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Strategies & Market Trends : The Ego Forum -- Ignore unavailable to you. Want to Upgrade?

To: No Mo Mo who wrote (12039)	4/22/2013 3:07:42 PM
From: hubris33	Respond to of 12175

Yes. The severity of the drop was surprising. Signs were there that the Bears wanted to take POG lower or were well positioned. Honestly I thought it would have come sooner, so my call perhaps a bit early? Guess I should thank Goldman for making me look good? But that chart was compelling. There was support in the 1423 area and either it was weak or a cascade of stops drove the price through that level. As I mentioned here, that was a 3 or 4 sigma move - way too much. Looks like the 1420 has regained a level of support so far. Also I note that liquidation in the GLD ETF helped fuel the drop. I have mentioned that for years during the bull phase, that the ETFs would help power the downside move in POG when the turn came. I'm certain few remember those prognostications. An article found at ZH captures and defines some of that thinking: zerohedge.com Here is what we have for COT today, based on Friday's close. What interests me on this chart is the fact that we held support in OI. While POG was cascading down in a cliff dive, the overall open interest in COT dropped but it never dropped less than prior support area from the last nose dive in early April. We stayed well above the 400K OI level. Perhaps this suggests that the driver of the drop wasn't the typical OI crowd? Interesting that COMEX OI didn't swell with the drop either as we saw in prior drops. So not a lot of paper OI chasing the drop (it was already in the game). Also, this is a contrast to what we saw in 2011 immediately after a 3rd margin hike in GC. That lead to one hedgie dude blowing himself up and dumping 80,000 contracts in one day. Interestingly at about the same POG level as today's price. A more focused look at OI.... All the signs were there, the continued build in OI as POG wavered and stalled and finally the collapse of POG on a push when those who got the memo to short were ready. But note the continued build in OI as the first leg (-63.50) of the collapse started. OI only dropped modestly during the second day (-140.30) of the collapse. But note that OI finally dropped -13.6K on Tuesday as the POG jumped up +26.30. So was this cascade caused by 15-20K of OI? But what lies in out future? Take a look at how this chart shows the primacy of the "front month" and when the next month takes "control" in spite of being labeled "front" or not. Remember Jun contract becomes callable 1 Jun so the mass roll-over should be the second- third week of May. Now while the Jun OI did exceed the level of the Apr contract, it has dipped down below its initial run up peak - that peak it reaches as the rollover from one contract to another completes every end of sharp up lines, both black & blue, on the left side. How front month OI behaves from this level makes a strong suggestion as to what POG is doing and potentially where its headed. So maybe we recover some lost ground in the next couple or three weeks. But come the roll-over or post that, as Sinclair remarks, when POG is most vulnerable, the risk continues. The trend is your friend and this ST/IT one is down. Now perhaps we see some rollover in markets that spooks participants there and they look to GC as a safe haven? Who knows and we'll see.