evening wrap, january 26
market vibes
“It takes a long time to get to be a diva. I mean, you gotta work at it.” Diana Ross
Silver volume was greater than 200% of open interest today, extremely rare but there is nothing about silver that is not extremely rare. If WTI were to have a similar 14% range at $60/barrel it would be $8.40. S&Ps would have a 1000-point range. Bitcoin would have a $12,000 range. According to Grok, a 14% intraday range in silver on record volume of 355,010 is a 5-sigma event. Implied volatility settled at 111%.
We have another bearish divergence which is a new high in prices and the 45-period slow stochastic does not make a confirming new high. The last one was on October 17 (extremely high volume = 195,000 or 60% of today’s volume). It took about 4 weeks to cycle out.
So… there are enough negative technical developments to expect some kind of horizontal activity in the next few days or weeks. If open interest is significantly higher tomorrow the highs and lows of today’s range become important because the sellers have the best entry price location in history and the buyers have the worst entry location in history. Therefore it is easy to identify the weak and strong sides of the market.
Under $100/toz means the highest volume of selling in history is in credit at the clearing house and the highest volume of buying is in debit. Because volume was 200% of open interest it implies almost all longs and all shorts coming into the session were active today. A close with authority above $118.00… silver goes to $150.00. A close under $100, silver could be in trouble.
There is a well formed bearish hammer candlestick in silver.
Gold had a similar reversal closing near the lows but up on the day on extremely high volume. They do trade alike but gold is not silver.
The gold-silver ratio fell as low as 44 toz silver to the ounce of gold today.
Platinum had a promising start but ended the session near the lows like gold and silver.
There is an interesting old-school head and shoulders forming in Bitcoin.
S&Ps had a random rally on extremely light volume and persistently declining open interest. That seems to be a pattern. From the middle of September to the middle of October open interest did exactly what it’s doing now. Then it goes up into expiration and the roll when a zillion options expire worthless…. But prices never move… like bitcoin the money in stocks is in fees, rolls and premium decay.
In other markets
Oil did nothing. The dollar continued to fall against the Euro and the Yen. Bonds closed on the highs in featureless trading.
my vibe
By the close today, all metals had severe downside reversals with silver and gold on extremely high volume. If this were the only high-volume reversal with a bearish divergence, I’d make a big deal out of it but it’s not. Silver has been so out of hand a day like today seems almost ordinary. But it’s not. I’ve been expecting these days since last year and now we’re here. The important thing now is what to do next… and what not to do.
Whenever I have doubts or uncertainty about markets the place I go for answers is the P&L. Whenever I can spend some time away from the screen and not be thinking about it then my position size is right for the markets. I spent most of the day shoveling snow today.
ADP employment tomorrow. Redbook. Day 1 FOMC.
night all … good luck in Asia…
JJ
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Whenever I can spend some time away from the screen and not be thinking about it then my position size is right for the markets...
Good stuff.
That right shoulder in Bitcoin has curled over & broken a trendline which has been in play from the start of this rally, it’s just sat on the 100-week EMA now. Ugly.