Monday thinking that would be a one day event, I went all in, sold my hedges. Boy was I WRONG!
We've had to withstand 4 margin hikes, now 60 plus percent increase in requirements at the Crimex. Why? Well they say, its to make the market more stable. Okay, but 4 hikes? Really?!? The fourth after a 25% drop. You wanted to slow the train down you put the brakes on, enough already!!!!
So now what happens when margin requirements reach 100%? The CME Group will have no means to restrain this market further. The market will become unstable (extreme volatility) Given the well known underlying fundamentals leading to demand such as massive inflation, debt, excess liquidity and industrial demand (limited supply) etc. Silver prices are set to explode and then what? How will they put the brakes on then. They have to and will make up laws to perhaps confiscate Silver. I don't know, this is getting and will get more bizarre as it plays out.
So now what happens when margin requirements reach 100%? The CME Group will have no means to restrain this market further. The market will become unstable (extreme volatility) Given the well known underlying fundamentals leading to demand such as massive inflation, debt, excess liquidity and industrial demand (limited supply) etc. Silver prices are set to explode and then what? How will they put the brakes on then. They have to and will make up laws to perhaps confiscate Silver. I don't know, this is getting and will get more bizarre as it plays out.
Its clear we are in a war, these guys are doing everything they can to buy time. They are in a fight for their survival. Read more.
For me those reasons are intact. Just take a look at recent headlines below. Fundementally nothing has changed. The only thing that is different is the price of the metal.
- US Debt Rating Should Be 'C': Independent Agency
- Dollar declining for 9th straight day after rally following news of bin Laden death fades
- Did they suddenly stop printing money? Has the job market improved significantly? Housing market no longer an issue? Have they announced any major budget changes? No, NOTHING HAS CHANGED.
- Silver production is falling, global stockpiles remain depleted, there is no decrease in demand for the metal in Healthcare, industrial, retail and many other applications.
Assessment: This is a shock and awe operation headed by the 4 big banks that hold more than 70% of all shorts working in concert with the Crimex, needed to print a top at 50. 50 is the line in the sand historically (Hunts Bro's all time high etc). They let the first 50 print slide and then printed the failed test. In technical analysis that is a sell sell sell signal. Then you add in the margin increases, now you have the TA guys and the weak holders out, you also take out the mo mo guys so this is gut check time. As for as the margin increases are concerned, there is nothing improper about making such a move, assuming it is motivated by a valid objective. Raising the margin requirements on contracts (which is equivalent to reducing leverage in the sector) is a move which is intended to “put the brakes” on a particular commodity market where “excessive speculation” (i.e. leverage) is perceived to exist. But 4 times in 7 days, that is seriously bullshit! The game is rigged. This is not a top, they are just making it look like one.
Conclusion: Stay long, or get more long or if you don't have any PM GET SOME TODAY. This is almost over. When will the sell off end? When JPM unwinds its massive short position and then goes long. Probable risk is a low of 34 and a high of 80 by year end (why 80 thats what 50 bucks was worth in 1972).
and I'll leave you with this rally song I Get Knock Down But I Get Up Again
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