"When misguided public opinion honors what is despicable and despises what is honorable, punishes virtue and rewards vice, encourages what is harmful and discourages what is useful, applauds falsehood and smothers truth under indifference or insult, a nation turns its back on progress and can be restored only by the terrible lessons of catastrophe." … Frederic Bastiat

Evil talks about tolerance only when it’s weak. When it gains the upper hand, its vanity always requires the destruction of the good and the innocent, because the example of good and innocent lives is an ongoing witness against it. So it always has been. So it always will be. And America has no special immunity to becoming an enemy of its own founding beliefs about human freedom, human dignity, the limited power of the state, and the sovereignty of God. – Archbishop Chaput


Monday, February 28, 2011

March Silver Futures see continued drawdown in Open Interest

Open interest in the March silver futures contract experienced another sharp drop on Friday, adding to the substantial comedown seen on Thursday where it shed over 14,000 contracts. Friday witnessed a drawdown of a bit over 10,000 contracts bringing the remaining open interest in the March to 4,250 contracts.  That is 21.25 million ounces of silver.

If there is going to be a short squeeze on the March, I would think that we should not see any further sharp reductions in that contract. If the specs keep bailing out at the present rate, any fireworks will have to wait until at least May unless of course someone wants to play the very thinly traded April contract. At this point I would have to say that the prospects of a squeeze in the nearby are diminishing.

In watching the spread between the March and the May, the market is currently out of backwardation by about 2 cents or so.

If the longs want the silver badly enough they will force the March to a premium back over the May contract.

We will just have to wait and see.

Even without this occuring, the price action in Silver is very impressive with it up nearly 3% at one point during the session. It continues knocking on the door of the $34 level and although it cannot seem to muster the energy yet to take that out, it is thus far not dipping very much either. I think that if the mining shares could show any significant display of strength, it would help silver run through $34 but so far nothing doing on that front.


  1. Thanks for your constant insights into what is happening on the markets.
    I am iin admiration for people like you, the Turd and Harvey Organ for the sterling work you are doing.
    It is so valuable to hear the opinions of people with much more experience than myself.
    I acutally sold at 33.90 today because of a feeling that the big one might have to wait another couple of months. The reduction in OI supports me in this. Though I might change my mind again if it bounces back healthily from its current drop to 33.50.
    Respect to you Dan!

  2. Dan your analysis + commentary rocks.

    What I like most is the lack of bias. It is what it is.

  3. Dan, Love these 4 hour charts you maintain. I really appreciate that. It really helps part time traders like myself and I learn something almost every day.


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