Making sense out of the PM crash
(updated edited version)
Ladies & Gentlemen I presently am in the middle of a work rotation and can’t devote much time to this, but I thought I would pen a few notes here. I fully understand that the following comments are NOT sponsored by the management of this site, and probably not accepted as valid, but I will deliver them to you anyway.
First off… Please don’t be a lunatic, do not use the 3X ETF’s as a vehicle speculative or otherwise. I personally believe the SEC should ban them. All it’s going to do is separate you from your money. I will part myself from Rambus here and side myself with Buffet. Please avoid them as they are reckless, you are signing a deal with the devil when you use them… I know Rambus always uses a disclosure when he mentions them, but I am simply telling you please…. avoid, avoid , avoid.
Here is what Buffet says about using margin:The good investors don’t need it and the bad investors shouldn’t use it. That really sums it up.
So JNUG lost 94% on the week last week… seriously
Here is my take of what went down last week. And those who refuse to listen to “conspiracies” should probably just move on from this post.
First off if you don’t think that there is a group of inside players in this country/world that doesn’t operate with shrewd money then you may have a hard time accepting this. If so I will tell you right now that you are a very naive individual. Occasionally this group steps in and engineers a market opportunity for themselves. I believe this is exactly just what happened Friday afternoon in the gold market.
The inside circle of banking interests likes to place investment grade positions into the market just before a major move begins… at discount prices. No they are not like us who read the tea leaves years in advance and discern the trend early on and establish positions early in Phase I before virtually anyone else knows. Unwashed, unprivileged retail investors like ourselves often need to suffer through years of basing action before the big move. No this big investment grade inside money class makes its move after the trend has become pretty clear. Shall we say its already obvious, but still before the public figures it out. Problem is price has already moved quite a lot from the original base. That’s the base that insightful savvy investors identified early on and established their positions early on in the trend… very painstakingly I might add.
But here is the thing… these big investment grade monied interests want to move into large scaled positions. Problem is the trend has now developed to the point that it’s impossible now to do that as there is now enough interest there that their scaled activities would run up the price. They know its now time, they can readily see it’s getting late in the game to establish positions… it’s time to make the move, but they can’t. The market is simply become too tight. They are going to have to engineer themselves an opportunity to get in at a discount price. This is impossible to you or me, but for them they have the wherewithal.
When one watches CNBC there is NEVER anyone there who knows ANYTHING about the PM sector worth listening to. These people do not show up on CNBC, but there are monied interests out there that are knowledgable about these things. I am telling you that these people were behind the waterfall decline you witnessed on Friday.
The Set-up: The bankers were in on the deal that was being put together last week to address the virus. It’s a huge bailout.. Monetary as well as fiscal. They know just how it will debase the currency. They know how bullish for gold it will ultimately be. So they wanted to take a MAJOR position in the hard money gold trade for INVESTMENT purposes. So this is what one would refer to as an OPERATION.
Raid gold for $100 which allows COT interests to cover their positions and know that it will trigger a margin call cascade. Retail investors loaded with crap vehicles like JNUG and NUGT will literally melt down and cause forced liquidation. Offside hedge funds will simply have to sell their margined positions before the close on Friday… absolutely have to, this is called forced liquidation. Keep in mind that the problem with ETF’s is they can have market caps approaching the size of the cumulative position OR EVEN MORE than the underlying securities!. What this means is that an inordinate amount of selling has to occur in those issues inside the ETF… That’s what we witnessed on Friday.
So the monied interests want in on the big investment grade companies… the FNV, GOLD, NEM, AU AGI, PAAS, etc. But they don’t see themselves as retail buyers buying at a market price… No they want to buy wholesale at large volumes well after the trend has already established an elevated price. How does one do that?… they do it by conducting a stop run raid
That’s exactly what we witnessed. A stop run raid. That’s where you run the stops as far as you can (one never knows just how low it will go) and once the bottom is reached you start buying on the way up.
