iShares Silver Trust (SLV)

[BorisB]

The following is for information purposes.

Please read this!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

No one entity sold 23,000 contracts in a half hour!!!!!!!!!!!!!!!

ROGER THAT???????????????

That is not how the market works.

Lets start by imagining that one or more parties is seriously short silver, like JPM maybe 28,000 contracts and Scotia Bank maybe 20,000, just as a hypothetical example (Right!).

They sell consistently as prices rise to accumulate peak short positions.

The net Commercial short position was at a peak when this smash occurred.

Then they manipulate a price drop to make money on their shorts and buy physical at the trashed prices which they create.

How?

The dump was just after the London close, so NY was open, but the rest of the world was headed home, or already there.

Lots of parties would have long positions, but have stop-loss sell orders at some price lower than the current market.

Partially offsetting these would be some “buy on the dip” limit orders (executed at a specified “limit” price”. However, these are a small fraction of the stop-loss variety.

There would be some “short on a price rise” as well.

All of this collectively is called the “stack”.

“Running the stops” is an illegal little trick whereby a party waits until the stack is weighted unusually heavily towards the stop-loss variety of order. It works best when the market is “thin”, not a lot of active traders, like a Chinese holiday, or during early Asian trading. This one, during COMEX hours, was pretty bold, but the rest of the world was after hours.

Anyway, the game is that somebody suddenly SELLS enough contracts to fill all the buy orders for a significant distance down the stack.

That knocks the price down some distance.

Then, the same party starts issuing buy orders, but not too suddenly.

They try to buy as many longs as possible while keeping the price down.

THIS IS STEP ONE, and takes place in a VERY SHORT TIME.

If it is a small manipulation, the market will rebound to the original price as the manipulator buys.

If the contracts bought are significantly more than the number sold (weighted by a price differential but lets try to keep it simple), then the manipulator has a profit at this point, but not a huge one.

That is why it is illegal.

THE BIGGER MOVES ARE MORE COMPLICATED, and require a larger initial dump to get the process rolling.

Step 2 is that lots of others start to sell as well.

This part works best near price points that Managed Money traders who trade based on momentum use for trading decisions. A lot of this trading would be automatic, and can also happen VERY FAST.

The 50 day moving average is one, but the most significant is the 200 day MA.

And, pray tell, where was the price of silver when this dump happened?

It was just above the 200 day MA and went below it during the dump.

Fancy that.

Then, the hope of the big shorts is that there is continued selling by other parties that takes the price much lower.

The 200 day MA pierced from above is used by a lot of momentum – algo type traders to start selling.

And others join in as the price drops, particularly those with more leverage than they have spare money.

The manipulators only spook the herd. It is the herd that tramples their own price!!!!!

The big shorts cover as many contracts as they can (without ruining the price decline) on the way down, making big money on them.

That is part of why this is such a perfect crime. The manipulators net buy on the way down, and net sell on the way up, so they can claim, with a straight face, that they provide liquidity to “STABILIZE” the market!!

JPM, in particular, also buys heavily into the front contract month (while selling longer ones) and takes delivery at the trashed price, which they themselves trashed.

Again, what a PERFECT CRIME!!!!

(It is also curious to watch the sales of 1 oz coins by the US mint. Sales will plummet 50 – 75% just before a price crash. I suggest that most of their sales go to the great manipulator who declines to buy for a month before the knockdown, and then buys all the excess accumulated inventory after the smash.)

So, in conclusion, we have no way to know how many contracts the manipulator sold to get this process started.

However, the 23,000 number is the total of contracts sold by the manipulator, PLUS the net short of the stack down to the minimum price, PLUS all the automatic 200 day MA related trading, PLUS panic selling, etc., MINUS BUYING BY THE MANIPULATOR AND FRIENDS.



MOST IMPORTANT POINT OF THESE COMMENTS: IN FACT, THE MANIPULATOR(S) UNDOUBTEDLY CAME OUT OF THIS PROCESS WITH MORE CONTRACTS BOUGHT THAN SOLD, PLUS A BIG PROFIT!!!!!!!!!!!

THEY DID NOT SELL 115 million ounces that is going to bust them!

That suggestion is absolutely ridiculous, but appears in articles and comments all over this site!!!

IT WAS THE HERD THAT SOLD 23,000 CONTRACTS, NOT THE COWBOYS!!

It is tough to get a handle on the approximate numbers involved, as the CFTC report only comes out once a week, so there is a week’s data combined, and it is a bit stale when it does becomes available.

I assure you, however, that unless there is a sudden price recovery the Commercials will be less net short in next week’s report than they are in this week’s report.

Think about that, and check it next week.

The bad boys bought on net in this smash, I assure you, and strongly suggest you check it out yourself.

All of this is really only SUPER-IMPORTANT to people who want to trade futures.

However, if everybody understood at least the basics, many of the articles and comments on this site could be improved dramatically.

If Doc wants to lift this and make it a feature article, feel free to.

As many as possible should see it.
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source:OP is Faranginkorat and he adds the p.s. below.

P.S. To give credit where credit is due, I would like to thank Ted Butler and Ed Steer for helping me to understand this.


From link below.. scroll down a bit to find original post.. I in no way promote or support the article this post came from or any other comments there. The copied comment is what it is..

http://www.silverdoctors.com/silver/silver-news/game-over-115-million-oz-silver-price-smash-just-ended-their-own-game-bill-holter/#comment-230655


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