Monday, June 6, 2011

Mysterio Monday

5:29 am (Hawaii) Rise and shine. It's dark here in the islands, but not for much longer. My tiny position in DGP is increasing. Not so much the tinier bunch of OWW shares. (I wish I could say I'm playing crude oil and lower prices and increased travel, but that wouldn't be true.)

Spot Silver and Gold are healthy this morning. My guess is JP Morgan/Fed/etc are going to let precious metals ride a bit here, possibly back to 39 this week, before putting a chokehold on longs (again). Same old yo-yo action. Why? Because 1) they make much more money toying with these markets up and down, and 2) they can.

Silverfuturist asked this morning, "How much of the action in silver is speculative?" Another guess: Spot went from 49 to 32 a couple of months ago. Given some smaller percentage of fearful longs and optimistic longs — those who sold out and those who added more at 32-35 — it might be fair to say that 35% of the market were speculators. Near-term traders. Nothing evil, just the usual calculated bets, while others were riding their beliefs one way or another. There were speculators on either side, probably more than we think rode BOTH directions.

Is the speculative party still 35%? Probably not. If we apply Fibonacci levels, the upside move from 32 to 39 was 41% of the previous move, which is fairly close to the 38.2% level. And now? I wouldn't count on anything to predict something like silver, being so easily manipulated, but it's food for thought. For all we know, everything, and I mean EVERYTHING we think we know about silver could be mythical. There's no way to completely verify everything bullish or bearish. How much is fact? How much is fiction?

Almost every money-making setup in the market is basically a pyramid scheme. It's the history of American markets in general. The supply chain is a lesser form of the scheme, but it's all about added costs, distribution, et al. Everybody wants a piece of the pie. They get their cut. To me, the only great thing about the precious metals boom is that if you were early (2008, '09, even '10 wasn't too late), you collected gold or silver at major discounted prices. At these current levels, it's purely a security measure to acquire the physical. I'm aiming for more physical, but how much more depends on how looney-tunes the global market gets. By then, it might be too expensive. It's not easy being too late to the party, but the psychological aspect of having some security — assets that are not chewable by inflation or the greed of filthy banksters — can't be denied.

That's why playing the paper game is still an option, and why so many traders don't bother with physical. I'm just one of those guys who wishes this were 2009 again. Too much daydreaming, no doubt.

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