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Catch a falling silver knife - Notes on EJ's April 29 silver sell call

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  • Catch a falling silver knife - Notes on EJ's April 29 silver sell call



    We've received dozens of emails and phone inquiries over the past few days on EJ's Time at Last to Sell Silver ($ubscription) announcement on April 29, 2011 to inform subscribers of EJ's decision to sell all of his silver that day after holding it for ten years. As of May 5, silver prices have collapsed 27% since then.

    To save time answering each inquiry on the call individually, here is a summary.

    Five ways that EJ's silver sell call was unlike others you may have read:
    • Did not conflate silver and gold markets
    Said gold was likely to fall, too, but not nearly as much as silver, and may even rise. This correction is about the silver market, not precious metals generally, or about gold. In the event, gold declined only 2.5% while silver plunged 12% at the open the next day.
    • Waited 10 years to sell
    Didn't buy silver a year or two ago. Bought silver in 2001 and didn't sell it until 2011. Bought silver at $4.25 in 2001 when the price averaged $4.36 for the year. At the time an ounce of gold cost 63 ounces of silver. Sold when silver traded for $48.50, at 11.4 times the price paid.
    • One sell call in ten years
    Unlike the stopped clocks who have been calling for a silver price correction since the price hit $20, EJ has not warned once of an imminent silver price correction before last Friday. He made one (1) sell call in ten (10) years.
    • Sold within 2.5% of all time peak nominal price
    On the day of that one and only silver sell call, silver reached a London fix spot price peak of $48.70. The spot price EJ locked in for his sale was $48.50.
    • To-the-day timing
    Starting the very next trading day, silver prices plunged 16%, the largest two day silver price decline in history.
    EJ will send an ounce of gold to the first reader who can find another silver sell call that meets all of these five criteria.

    Five reasons why EJ sold silver on April 29 after waiting 10 years:

    Reason #1: The Gold/Silver ratio hit 32, near the all time low of 27 in 1978.

    Reason #2: Silver prices have risen far ahead of gold, a currency, and platinum, an industrial metal. The only possible explanation is that we are experiencing a silver bubble, likely driven by a one or more large players cornering the market.

    Reason #3: The Silver Stadium is packed to overflowing. Too many rabid and poorly informed silver fans in the stands for my taste. When I got in, the Silver Stadium was virtually empty.

    Reason #4: High volatility implies a turning point, as the market divides into two major groups, those who justify the historically high price that's out-of-whack with gold and platinum and those who can't. As a peak approaches, both camps get increasing nervous until the trading breaks to one side or the other. I'm betting it breaks to the downside.

    Reason #5: "The pigs get fat and the hogs get slaughtered." An 11x return over 10 years is acceptable.

    We'll use the chart below to either confirm or invalidate EJ's theory that the silver bubble is in collapse mode. It shows the actual silver price in black, a theoretical non-bubble silver price growth rate in green, and my April 29 price crash scenario in red.



    Original chart posted on Sunday May 1 before the market opened in Asia. EJ's silver crash forecast is shown in red.



    Last update, close of market Eastern Time May 6. We will update this chart from time to time as the silver price crash continues.

    Does EJ hate silver?

    EJ writes:
    "On a personal note, I'm certain that many of you, like me, like silver. It was not easy for me to sell silver I'd possessed for ten years, and I did keep a small amount as a souvenir. When I buy it back, I probably will not buy 1921 silver dollars again. I enjoyed giving silver dollar coins away as tips to wait staff at restaurants and to friends as gifts. With a cost basis of $4.75, and a sell value of $10, then $20, then $30 as the price went up over the years, the novelty of a 90 year old coin communicated my feelings for the recipients perfectly: to a waiter, that I appreciated superb service, and to a friend a lasting memento of my fond wishes for their good health and success. But it's important to not get attached to one's investments. There is always a time to sell. Your silver doesn't care about you, so you should return the sentiment and view it only as a means to an end. Abstract yourself from your investments, maintain emotional distanced, and focus market dynamics -- the price action, the behavior of market participants, the macro environment, and public sentiment."
    What about gold?

    EJ writes:
    "Gold is not a bubble. It may develop into one, but I doubt it because gold unlike silver is a reserve currency, hoarded by central banks as a back-up plan in case the global monetary system breaks down, which it has been in the process of doing for the past decade. If my theory is correct that gold is a currency and will behave like a currency during a bond market and currency crisis, then gold will not become a bubble and will not correct the way a bubble does but as a currency does following the acute phase of a currency crisis. For example, gold may rise to $6000 then decline to $5000 and more or less remain there as the "new" dollar price of gold after the crisis is resolved. Calling that peak price is a non-trivial undertaking that I have been preparing for since I purchased gold in 2001."
    Subscribers can click here the original Time at last to sell silver article and thread of discussion before, during, and after the silver market correction that followed.

