The "Buy Silver, Crash JP Morgan" Hype

Dear All,

I recently came upon a signature of one of the members saying "Buy Silver, Crash JP Morgan"....The signature linked to an article explaining why this should happen...

So I googled the whole thing and I found a huge amount of blogs, articles, websites revolving around the same concept...

In brief, it is assumed that JP Morgan is cornering the silver market and that they have a HUGE short position in Silver futures and that every tick up causes them to lose money.....As some websites and blogs say, the short position is around $1.3 trillions....Please keep reading because this is very important....

It's been circling all over internet that the physical deliveries of silver skyrocketed and that the JP Morgan short position is extremely in danger and can cause the big bank to go bankrupt or get a bailout...!!!!

Now, let's get down to facts...The silver market is not a huge one when it comes to futures...The standard silver futures contract traded on the NYMEX is worth 5,000 oz and the average daily volume is around 70k contracts...

This means that at current price levels of $29 per ounce, the contract is worth $145k and that the average value of silver traded on a daily basis is around $10 billions...

There are 2 other silver contracts traded on NYSELIFFE, however, they are not as liquid as the NYMEX one...In fact the mini contract on NYSELIFFE is much more liquid than the standard one....The mini contract is 1,000 oz and averages around 7K contracts per day, that's another $200 millions a day...

Now here comes the interesting part....

A $1.3 trillion dollars short position in Silver means $1,300 billions...This is equivalent to 8,965,517 standard silver contracts!!!!! Yes, that's 8.9 million standard silver contracts...!!!!

If I am conservative enough and say that the open interest of all available silver futures around the world in all exchanges (Including ICE and LME) sums up to 4 million contracts, this means that JP Morgan is still holding double that number as a short position....


Conclusion:

In my opinion, THIS IS A BIG HYPE....It's a distribution methodology to induce masses to buy silver while big players and funds sell their holdings...It's just about trying to create enough demand...Just exactly as the newsletters you get every now and then promoting a thinly traded stock who has just moved a decent 300% where you are actually buying the distributed stock from the strong hands if you follow the newsletter recommendation...

I am not recommending to anyone to buy or sell or short silver futures...I am just here to CLARIFY that this hype can't be real given the reality of the silver market and with proven statistics...

Just question it and question everything I am saying before making any decisions...

FYI, I am flat on Silver, I don't have any long or short positions right now...


Regards,

Nader

Today was a bloody day for silver....It dropped some $1.325 per oz....

Again I am not saying this inducing anyone to take any positions, either long or short....I am just warning to strictly question the "Buy Silver, Crash JP Morgan" hype which has been all around spreading like hell...

Trade well...


Regards,

Nader

The short side of silver is the best trade for now.



humble golfer

What goes up must come down If silver runs out of buyers, the longs have no choice but to lose control to sellers.

A really good way to learn to identify how trends must end is Larry Williams book; Trade Stocks & Commodities withe the insiders, the secrets of the COT report. He actually examines a complete bull bear cycle of the silver market around 1996, if i remember correctly ( i could be wrong about the year) in this book.

I found a paper that uses this exact situation as a strategy on the internet while i was searching for info on order flow and liquidity. Sounds like J.P Morgan might soon provide alot of liquidity to the market. There was a situation in the 90's very similar with natural gas and Amaranth Advisors LLC

As a general rule its probably not a smart idea to buy anything that is at an all time high. Another very general rule might be fade the crowd. One could probably do worse alot easier than that.

My thoughts.....exactly.

Looking good so far!



humble golfer

Well, I slightly disagree....It depends on the timing....At some point in time, the all time high of gold was just $850...When it broke above this figure, it was making an all time high every single time and it continued to do so for another $580...This represents around 78% more than the initial all time high....

Plus silver is not at an all time high...


Regards,

Nader

Actually nverstop as long as you are buying strength (demand) you are doing basic trend following. So it doesn't matter if the security or commodity is at an all time high, as long as it continues to make some form or pattern of higher highs and higher lows, buy should be the response (at least on the daily and up time frames).

If you get a chance to read Michael Covels Trend Following: learn how to make millions in up or down markets he gets alot of interviews with some really successful trend following traders. John W Henry, Richard Dennis and Jerry Parker all basically use the same concept; buy strenghth sell weakness and they are always doing the right thing when the market really moves.

Its just a question of when to get out.....

Man i think exactly the same.
I'm bearish on Silver since Nov. when a buddy of mine, who has nothing to do with trading, told me he was going to buy Silver.

I laughed and thanked him because i wanted to buy some too

It's really amazing how the silver price behaved since this hype started circulating on the internet and on YoutTube...

