Silver Volume? Anybody paying attention?

[richiedoc]

There must be something wrong with my charts.

Right now, 10:45pm Pacific Time, Asian silver (for the last 500 minutes) has been consistently trading at 4X it's normal volume (9 contracts/min - it is usually2-3/min) and the price is NOT BEING AFFECTED AT ALL! :roll:

This happened in August once. But then the volume wasn't nearly this high. But the contracts came in a steady stream like they are now and the price STAYED CONSTANT! This is uncharacteristic for Asian trading which has a spotty and slow pace...investigate for yourself if you wish:

http://www.livecharts.co.uk/MarketCharts/silver.php

My take is that someone is swapping their short contracts for longs. They are doing it in a controlled environment so the price won't go up. There may be other explanations...I'd love to hear some.

Also, volume on the COMEX the last two weeks has been shockingly high - 3-4X normal. Yet this huge volume began AFTER silver bottomed at 10.50ish. For the last 10 trading days this monstrous volume hasn't tanked the price of silver. In fact, the price is gaining strength, up to toady when silver said "screw you" and broke out of its schizophrenic price action.

Has a big short seller noticed this as well? And is this person using the sleepy Asian Exchanges (TOCOM? Hong Kong?) to flip their position before the crap hits the fan?

If I had Ted Butler's phone number I'd call him and wake him up with this development. :shock: :idea:

Let's see what develops today when London opens and then NY.

Richie

PS - Hello everyone. I'm glad to be here on a silver forum.

[richiedoc]

I may be completely wrong, because I don't know what a run looks like on a chart, but someone appears to be backing up the silver truck in Asia...the price is now starting to rise...and the volume is increasing to 12 contracts/min.

London opens in 45 min. We're locked and loaded here. I'll check in again.

Send me an email if you want to talk about this. I'll be up all night.

richiedoc@omencity.com

Richie

[oroborean]

Well, Richie, the mainstream press would have us believe that gold's recent rise has been on the back of oil and that silver is up on increased demand in india. Of course, the one thing that would bring all three up, as well as take the Dow and S&P to record highs, is the expectation of a rate cut from the US Federal Reserve. As I've been observing in another thread in this forum, the Bernanke Fed has played both sides of the equation ingeniously by halting rate hikes and sounding credibly bullish on inflation, all the while going under the radar to expand total Fed credit and reduce bank reserve requirements.

The chatter in the mainstream media over the "conundrum" of conflicting signals from the bond market and the stock market is disingenuous. Few if any observers note that the stock market is reacting to short term, current news only -- the bond market is where traders discount future macroeconomic developments. The "smart money", therefore, is predicting a "hard landing", if not a recession, that will force the Fed's rate-cutting hand in 2007. It is this promise of renewed liquidity that is keeping investors in the stock market at these risky levels -- even if that liquidity is not eventually delivered!! The question I've been asking myself is, will they do it? Will the Fed actually cut rates to stave off recession by reopening the floodgates of easy money? While a variety of options exist, from offsetting lower overnight rates with higher reserve requirements, to coordinating with foreign central banks to control liquidity on a global scale, I still believe that despite all the hawkish talk, old helicopter Ben won't hesitate to cut rates if he has to, even if just to make things look good.

Your short-covering silver hypothesis sounds plausible, especially in light of the scenarios I've just described. If the commercials feel a new round of liquidity and speculation coming on, then they just might be going long before the momentum picks up. I, for one, will be paying attention to crude oil trading after the inventory numbers are released Wednesday. If the number is bearish, but oil fails to react, this will tend to signal a bottom in the oil market and confirm the promise of fresh liquidity as the driver of the recent market highs and upward moves in commodities. If oil corrects substantially lower, this could stymie any major moves in gold and silver at least until winter.

Happy trading!!!

[richiedoc]

Silver trading appears to have stopped in London at 9:37am. Contracts got as high as 11.68, came down to 11.60 and then - nothing. 20 min so far with only 4 stray contracts spread out...very strange and certainly not typical of the London Exchange.