    We will add the Time at Last to Sell Silver article to the list that begins in 1998.

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    All information provided "as is" for informational purposes only, not intended for trading purposes or advice. Nothing appearing on this website should be considered a recommendation to buy or to sell any security or related financial instrument. iTulip, Inc. is not liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. Full Disclaimer
    Last edited by FRED; 05-06-11, 06:01 PM.
    Ed.

  • #2
    Re: Catch a falling silver knife - Notes on EJ's April 29 silver sell call

    silver just fell below $40... 18% below EJ's call... 19.5% below the peak...

    Comment


    • #3
      Re: Catch a falling silver knife - Notes on EJ's April 29 silver sell call

      I'll be impressed indeed if silver falls to below $20 over the next 6 months...

      Comment


      • #4
        Re: Catch a falling silver knife - Notes on EJ's April 29 silver sell call

        Originally posted by FRED View Post
        We'll use the chart below to either confirm or invalidate EJ's theory that the silver bubble is in collapse mode. It shows the actual silver price in black, a theoretical non-bubble silver price growth rate in green, and my April 29 price crash scenario in red.


        There appears to be an error in chartsmanship here (and also in the same chart, posted in the original silver call thread). The x-axis appears to be off a year, as we are in mid-2011, not mid-2010.

        5/4 p.m. seems to have been fixed in this thread, but not in the original "sell silver" call thread thread... OK, not a big deal, I'm just nit-picky.
        Last edited by peakishmael; 05-04-11, 11:44 PM.

        Comment


        • #5
          Re: Catch a falling silver knife - Notes on EJ's April 29 silver sell call

          Originally posted by c1ue View Post
          I'll be impressed indeed if silver falls to below $20 over the next 6 months...
          a single 'sell' call in 10 yrs... day before the mega-est silver price crash ever... & c1ue sez...

          Comment


          • #6
            Re: Catch a falling silver knife - Notes on EJ's April 29 silver sell call

            In all fairness, the fact that margin requirements for silver were just changed probably is responsible for a large part of this big drop in silver prices. Six months from now, silver could be much higher (or much lower). I think it's a bit too soon to be calling this a successful call, from a long term standpoint. Sure, if EJ was advocating short term trading positions, the silver sell call would be a slam dunk.

            Don't get me wrong, I have followed you guys for years and years and I think this is one of the best, if not the best sites for rational investment analysis. (I actually have one of those itulip.com stock certificates you guys used to sell if that tells you how long I have been visiting this site.)

            Comment


            • #7
              Re: Catch a falling silver knife - Notes on EJ's April 29 silver sell call

              What an incredibly timed call! Well done.

              I look forward to EJ's future thoughts on where to allocate capital preferably for the little guy who doesn't have millions to invest.

              Comment


              • #8
                Re: Catch a falling silver knife - Notes on EJ's April 29 silver sell call

                Originally posted by nathanhulick View Post
                In all fairness, the fact that margin requirements for silver were just changed probably is responsible for a large part of this big drop in silver prices. Six months from now, silver could be much higher (or much lower). I think it's a bit too soon to be calling this a successful call, from a long term standpoint. Sure, if EJ was advocating short term trading positions, the silver sell call would be a slam dunk.

                Don't get me wrong, I have followed you guys for years and years and I think this is one of the best, if not the best sites for rational investment analysis. (I actually have one of those itulip.com stock certificates you guys used to sell if that tells you how long I have been visiting this site.)
                i wondered about that too. ej's argued since the fake-o stock cert days to not trade gold/silver... taxes & fees eat up your profits. how far does silver have to fall to justify the cost of getting out & in again? 30%? 40%? to $30 or $35?

                Comment


                • #9
                  Re: Catch a falling silver knife - Notes on EJ's April 29 silver sell call

                  Based on EJ's call/comments, I sold roughly 2/3 of my silver holdings last week at spot silver between $USD44.5 and $USD48.5.

                  However, I think it is important to keep things in perspective and understand that silver may never reach $US20/oz again.

                  YTD as of May 4th/11 - 2:45pm:

                  Silver - Start $30.63 / Current $39.80: +29.9%

                  Gold - Start $1,405.5 / Current $1,516.6: +7.9%

                  Comment


                  • #10
                    Re: Catch a falling silver knife - Notes on EJ's April 29 silver sell call

                    Originally posted by metalman View Post
                    a single 'sell' call in 10 yrs... day before the mega-est silver price crash ever... & c1ue sez...

                    I don't know if this was that difficult of a sell call. Market, limit, stop, orders, etc. tend to congregate around previous support/resistance levels, historic price levels, and psychological numbers. $48.70 (hunt brothers 1980's high) was a historic and psychologically significant number, along with $50 being a big psychological area for orders. Even with lax margin requirements, these are historically important price levels.