Does that sound like what we witnessed on Friday?
Exactly, and it all happened within a 45 min period. Can you imagine what just happened! Big investment grade money got positioned into big cap quality names IN SIZE at discount prices way below the market… can you even comprehend what just happened!
All at your expense of course… welcome to the real world of finance and you are not included.
But now we will undergo a few days of market clean up characterized by sloppy trading. For the easy prey suckers that operated on margin or the ones who just don’t have the nerve to hang in there they will be shaken down perhaps a little bit more. But the stage is now set. The strong hands are now holding the big cap players… The bull market is about to resume after a major shakeout.
I Fully ( The Management) FULLY ENDORSE THIS MESSAGE
I agree regarding 3X kamikaze trades.
They work for Rambus but are very toxic avoid avoid !
I also believe in selective manipulation in PMs…I just don’t believe it is engineered by governments all day every day
and I don’t believe it is restricted to PMs.
Thanks Sir Plunger for taking the Plunge…YOU KNOW you are FREE to express all your opinions here any time !
Whew… Fully didn’t take me to the woodshed
hahaha
🙂
This post is incredible and is saved on the top of the sidebar
Your PBC Series is also prominent on the sidebar….the most comprehensive work ever on this topic IMHO.
Your work is indispensable…Nobody has explained what just happened like you have Sir !
Can’t thank you enough.
So I guess we could say Friday the Thirteenth was truly Plunger’s Flush !
🙂
Thanks so much for helping out the smallest of small people in this world of stocks such as myself. I always look forward to your posts and this one is no different.
I think I would have sold everything this past week or two but enduring the pain for the last few years in this sector has given me thicker skin. But wow did my portfolio take a huge hit.
I’m ready for the bull to resume haha.
Thank you Plunger for your in-depth thoughts.
This manipulation was described in great detail 50 years ago by Richard Ney in ‘The Wall Street Jungle’. My father gave me a copy.
Of course this manipulation has never been limited to the PM market; although as PM is a smaller market, its effect gets exaggerated.
~~ Long live us conspiracists! 😉
https://www.amazon.com/Wall-Street-Jungle-Richard-Ney/dp/B00005X4AX
https://openlibrary.org/works/OL6920679W/The_Wall_Street_jungle
Yes, The Markets ARE Rigged
https://www.youtube.com/watch?v=6kBPLVetiq8&t=20s
Also described in “50 years on Wall Street” a book on the market during the late 1800’s to early 1900’s
The glimmer of good news in all of this is that this is serious investment grade money now moving in
I have no doubt that big market players undertake stop raids.
But I think there was more at play this last week than one of those.
But you are presenting — I think — a test for your thesis.
In that, if big players wanted in, HERE, the PM market should base soon and recover.
And NOT fail to make new highs within the next few months or so. Along those lines.
But I think there’s something much bigger afoot, and leverage is being taken to the woodshed.
If its being used in volume, the underlyings will not be spared.
You and I have conversed … through intermediaries … and we are destined, if not now then soon, to unwind the monetary debasement (I call this inflation) since 1970 if not from before.
Perhaps this has started, or at least we get a HUGE heads up that’s its coming.
This SEEMS bad enough already to call it the End of the (present financial) World. But what if its just a shot across the bow, that its coming and NEXT? Too soon for me to claim that, but I’m thinking it.
Could all be true so the best approach for one would be to buy as much gold one can and take physical possession. Ideally buy it off of the future exchange and take delivery.
Thanks as usual Plunger, I re-read your posts several times to remind myself where we are at. 🙂
There will likely be more selling in the miners on Monday due to the GDX and GDXJ trying to bring their NAVs back into balance. GDX closed the week at a 7.27% discount to NAV and GDXJ with a 13.87% discount. So the ETFs should outperform the miners Monday morning. Thanks for the insight. There was definitely something extraordinary happening in the miners on Thursday and Friday last week. What you said puts a new perspective on things.