If indeed silver trading has been suspended in London then this will be an interesting development no doubt related to the huge Asian volume and incredible price rise (11.28-11.68 in after hours trading then the first hour in London - 11.04-11.68 in the last 24 hours encompassing the low yesterday in NY and the the high in London a few minutes ago). I don't know how to get a confirmation of whether this is an official halt of trading or not but I will keep watching. Someone out there may eventually read this thread and have some insider info.

I have been saving screenshots of the action and will post them at some point.

The "halt" is now 35 min old...

R

[richiedoc]

Well, who knows what was going on yesterday, but Asian trading and London are back to normal volume and the price has been going up all night. I'll just say this is good news for now...

I have noticed that Asian traders on their light volume have been taking the silver bullion market up little by little consistently over the last 3 months, and London to some extent and NY to a very large extent has more often than not tried to erase those gains.

But this time, even with the huge volume thrown at silver over the past two weeks the price could only go down a few dollars in just the first few days...and the rest of those high volume days merely solidified a new base it seems and now three days of stellar gains. Are we beginning to win?

R

[oroborean]

I, too, as outlined here and in another thread in this forum, have been watching the relative action between NY and the foreign markets, which have been trading mostly in opposition to each other for some time now. The only brief period where NY traded silver up recently was this week when expectations of a Fed rate cut in January peaked at 56%. Since then, the odds have dropped, down to less than 33% today, and silver has flattened in NY accordingly. The stock markets are continuing their rallies because it has become a mark of patriotism and GOP party loyalty to buy this market, but commodities (inflationary) are no longer getting a boost because the markets are healthy enough for the Fed to simply stand pat, rather than cut -- at least for now, which is all that matters today. And so the tail continues to wag the dog.

[richiedoc]

I have just posted charts and screen shots and commentary at Omencity.com. Please take a look at it and make any comments you feel are helpful:

http://www.omencity.com/silver/silver_9-26-06_volume.html

Again - silver volume has continued at RECORD volumes for the past 15 trading days and no one seems to know about it...or want to talk about it...or admit it.

With this kind of volume one would expect there to be extreme price movement. Short covering last night (in after hours trading) raised the PPS of RIMM to over $100. When I heard THAT on CNBC this morning I knew I had to put up these charts and get some feedback.

Thanks for your time.

R at OC

[richiedoc]

4:15pm Pacific time - Two hours and 15 minutes into the Sydney open and a paltry and typical 25 contracts have been traded. I'm now waiting to see what Hong Kong will do. They open in 15 minutes.

Here are some volume figures that as yet I have not been able to corroborate with any other charting system accept Dukascopy:

Sept 4 - Sept 8 2006 - 22,942 contracts - 114,710,000 oz
Sept 11 - Sept 15 2006 - 68,826 contracts - 344,130,000 oz
Sept 18 - Sept 22 2006 - 51,215 contracts - 256,075,000 oz
Sept 25 - Sept 29 2006 - 46,800 contracts - 234,000,000 oz

Prior to these 4 weeks trading the number of contracts traded in any one week never exceeded 20,000, and averaged about 12,000.

Hmmm....

R

[oroborean]

Larry Kudlow says "the greatest story never told" to describe the somewhat dubious economic success of the Bush-led, Republican-dominated, single-party government of the United States. Richie does this board a great service by uncovering and describing an incredibly juicy facet of the silver market that rivals supply-side tax-cutting for deserving Ludlow's pet phrase.

The perceptive comments Richie makes on his linked website are a relevant addition to the very telling official particulars of price and volume offered in chart and table form for a variety of time frames. But the real entertainment value is the wild swings of money, silver and human energy represented by the numbers and lines on the charts. It's amazing to contemplate how much effort may have gone into creating a single sound-bite for waking NY traders at an important market juncture.

Standard Bank had nothing to say about silver volume or Asian trading patterns on Sept 27 or 28. In fact, they said "Silver was quiet in Asia". Looking at just the candlesticks one would have been put to sleep.

And so, with silver "quiet", fund managers and traders could close out the quarter buying up a market presided over by a Fed for whom the inconvenient truth of inflation in commodity prices was no longer a hindrance. Absent a headline, the Fed doesn't have to explain huge, sustained foreign demand for metals and declining foreign demand for the USD.

