The TU.SILVER Report
The Rally is Over Part 1: “Turning the Corner”
March 16th, 2013
Dear Investor; it is our pleasure to present this week’s report. In this issue, past analysis comes to a head as we analyze the trade that killed the rally. But first, let’s get started with the weekly market wrap-up:
| kitco.com Gold: | $1592.9 |
| kitcosilver.com Silver: | $28.77 |
| Mt. Gox Weighted Average: | $46.60 |
| Gold/BTC | 34.18/oz |
| Silver/BTC | 0.6174/oz |
First Impressions:
Gold and silver, priced in Bitcoins, have remained essentially flat for the last two weeks. The rally is over?THE CRASH IS OVERLet’s begin with a simple observation. The
crash is over. Silver has been flat for weeks, and the rally in BTC has ended. We can see this in the Silver/BTC chart using parallel line analysis. The 10-point trend which was in formation since February has been broken:
This gives us pause. Of course, this is the most interesting chart for TU.SILVER buyers, as if it’s true that we are now entering a consolidation phase it would be the time to accumulate shares. A move back to the .20’s could happen even faster than we hit .10 if both silver and BTC move against each other.
THE BITCOIN STORYThe 7-week chart shows a broken trend line. As explained last week we are in the middle of a speculative bubble. This is the critical moment. Will the bubble burst, or is there another leg up? In one sense, it doesn’t matter. If you just buy TU.SILVER now, you should come out ahead when the bubble bursts. On the other hand, if you are willing to risk staying in BTC, there might still be time for one more rally before the crash. Let’s take a look:
This is a Volume Analysis chart of Bitcoin since inception. There are three price spikes marked A, B, C. Each price spike has associated mass index moves marked 1, 1 and 2, or 1, 2 and 3. Finally, a line has been drawn down to the Money Flow index to show whether the volume was positive (flowing in) or negative (flowing out) at the time.
First a quick explanation of the chart and the indicators. The Mass Index was invented by Doland Dorsey. It is based on the exponential moving average. According to Dorsey, a high value indicates a “reversal bulge” and is a probable signal of trend reversal regardless of the direction of the trend. This occurs marked at the red and blue lines on the chart. Regardless of the fact that the mass index is declining, it is currently above the red line. This means the rally has not been confirmed to have ended. This important marker (the red line) will be a strong signal that the trend is over. Note that there are cases where a declining mass index has reversed above the red line, leading to new highs (such as peak A-1). Therefore investors will keep a close eye on the mass index to confirm whether or not this rally is dead, or is merely resting.
The second major indicator of volume shown here is the Money Flow Index, or MFI. This indicator shows money flow on up days as a percentage of total up and down days. This translates to price times volume, and shows how much money is going in and out of the stock on an instantaneous basis. It is therefore related to the volume analysis based on the EMA shown by mass index. How important is the MFI here? A line has been drawn from the end of each rally to the MFI chart below. One can instantly see that the MFI is a leading indicator which can signal a price crash during a speculative bubble. When the MFI declines below 80, this has been historically a clear signal that the party is over. We are currently at 60 in the money flow index. This is a very strong sign that the rally has ended and we are about to head very much lower. Of course, we caution you that no one can predict the future; but when you think about what the money flow index means, it is clear that buying has dried up in the market. With no more buyers, and no resistance to the downside, we feel there is a very large amount of negative potential energy which could be released and we would rather avoid this possibility by selling our Bitcoins and moving into a more stable asset.
However, and we cannot stress this enough; if the MFI turns positive at this time, and the mass index does not signal a reversal, this will be the mother of all rallies, and we could see a move break through $100 within days. The key is to keep an eye on the indicators and be ready to move when the signal comes. We only publish this letter once per week so this is not the kind of alert we can give you when it happens. You need to educate yourself and watch for it yourself, and make your own trading decision. All we’re doing is pointing out the obvious. We just hope this is interesting information for you.
WHAT WE’RE PLANNING TO DOWe can’t tell you how to invest because we have no professional qualifications as money managers. However, we can tell you that our plan is to sell Bitcoins for either USD or Silver (or some other tangible asset) as the MFI continues to decline. Should we see a reversal in the leading indicators discussed above, we will dump Bitcoins at whatever price we can. We expect by that time we will have all of five minutes to react before fear grips the market. We hope to avoid a 30% to 50% crash in the price this way.
We stand ready to buy back Bitcoins once we reach the next long-term trend line at a price range of $15 to $20 should we reach those prices in April and May.
DISTRIBUTION & INVESTMENT POLICY FOR MARCHAs mentioned in last week’s report we have sold all our JAH and current figures indicate we are now in the black by about 13 Bitcoins. We also hold the 221 unsold shares representing a further ~25 Bitcoins in value. This and other factors lead us to report a Book Value of 0.1195 for March 16th, 2013.
Due to the amount of money we made trading JAH we are planning to issue a somewhat larger dividend for the month of March. We will announce a tentative plan to pay a dividend of approximately 2%. This is not normal; we don’t expect to pay more than 0.5% on any calendar month, but this month saw exceptional profit and we’d like to share that with our unitholders.
Secondly, now that we have enough money to buy silver without having to borrow money, we will begin a tentative investment program to increase the sustainability of the fund. The end goal is to be able to increase the amount of silver on a per-share basis in a sustainable fashion, without risking the underlying silver position itself. To that end we will purchase approximately 1,000 units of BTC-BOND, and approximately 1,000 units of LTC-ATF.B1. Exact amounts and figures will be available in our audited Financial Reports for March 2013. We will hold all other income for operational expenses such as payment of dividends, the purchase of silver, storage fees, etc.
BTCJAM LOANWe have repaid the BTCjam loan secured in mtgoxUSD at a slight discount due to the rise in price of BTC. We made three payments of approximately 11.8 BTC each, and the total amount loaned was 35.8 BTC. This implies a profit of approximately 0.4 BTC despite having paid 2% interest in US dollars.
TU.SILVER: LEADING THE WAY IN BITCOIN PRECIOUS METALSWe thank our investors, and we thank rastapool. As of today, investors in TU.SILVER are granted free shipping on all redemption orders. We will review this policy on a weekly basis.
REACTION TO SILVER/BTC PRICECompany sales of silver at cost are hereby suspended. We will be placing an order for silver soon, and aim to hold said silver until the price recovers. We will review this policy on a weekly basis.
For more information on TU.SILVER and how to protect your money in today’s crazy BTC market, please visit the TU.SILVER page on BitFunder:
https://bitfunder.com/asset/TU.SILVER
