No More Blood in the Turnip

Posted October 8, 2014 By Phil Elrod

I seldom trade the futures market for gold and silver anymore, but I watch those markets regularly. What I look for is what is happening right now. The manipulators have been sucking blood from the turnip and I am thinking there is not much blood left – that we are getting real close to a bottom. I am writing this at about noon, October 8, 2014.

The situation is silver is particularly interesting. The connection between the paper market (COMEX) and the market for the metal itself is seriously out of whack. The cost of producing silver is more than the current paper futures price (just over $17 per ounce) – and the supply of silver is tight. That combination is indicative of a likely adjustment in the very near future.

Take all of the above and toss in the fact that there have been unusual movements of physical silver of late (the silver ETF has had massive inputs of the metal) and I can make a pretty good case that the manipulators are positioning themselves for a big move upward. The recent depression of silver has been a case of commercials buying as the price falls and the tech funds selling and shorting. Currently the tech funds are massively short silver. It would appear that the shepherd has gathered just about all the sheep he can expect for the coming slaughter.

I do not know what the future holds, but the probability of silver being driven down further seems small. On the other hand the possibility of a very large move to the upside is within reason. The futures market is so volatile when these moves take place that I just had to swear off trading them. But physical metal is still a viable means of playing these moves. And buying at – or very near – the bottom for a commodity usually results in a good trade. In my opinion, silver at the current price, is a screaming buy.

The next week or so should be really interesting in the market for silver. If I am right we will see a pretty significant correction in the price of the shiny metal.

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The news these days is filled with articles about market manipulation – is it really happening or not? There appears to be no general consensus on the subject. But everyone has an opinion – and I, dear reader, am no exception. For many years I have been convinced that the precious metals markets were manipulated. The evidence, to me at least, is self evident. Allowing a single entity to hold as much as 40% of the net short positions in any market is proof positive of manipulation.

So as far as I am concerned, the statement that markets are manipulated, as applied to precious metals, is a fact. That the government looks the other way, passively approving, is likely only the tip of the iceberg. It is in the government’s interest that gold – and silver – be subjected to price suppression. That paper money has to be protected to the extent possible.

Not we are hearing of FOREX and stock market manipulation as well. It seems that there are no free markets anywhere.

So what difference does it make to a short term trader? Some, but not nearly as much as might be expected. Long term, it makes a great deal of difference that markets are manipulated. Who knows what the real price of gold and silver might be without the manipulators.

But the effect on short term trading isn’t all that dramatic. Let me explain. When we enter a short term trade we always have a stop loss in place – if not a hard stop (an actual order to sell if a certain price is hit), at least a soft stop (a certain price at which we enter our exit order).

In the precious metals markets the manipulation is generally to the down side. Knowing that and also knowing the time of day that such manipulations usually occur can go a long way to keeping the damage to a short term trader to a minimum.

And getting long after the manipulation ends can quickly compensate for a small loss as the manipulators took the market down.

The manipulation in FOREX and stocks is probably a bit different. I do not short term trade stocks, but I dabble in FOREX from time to time. My feelings about manipulation of FOREX is not as strong as that of the precious metals markets, but the signs of manipulation can be seen if one really watches the markets – particularly in the bid/ask values. I once placed great value in the values of bid and ask – particularly quantity. No I only look at the spread I price and watch the tick value to determine the strength of the market move at the time.

I detest the fact that the manipulators, particularly the precious metals, are allowed to do their activity (it is actually criminal) with immunity. It is a disgraceful display of total disregard for legality and fairness. But it will not end until the government decides to do something about it – OR the manipulators lose control of the market (a paper market is ultimately susceptible to the physical market).

There is a bit of government activity in examining market manipulation in FOREX and stocks. Who knows, honesty day one day return to the markets.

In the meantime, I continue to trade – hoping to be on the side of the manipulators, or with a tight stop if I am not. But it makes me sad to know that I am associating with criminals. It is sad commentary on what our society has evolved into.

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Why I call it “Music of the Market”

Posted July 22, 2014 By Phil Elrod

Why I call it “Music of the Market”

Look closely at the price bar action relative to the horizontal lines.

Those horizontal lines were put in several days before the day of this chart.

It is not very apparent but there is a line at the top of the chart.

Those horizontal lines (like the staff lines on a music sheet) are a road map to price action. I cannot imagine trading without them.

The secret to creating these lines can be found in my eBook SEE THE MUSIC OF THE MARKET.

Figure 1 Copper Futures 200 Ticks per bar 7-22-2014

Wouldn’t you like to have such a roadmap when you trade?

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A brief message to my liberal friends.

Posted July 19, 2014 By Phil Elrod

I know you think you have good intentions.

But I have a message for you to think about.

Paving the road to hell with good intentions does not change the destination.

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