As far as the large volume trading having begun on 9/11, my thoughts from that day's trading journal describe a seemingly inexplicable universal downturn in sentiment about metals, with oil slightly steepening its downward trend since july. Leading up to that point, the Fed had been signaling a desire to pause rate hikes, but was still choking on high inflation that discounted a halt and prohibited a cut. Uncertainty over interest rates and geopolitics in general buoyed higher commodities prices until, as if by magic, the market grew patriotic and compassionate on 9/11/06 and brought down gold and silver without affecting the dollar or wrecking the indexes. This was the opening of the door to the Fed's inflation fighting credibility and therefore of possible rate cuts and a sustained market rally to record highs. It was also the inception of the much discussed competing bond and stock market mixed-messages, where bonds predicted a "hard landing" or recession, while stocks seemed to expect moderating growth or a "soft landing". What I took to be a fleeting display of decorum developed into a serious downturn in the price of silver.

As detailed in this and other threads, the most recent upsurge in silver corresponded with economic data that, only when seen in the light of the new inflation outlook just described, painted a picture of rate-cutting for bond and equities investors. Perhaps unintenionally, the Fed report made it possible for patriotic NY traders to embrace weak manufacturing numbers and reinforce the rate-cut idea by taking up traditional inflation hedges like silver. No commentator I am aware of has been able to explain why, after the Philadelphia manufacturing numbers had such an unanticipated market effect, that Chicago manufacturing numbers later in the week, which should have been even lower in reflecting weak auto sales, were as contradictory as they were. But sure enough, they put the lid on the rate-cut odds and as this picture faded, so did the rally in silver, though commodities finished strong again into Friday's close. At the start of the fourth quarter, the Fed remains poised, as ever, between potentially higher inflation in the face of high silver, gold and oil prices that can't be hidden from view, or significantly weaker markets that are likewise visible. A middle path presents itself to the extent the Fed can waffle between either declaring victory and freezing rates or declaring victory and cutting rates. The outlook for silver becomes bullish when the Fed becomes justified in cutting rates, an increasingly more likely occurance once the major accountability periods of elections and holiday shopping are past.

Richie has done a great job in calling attention to the role of trading volume in these recent weeks. It's important to remember that high volume of trading does not tend to predict dramatic price fluctuations. In fact, the opposite is often true. Averages and patterns work best when they describe large aggregates of data -- it is actually in light volume where high volatility should be expected, when the price describes more individualized scenarios and reflects fluctuations of circumstance. A list of open bids and asks on a stock in after-hours or pre-market periods can show a wide discrepancy in price while, during normal hours, large-cap stocks can trade huge numbers of shares but barely move pennies in price. Low volume markets are much easier to manipulate and are therefore subject to wider, less predictable changes in price. A quote from Standard Bank echoes this principle:

In a somewhat thin market, this momentum was sufficient to force a high of $11.48 bid but the metal slipped lower to close at $11.40 bid.

Because silver is a relatively low volume market, it is traditionally subject to faster variations in price than oil or gold and particularly more so in the thinner overnight trade. If high-volume in Asian markets is ascribed to west coast traders pressing the advantage of their time differential and profiting on higher silver prices in foreign countries, or early-to-rise eastcoasters doing the same, this is not manipulation. Even if the intent was to manufacture a politically beneficial economic outlook, this is not the crime of manipulation if done through legal trading. More on this possibility may be posted in the appropriate thread, but if, as I suspect, the new shares of SLV will be backed by physical silver, but silver that will be leased out in addition to underpinning the ETF, then this might have quite a chilling effect on silver prices if widely known. This, like the 9/11 selling, will further corroborate the rosy image the Fed needs to cut rates and create the modicum of financial prosperity a modern national government might need to justify a new elective war and invasion.

My concern then, going into the next weeks, is not the high volume that signals the direct intervention of market forces aligned with political interests, but the forces shaping those political interests and the needs of the moment in terms of inflation, lower interest rates, liquidity and fear. Discussion of real estate was deliberately excluded from this and other discussions on the topic, but the overall markets for housing, mortgages and the rate of defaults will continue to be a major, though diminishing, factor in determining the direction of the economy. At least according to the Bernanke/Kudlow/GOP economic propaganda machine. Happy trading!