CARTEL FOOTPRINTS, HFT ALGOS AND PRICE DISCOVERY MOCKERY: JUST ANOTHER 24HR PERIOD IN THE PAPER SILVER WORLD

June 18, 2013

Silver trading over the last 24 hours shows signs of a cartel capping, High Frequency Trading algorithms and actual humans going long.

Real accumulation started at the New York open today and yesterday, only to be met with a capping effort as the London PM Fix approached — with today’s downdraft representing a classic smash down against stop loss orders, resulting in quick downward price spikes.

To most observers paying close attention to paper market silver trading, these shifts are old news. But the stark contrast between these trading phenomenon over the last 24 hours are so clearly visible it’s worth pointing them out.

By Eric Dubin:

Spot prices are derived from futures market trading and Kitco’s 72-hour “spot” charts have always been helpful when attempting to see shifts between regional paper trading centers. The last 24 hours offer a classic example:

Notice the tight trading band maintained for most of June 17th (red line)? That’s the sort of trading typically seen when High Frequency Trading algorithms comprise the majority of the volume on futures exchanges. Given the downward bias, this week’s example shows what most likely are HFT algos run in service of the cartel’s interest. But check out both the regular and after hours trading in New York for both June 17th and June 18th. There are visible buy-side upswings at the open of New York trading that deviate from the tight algo-dominated pattern encapsulating New York trading. Real accumulation started at the New York open today and yesterday, only to be met with a capping effort as the London PM Fix approached — with today’s downdraft representing a classic smash down against stop loss orders, resulting in quick downward price spikes.

Keeping tame price trends for the London PM Fix is one of the prime objectives of the cartel. More physical bullion deliveries are tied to the London PM Fix than any other paper-based price. But it’s noteworthy that this week shows new long-side interest coming out of New York, and we need to keep an eye on this to see if the trend continues.

It’s also worth pointing out the contrast Kitco’s 72-hour gold chart provides. It lacks the tight algo-driven pattern the silver chart demonstrates. This suggests silver algo-trading management by the cartel outside of New York hours executed to cap silver and, in turn, guide gold downward.

Just another day of bogus price discovery… But fear not. Bart Chilton is on the case and is “looking at the trades”.