Typical Contrary Opinion clear example....

Looks like JP Morgan is not going bust anytime soon


Regards,

Nader

There is a 1.5 Quadrillion derivatives market out there and Silver is a small part of it. How come you people are not talking about JPM's short squeeze? A problem? 50,100, 1000 dollar silver? Squeeze on baby.

Should have listened...

I did, you see silver had a small correction after that, and i bought the dip




...looking back i didn't buy enough

You obviously never heard of naked short selling.

Adjusted for Inflation gold has yet to make its previous all time high, silver for that matter too.

are you still laughing at your friend purchase, if he did bought silver back in Nov when silver was worth around 25 USD, just have a look where is silver today, probably your friend has made some nice money

@ All

I don't know nothing about JP Morgan trying to corner the market but in the end general condition should prevail, any type of manipulation. This movement is not the result of manipulation by pools or artifice by financiers, but depends upon basic conditions. And no matter who opposes it, the swing must inevitably run as far and as fast and as long as the impelling forces determine.

All manipulation of the primary trend are foredoomed to failure.No manipulation can put the price down(up) and keep them down(up).The reason is plain to anyone who will take the trouble to think about it half a minute.

Suppose someone would raided and put the price down to a level below its real value what would inevitably happen? The raider would be up against the best kind of inside buying. The people who know what the instrument is worth will always buy it when it is selling at bargain prices. the same is true in reverse.

"The theory that most of the sudden declines or particular sharp breaks are the results of some plunger's operations probably was invented as an easy way of supplying reasons to those speculators who, being nothing but blind gamblers, will believe anything that is told them rather than do a little thinking"

Gold and silver will be a bubble some day as will all commodities but doesn’t think it will happen in 2011, likely a few years away. Most investors don’t notice something until there is already a nice bull market underway.. There will be more people buying gold&silver, eventually everyone will own gold&silver and then we will have to sell our gold&silver. But that is a long way from now.

Silver will definitely reach new highs, but don't expect to go straight up because nothing goes straight up or straight down,there are always correction, there is nothing wrong about corrections.

but for now I'm worried especially about silver,although as I stated before I'm still expecting it to go upward in the long term following the line of least resistance, I don't like how she behave, I hope they continue to go up but in an orderly way, step by step.

If it will move the same like an parabolic move I will have to sell it because that is a bubble and all parabolic moves end badly. I hope it doesn't happen we not have a parabolic yet,and as crazy as it seems I hope something stops it going up like this. I would love to see a correction but don't known what could cause a correction.

many would be surprised when they will see printed 100 USD for silver, but still we have some time to reach that figure

All previous bull markets in commodities have lasted 15 or 20 years. This one’s going to last at least that long if not longer and fortunately or unfortunately, the supply side of the equation seems to be getting worse not better. We are not far away from 2008 when everyone got hit and it does not need an understanding of the einstein theory of relativity to see that the world cannot possibly progress in a straight line in its development. that's way there is a cycle of panic and a time of prosperity. After the panic comes the period of readjustment when people will begin to rebuild and try to recover from their losess, that is how the bull side and the bear side works, I'm a firm believer that history will repeat itself.

It's always the same cycle. When a market is very low, there comes a time when some peope buy it because it has become undervalued. The market starts to go up and more people buy because it is a fundamentally sound thing to do or because the charts look good. In the next stage, people buy because it has been the thing to do.

Finally, there comes the magical stage: People are hysterical to buy, because they know that the market is going to go up forever, and prices exceed any kind of rational, logical economic value.

The whole process then repeats itself on the downside. The market gets tremendously overpriced and it starts to go down. More people sell because the fundamentals are turning poor. As the economics deteriorate, more and more people sell. Next, people sell just because it has been the thing to do. Everybody knows it is going to go to nothing, so they sell. Then the market reaches the hysteria stage and gets very underpriced. That's when you can buy it for nothing. But for a long-term investment, you usually have to wait a few years and let the market base.

just my humble opinion of an trader who already own a heavy position in both gold&silver market.

all the best!

Yes i do, because he wanted to open an alpari account and use the nice leverage instead of buying physical...

Would just like to say that a $50 high in 1980 is equal to about 90$ at least today...

so with silver at 34$ and most other commodities having boken their all time highs, I'd be buying silver like crazy...

Going to try get the 32 july 2011 call at around 2,80 and then watch the price go back to test the 50$ level at least! will be selling and rebuying in the process ofcourse ;-)

Id use options... no margin call

Yep, maybe closer to $140.