They only work because everyone is looking at the same thing so its kind of self-fulfilling but, still, it is remarkable.
1445 was obvious because its the old resistance from the six-month range we just exited.
Now look at it here on this hourly chart. Pretty cool, huh?
Now, like yesterday, someone could try to pull the rug out from under gold and send it cascading downward again. If they do, I’ll be patiently waiting at 1445 with some buy orders. I kind of hope they do because I didn’t get filled yesterday. I was trying to buy some June 1450 calls. I could only afford to pay 25.6. The low was 25.8. Ugh.
Also watch the 1453 level as a break there would be your first sign of trouble and an indicator that a second test of 1445 is coming. A break UP through 1468 would be reason to believe that the storm has passed.
I’ve got lasts of 1459 and 40.40. Should be another interesting day.
More later. TF
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