                    I had my take profit orders spread out between $48-$50 Most hit. Price didn't drop magically, it dropped because specs/investors/etc. who knew what they were doing took profit. When there was no one else bidding up the market it dropped, the suckers who didn't take profit lost.

                    Abstract yourself from your investments, maintain emotional distanced, and focus market dynamics -- the price action, the behavior of market participants, the macro environment, and public sentiment."
                    EJ said it himself.

                    Comment


                    • #11
                      Re: Catch a falling silver knife - Notes on EJ's April 29 silver sell call

                      You might want to check this out.

                      I intended to post it last night but couldn't keep my eyes open.

                      http://talkdigitalnetwork.com//goto/..._2011_0503.mp3

                      Ross Clark is one very smart and talented Canuckian.
                      I've followed his chart work for years.
                      When you open the MP3 have the pdfs open so you can follow along.

                      On Tuesday, April 26th Ross said the best target for the near-term upside in Gold was $1,580.
                      (It was trading at $1,504 at that time.)

                      I show the high for the June '11 Comex was $1,577.40.
                      I guess that's close enough for government work.

                      PS. Ross remains VERY bullish on Gold, and sees the top coming in less than two years at a price well above $2,000.
                      Attached Files

                      Comment


                      • #12
                        Re: Catch a falling silver knife - Notes on EJ's April 29 silver sell call

                        Originally posted by chr5648 View Post
                        I had my take profit orders spread out between $48-$50 Most hit. Price didn't drop magically, it dropped because specs/investors/etc. who knew what they were doing took profit. When there was no one else bidding up the market it dropped, the suckers who didn't take profit lost.
                        when did you get into silver? 10 yrs ago?

                        never trade out?

                        how many head-fake silver corrections went down since 2001 that blew out the technical traders?

                        maybe others here sold, but who except ej had the balls to make a 'time to sell' public announcement of the fact on the internet? for the record? in his own name not some anon alias? rep at stake.

                        think of the shit we'd throw at ej today if he was wrong & silver broke 50 & kept going up... or even if prices only dipped 5%?

                        good trades have many fathers, bad ones are orphans.

                        if we want to hear more of these... really... let's try to make it worth his while & not cut him down.

                        my 2 cents.

                        Comment


                        • #13
                          Re: Catch a falling silver knife - Notes on EJ's April 29 silver sell call

                          Originally posted by metalman View Post
                          i wondered about that too. ej's argued since the fake-o stock cert days to not trade gold/silver... taxes & fees eat up your profits. how far does silver have to fall to justify the cost of getting out & in again? 30%? 40%? to $30 or $35?
                          This is what I'm wondering too. The reasons to buy silver long term are still there, right? If you get past all the conspiracies, we're still using more than digging up so I would think it has to go up until it doesn't make financial sense to put it in socks and deodorant. I'm not sure what that price would be though.

                          Comment


                          • #14
                            Re: Catch a falling silver knife - Notes on EJ's April 29 silver sell call

                            Originally posted by metalman View Post
                            when did you get into silver? 10 yrs ago?

                            never trade out?

                            how many head-fake silver corrections went down since 2001 that blew out the technical traders?

                            maybe others here sold, but who except ej had the balls to make a 'time to sell' public announcement of the fact on the internet? for the record? in his own name not some anon alias? rep at stake.

                            think of the shit we'd throw at ej today if he was wrong & silver broke 50 & kept going up... or even if prices only dipped 5%?

                            good trades have many fathers, bad ones are orphans.

                            if we want to hear more of these... really... let's try to make it worth his while & not cut him down.

                            my 2 cents.
                            Whats wrong with trading in and out?

                            Of course he had balls here but, he has a product to sell, and he has done a good job. I don't want to take anything away but, it wasn't JUST ej and itulip members taking profit that caused the market to go down.

                            Comment


                            • #15
                              Re: Catch a falling silver knife - Notes on EJ's April 29 silver sell call

                              Originally posted by metalman View Post
                              when did you get into silver? 10 yrs ago?

                              never trade out?

                              how many head-fake silver corrections went down since 2001 that blew out the technical traders?

                              maybe others here sold, but who except ej had the balls to make a 'time to sell' public announcement of the fact on the internet? for the record? in his own name not some anon alias? rep at stake.

                              think of the shit we'd throw at ej today if he was wrong & silver broke 50 & kept going up... or even if prices only dipped 5%?

                              good trades have many fathers, bad ones are orphans.

                              if we want to hear more of these... really... let's try to make it worth his while & not cut him down.

                              my 2 cents.
                              +1.

                              Comment

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