Sunday, September 21, 2014

A Few Silver Related Graphs

Any serious silver investor knows that there was an attempt to break silver down through its implied support on Friday, Sep 19.  In short term tick charts the sell raid took on a look something like this. 

20140920 Silver Sell Down

Take a look at the COMEX open interest graph for silver futures below.  The Key point here is that there is an extremely high open interest at the same time that silver is probing its implied lows.  In essence there is an unusual amount of “paper metal” in the system. 

20140920 Comex Siver Open

By the way,  a COMEX open interest of 171,260 contracts is equivalent to 856,300,000 ounces of metal.  (That's about $15.4 billion worth sold into the COMEX, mainly by traders and speculators who neither have the metal nor intend to have it in the future.) 

One more interesting graph before we get back on the road...  Just since July 15, as silver declined $1.97 or 9.5% (from $20.67 to $18.70 measured on Tuesdays) Managed Money traders have, by doing their usual trend-following, gone from hugely net long (by 45,943 contracts) to report an unusual net short position of 1,703 contracts.  

20140920 MM NET SI

Over that same period Managed Money has ramped up its collective silver short bets in a big way again.  To the tune of a near record 42,249 shorts, which is equivalent to 211 million ounces.    (That alone is an enormous amount of potential short-covering "horsepower," folks, and, once the MM traders become convinced the sell down is over, I believe they form part of the basis - the fuel of the next rally-reversal.  Here's the MM Shorts garph for reference.

20140920 MM SHORT SI

Meanwhile, behold an industry that sees little downside at current levels, reporting only 19,354 contracts net short.  Really?  For an entire industry?  That's not very much hedging... The only time in our records that the Producer/Merchants held fewer hedges on silver futures was June 22, 2006, when they held 17,872 contracts net short with silver then $10.26.  See for yourself in the graph: 

20140920 PM NET SI

(In this particular graph as the blue line rises it means a smaller net short position.)

Apparently the silver trade is not motivated to put on significant hedges with silver anywhere near the current range.   

Vik small


"Ya think silver volatility is about to spike much?" 


The Original
Vulture Speculator

Trading gold, silver and mining shares since 1980 with a focus on taking advantage of volatility extremes, Gene Arensberg analyses the markets through a basket of technical and fundamental indicators and shares his findings from time to time here at Got Gold Report. Mr. Arensberg has been quoted in the Wall Street Journal, Dow Jones MarketWatch, USA Today and dozens of other news organizations.

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