- Largest combined commercial traders least net short silver since 2001, when silver traded for $4.20 the ounce.
- Traders classed as Swap Dealers report record net long futures position.
- Just since November 15, as silver fell $4.98 or 14.4%, combined commercial traders reduce their collective net short positioning by stunning 43.6%.
Please note: This article originally appeared in our Got Gold Report subscriber pages on Monday, December 26. It is being reprinted here in full for our entire readership as a holiday courtesy.
HOUSTON -- Just below is a holiday look at the COMEX silver futures positioning as of the December 23 Commodity Futures Trading Commission (CFTC) commitments of traders (COT) report, for data as of Tuesday, December 20. We are at a remarkable and very unusual condition that can only occur after a very large change the price structure with one-sided sentiment and with unenthusiastic Spec trader expectations. Very short term, expect anything, but longer term this COT setup is about as bullish as they come. A tremendous amount of bull-side “horsepower” is resting on the sidelines of the New York futures bourse.
We See the COT as Supportive of Our Planned Position Taking Just Ahead
The closest we have seen to the large trader positioning we see now occurred during the heat of the 2008 panic, back when the world thought there was a good chance of a full blown banking collapse. That is to say that this current positioning is extraordinary and likely very meaningful. We are not convinced it is very, very short term bullish (because momentum strongly favors the bears), but we are convinced it is extremely medium to long term bullish. We believe the positioning we see below gives us cover to begin adding in our green target box for silver with reasonable confidence, for the first time in over a year, if only the Trading Gods will allow it. (Vultures refer to our linked silver charts for that box placement.)
Absent a full-blown global meltdown ahead we believe that silver has used up a good deal of its inherent volatility to the downside, and we also believe that trader exhaustion has already begun. Thus the potential for a wild, backbreaker event and potential capitulation and then a major reversal has become much more likely. One can sense traders watching computer screens worldwide looking for it and ready to pounce.
Momentum certainly favors the bears very short term, but the largest of the largest traders of silver futures are definitely not positioning as if they see a great deal more downside for silver. That doesn’t mean they are “right” but we think it does indeed mean the large commercial traders are not piling on the short side of silver following its roughly 47% correction. To the contrary. See if you agree with that assessment given the large trader positioning, charts and a very few comments by us for context just below.
As usual we look first at the legacy COT report, which traders have followed for decades. The report combines traders into just three categories, commercial, non-commercial and non-reportable traders.
For the COT week, as silver fell $1.21 or 3.9% Tues/Tues, from $30.74 to $29.53 (the first sub-$30 close in silver on a COT reporting date since February 1, 2011, almost 11 months), the combined COMEX large commercial traders, as a group, strongly reduced their combined collective large commercial net short positioning (LCNS) by 4,940 contracts or a big 25% from an already very low 19,765 to a stunning 14,825 contracts net short.
Just below is the nominal LCNS graph for silver futures.
Source for all charts CFTC for COT data, Cash Market for silver.
The open interest for silver rose 2,854 lots to 101,165 contracts open. (more)