Plunger
Many thanks too you and your wisdom!
I’m working on a theory instigated by something Fully & Patrick mentioned regarding too far too fast. IMO this is a very legitimate market structure. The meat & potatoes is when big money puts in an order it doesn’t have an experiation date unless the order is cancelled……so if an order is placed by big money it can exist for years. In certain cases large orders get placed that don’t get filled because of breakouts buy or sell don’t get filled for years and probably dark pools not publicized orders. These latent orders show up in charts as support/resistance levels us chartists see on our charts and wonder why some hold and others don’t. I had two levels for the GDX 23.95 & 16.62……..i’m still bactesting.
Never ever did I think the 16.62 would hit. 23.95 blew with momentum so I never bit at 23.95 luckily. I should have stink bid for a scalp at 16.62.
FWIW I have/had of levels at 1615 & 1354 Au Futures/GDX. Because momentum blew threw 1615 & 23.95 I never bid…I have two latent levels below 1354 that I don’t expect to visit near future but 1354 Au is live regardless of the uptrend IMO.
100% agree with you theory of big money Plunger thanks for re-affirming my suspicions.
The unfortunate thing is I have levels where big money was sidelined because market left without them in Au much much lower than where we are today. Au in an uptrend (shaky as it is ) but IMO have to view that as the trend for now unless 1354 fails.
Thanks Plunger for your time and effort !!! As I responded to Eagle Seagle on Twitter last Thursday: “ Still inclined to think we had a historic 100 year low in 12.2015 in the miners relative to sound money – the rest is short term noise. Nevertheless I am a little scared – have to put on my big boy pants !! I DID NOT SELL MORE THAN 3% of my miners EXACTLY because I had INTUITION (thanks GOD) of what you just said !! These crooks will not get my silver mining shares because I AM NOT F***** WILLING TO SELL THEM !!! God bless you Plunger !!!
I sold everything that wasn’t nailed down and bought MAG silver. I also decided to hit the mattress stash and I’m going to buy some SLV shares hoping that we get some stupid spike to the downside that just might occur for a fleeting moment.
I bought MAG myself (a day too early though). You do realize that SLV is paper silver right? I recommend buying the Sprott ETF instead or the CEF. That way you are buying real metal
really? pslv? yeah cef OK
https://stockcharts.com/h-sc/ui?s=pslv%3Aslv&p=w&yr=11&mn=8&dy=0&id=p5444238265c&a=614027596
https://stockcharts.com/h-sc/ui?s=cef%3Aslv&p=w&yr=11&mn=8&dy=0&id=p5444238265c&a=614027596
Thank you, thank you Plunger. The penny dropped for me yesterday. Gold and silver coins are hard to get here in the UK. My usual provider can’t keep up with demand and both are selling at new highs. They’ve gone Up in price not down. This was a coordinated, pre- planned, paper takedown. Quality miners will soon literally take off. Their profits must be rising nicely. Incredible.
Sir Plunger what period of time do you most associated this period with…1929-1934 or 1987 or other…?
1929 and 1873. NOT 1987. 1987 crash was just a rapid correction within a bull market. We are now in a PBC. Virus is just the pin bursting the already inflated bubble.
Agree, there is definitely more going on now than the usual market shenanigans within a bull market.
It’s the perfect deflationary storm; plus CoV first as a catalyst, and then as an accelerant.
— Of course that doesn’t mean that there wont be great trading opportunities for the flexible.
I wholeheartedly agree…eerily similar in fact…
Plunger, I agree that the quick move down looked manufactured, but it was also clear to me that the Cycle top was in for Gold & PM’s. Perhaps this was just a massive liquidity event across all assets (Even Bonds (TLT) found at least a temp top last week). A bigger concern is Cycle timing for the next low. If my normal timing bands hold, there is still much Time left for Gold & PM’s to move lower even though they are due for an oversold bounce.