Loading ...Of. course, there could. be. a big correction at any time…but I’ve. sat tight
Mexico Mike is worried too=he writes this from Murph tonight=
Mexico Mike…
Red Flags!
Hi Bill!
I have posted a few times that my expectation for the immediate future is a nasty slam across the board. So far I have been wrong in the timing, and I would love to be completely off side with this outlook. However, I am watching the performance of the metals and the senior mining stocks and there are warning flags all over. I have seen this act before, and it usually ends with short term selling pressure and frustration.
People forget the massive leverage that can be brought to bear by the Commercial shorts. Was the aftermath of Brexit that long ago? The banks waited it out and then crushed the mini-bull market when the buying power faded. How about the night of the Trump election victory? It took less than a day for the banks to counterattack and strip an enormous surge away, using the power of unlimited leverage.
Now what have we be seeing for the last few weeks in the COT report? The large spec shorts are covering, while the banks are going further out on a limb. Does anyone think the banks are stupid? That the slimy traders working for these trading houses cannot read a chart? Why would the banks let the spec shorts off the hook so easily, knowing that the funds do not have liquidity to sustain the losses of the last few months? The Commercials do not want to see a melt up here, and they will make it easier by continuing their role as the featured contract seller even as the funds are closing shorts and taking losses.
I am expecting a monumental slam in the coming days. Perhaps timed around the NFP data, or perhaps the next FOMC statement. I do not think we have seen the best shot yet from the goddamn shorts and they are capping and intervening to manage the rally before they make their move. With so much frothy spec money playing long, it may take a nasty selloff to trip stop-losses and cleanse some of the froth. Then we should get the contraction in open interest to sustain the next phase of this bull market through the fall.
I would love to be wrong here, and I agree with many of the analysts that are pointing to superb fundamentals as an argument for further upside. But again, I have seen this act before, and exceptional fundamental support did not count for much when the metals were bouncing along their lows a while back. It will be the Comex paper tail that wags this dog for the next move.
I still believe there will be so much money waiting on the sidelines for a correction that even a very nasty selling event will represent just a short term blip on the chart, with a rapid rebound. I think the stealth bull phase is coming to an end, and the retail buyers will start becoming a factor, both in the small bar physical bullion market, and in the junior mining stocks. This bull run is just getting started. However, I have been trading this stocks since before the Bre-X crash and have learned to watch for the inevitable slam. This rally is long in the tooth and there will be a consolidation before we move on to higher highs.
cheers!
MM