Golden Minerals Company

I watch the way the juniors trade very closely and it seems that even as the Cartel seems to be losing the war to control silver they are increasing their efforts to keep the mining stocks from getting interesting. The most commonly watched indicator is the HUI and since this is composed of just 16 companies I think it is relatively easy to influence the trading if there is a snake lurking in the weeds. Pick the weakest stock or tow and hit it hard, to give the impression that the market is not 'a believer' in a rally for the metals.

Anyone that doubts that assumption can review the trading performance of a handfull of miners that reported earnings this week. The selling in some of them has been an avalanche, including one stock I own AEM, which has been crushed for $5 per share on a guidance miss of just a couple thousand ounces of gold production on the year. Earnings were excellent and cash flow a huge improvement, but the stock is hammered. Blood in the water attracts sharks. Add the stop-losses that people put up at round number and the effect like magnets to draw out the shorts. It happens all the time and if you can create weakness for market leaders often the specs will take profits across the board and wait it out. The latest NR from ECU had some issues that were red flags to my mind, and that could have drawn in some raiders.

The market is no longer just about the HUI and XAU. Now you have a few junior ETFs that are also having an impact both up and down. Weaker sentiment for the entire sector is going to lead to selling of the ETFs and that will trigger steeper dips for some very good stocks that should be trading higher with the metals.

Lastly add in the move by China to demand a higher capital ratio for its banks by boosting lending reserves. This is usually interpreted by the market as bearish for commodities and just one more weapon the shorts will seize on to try and roll over a sector.

Even as gold and silver move higher there are many bearish inputs driving the stocks lower. ECU has additional specific weak points to assist the shorts: it has a large float and is largely retail owned. Therefore even extemely bullish market depth can be overcome with a heavy selling program and retail specs are less likely to step up and ladder additional large buys once the stock goes red. Usually its the other way around, as specs get impatient and dump stock at the wrong times.

A final point, if there is an agenda to short ECU, it is attractive as a target because it is a low price stock. I notied SLW and FR were red early yesterday even as gold and silver were starting to run. However shortly after the stocks started following the metals as buyers swamped the sell pressure. Compare that to ECU, where the stock trades a million or two shares valued at a buck and change. If one really wants to go after ECU they will get a hell of bang for their shorting dollar. The same amount of money that will completely roll over ECU on a day like today would not make a dent in a bigger cap stock like SLW. Notice the difference in trading performance today for those companies.

I am about 50-50 on whether the price of silver can hold above $30. I fully expect a massive raid, a blitzkrieg to be launched with the utmost of urgency to try and trigger as much of the spec long position to roll over the contract month. The stakes are too high to allow a large batch of contracts to stand for delivery. Some suggest that the shorts will just offer to settle with a cash premium. Well, that is the same thing as buying contracts now at a premium to close a short. I have not seen it happen yet. I think we are seeing the small spec shorts getting hammered and closing for big losses the last 2 days. I fully expect the Morgue to dig and try one monumental effort to roll the silver market back under $30, trigger stop loss selling, and shrink the interest that stands for delivery for another contract month.

If they cannot succeed at that last ditch counterattack, then its game on. Otherwise juniors like ECU will consolidate and then perhaps attract new buying. I do not think there is any force on earth that can prevent the ultimate breakout for silver to new all-time highs, and I do not think the juniors can be capped and tripped up indefinately. I view all of these corrections as trading opportunities and try not to get greedy when taking profits because another chance to load up cheap is always just around the corner.

I am off for another ski trip this week, so good luck longs and I hope people do not get too discouraged if the price of silver is driven back down. The amount of ammo left in the Cartel locker is running thin and if they blow it all now, there may not be much left to hold off the next breakout. And there is still a good chance that silver breaks out for good this week and breaks the Cartel outright.

cheers!

mike