Is COMEX Cracking? Finally?

Many of us, myself included, thought COMEX silver might go bust last December. It inspired me to start tracking COMEX silver deliveries, thinking shortages may show up there first. [Vaporize COMEX countDOWN]

COMEX fooled me. [Gunther Asks If I’m an Idiot]

Most “deliveries” were not physical deliveries depleting COMEX’s metal reserves. They were really just moving a pile of metal from one bank’s hoard to another. So, I changed to just charting weekly changes in COMEX gold and silver inventory. [Charts: COMEX Gold & Silver] Gold inventory dipped through December, then recovered nicely. Silver, on the other hand, dipped and stayed, mostly, down.

Hmmm.

Now, no less an expert than Ted Butler [hero] is saying today:

tedbutler_sm“What’s somewhat ironic is that there was a tremendous amount of discussion over the past few months about backwardation and potential delivery troubles in the past December contract. None of those threats came to fruition.

“Now, with very little public discussion or warning, delivery tightness and backwardation seem to have arrived.

What’s this “backwardation” Ted’s talking about? 

“The main micro sign that we may be entering into a wholesale silver shortage is the appearance of an inversion or backwardation on the COMEX. For the past week, the nearby current delivery month of March has closed at a premium to the next major delivery month, May.

“What this means is that buyers are willing to pay more to get immediate delivery of wholesale quantities of silver. It means wholesale silver is “tight.”

It sounds like things may be heating up in silver…

See also:
COMEX Crimes: Your Tax $ at Work

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Bottom? NO Rally? YES

Scott's Soapbox

If you’ve seen your 401K destroyed in the last quarter of 2008 you may have one last, big opportunity to dump it shortly.

Do I think the bottom is finally in for the stock market? Absolutely not. Long-term you’ll still see my Market Predictions for 2009-2010 come to pass.

But nothing ever falls straight down and it looks like the long-overdue bear market rally everyone’s been waiting for since last December may finally be here.

poof_110x83The next 1 to 3 months may be your last chance to salvage your 401K.

Now, I already cashed out my 401Ks in summer of 2007 and 2008. I took the 10% penalty and paid the taxes. I avoided the massive collapse. 

But if I still had them I’d have been waiting for this coming mini-rally so I could dump them at an interim high. If the gods are with you, you might even see a final, temporary drop in silver & gold prices coinciding with the mini-bull.

If so, you may not find a better time to cash out your 401Ks and buy gold & silver instead. And, yes, I know you can roll your 401Ks over into gold. But have you read the news about CONgress wanting to steal retirement accounts? [401(k)s In Danger of Confiscation] And, of course, your 401K is only as safe as the financial institution backing it.

Physical gold and silver in your own possession can’t evaporate like Bear Stearns, Lehman Bros., Wachovia, IndyMac Bank, GM, Chrysler, AIG, Lloyds, Washington Mutual,HSBC, etc.

Please keep your wits about you. Please carefully think through whatever you decide to do to protect yourself and those you love.

Scott

Please consider this from Dr. Steve Sjuggerud’s latest “Daily Wealth” newsletter.

Investor Sentiment Leads the Way
I size up investor sentiment for a living. And I’ve learned the money is made at the “extremes.”

When most investors are feeling invincible, it’s often a sign to sell. The opposite is true as well… When the majority of investors are scared (which doesn’t happen that often), it’s usually a great time to buy stocks.

If you’re not familiar with what a sentiment “extreme” is, let me share one with you…

The latest sentiment survey from the American Association of Individual Investors (AAII), showed a new all-time high in the percentage of individual investors who expect the market to continue to decline. Seventy percent of AAII members expect more erosion!

More People Expect the Worst Than Ever Before
Since the survey’s inception in 1987, only one other survey approached this level of pessimism. Sixty-seven percent of AAII members were bearish during the week of October 19, 1990, in the last “real” recession. That also happened to be the week the S&P 500 ended its decline for that cycle.

Today, we’re seeing an extreme in sentiment – more people are negative on stocks than ever. 

We’ve been seeing other extremes, too.
1) We’ve gone more than 40 straight days without more than 1% of NYSE issues recording a new 52-week high.
2) We’ve gone 290 days without anything more than an 80-day rally.
3) Corporate insiders are picking up their buying in a major way, nearing 30-year highs.

I Could Name Many More…
For example, the eight other times since 1928 that the S&P has closed at a 52-week low one day (like Monday), then closed above the five prior closes the next day (like Tuesday), stocks were higher a few weeks later every time… even during the worst of the 1930s.

So we have the setup now (extreme bearish sentiment) and the trigger (the price pattern) that has occurred with regularity at past major lows in stocks, with exceptionally few “false positives.” This is the kind of situation we look for to establish trades with low downside and high upside.

1 to 3 Month Mini Bull
I believe we’re likely at the inflection point, where we’ll see a multi-month bottom take hold. There should be significant upside potential with limited downside risk over the next one to three months.

BUT…
If the S&P drops below Monday’s low of 666 within the next two weeks, especially for more than a day or two, then I will likely be wrong… But we’re seeing the same general price pattern we have seen at previous inflection points in the market. When we have the combination of an extreme in sentiment and the kind of price patterns we’ve seen this week, it’s time to expect higher prices.

Jason Goepfert

More good stuff:
401(k)s In Danger of Confiscation
Cartoon: Eeek!
DJIA Down 40% From 1 Yr Ago (Closing out my last 401k: what my financial advisor said.)