"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


Thursday, May 5, 2011

Silver continues to plummet mauling the entire commodity complex in the process

The complete and utter rout of the spec side silver longs - thanks to the antics of the exchange who decided to bail out their member firms who had played cute and shorted silver all the way up and bled out a large portion of their trading accounts, is now contributing to further pressure across the entirety of the commodity complex, regardless of fundamentals in several of the markets.

Even the grains, are getting smashed as hedge funds and other large specs incur huge losses in silver and are now dumping everything as a result. Panic selling tied to paper losses takes on a life of its own so until the Comex exchange is finished wiping out the trading accounts of the longs for the benefit of their pals, the market will keep falling. When the selling does run its course, and it will at some point, several of these commodity markets are going to stage very sharp reversals to the upside since the algorithm-related selling is overdoing it to the downside in those particular markets with very strong fundamentals.

Remember, hedge funds are technical animals whose algorithms do not care one whit about fundamental factors. It is all about money flows and those are tied to the last price tick.

I have noticed this morning that silver's demise was finally too much for crude oil to bear and spec longs in there had no choice but to now cough up their longs in that market as well. At least that is welcome news to drivers who can get their gasoline a bit cheaper than last week.

The CCI continuest to plummet and as long as silver keeps moving down, so too will it. I do think however that some of the bigger commercials, particularly in the grain complex, are going to use the hedge fund selling to secure any long side coverage that they might need for their risk management programs.

Silver now looks like it is headed down to $35 at a minimum.


  1. It does seem kind of ridiculous that they would claim they're trying to protect markets by suddenly hiking margins to a ridiculous degree and tanking the entire commodity complex. Which commodities do you foresee having the sharpest reversals?

  2. We are witnessing a 1987 crash in the CRB Index unfolding...

  3. Dan, could you reload the silver chart, the left side of it has been cut off.

  4. Trent - thanks for the head's up - should be okay now

  5. "The complete and utter rout of the spec side silver longs - thanks to the antics of the exchange who decided to bail out their member firms who had played cute and shorted silver all the way up and bled out a large portion of their trading accounts"

    How does this process work exactly?

  6. This is getting worrisome especially since the dollar index could still move up a point or 2 before hitting resistance which could cause silver to break $35.
    This is scary, although it's always darkest before the sunrise...

  7. GDX holding support at about the 200 day MA is bullish for the metals.

  8. Scare me not, but into temptation..but deliver us from evil.

    Buying the dip Dan, this is Wal-mart style pricing...For those that missed the last run..now is your chance.

  9. Dan, silver open interest is quite stable in the last 4 days. Volume however is very high. It appears that new shorts are crashing the market only to cover before the close. But there is no net liquidation from longs. This is very strange and I think evident for strong hands accumulating during the decline.

  10. Ditto Shill!

    buying, buying, buying...

    Thank God I've got cash

  11. Hi Dan,

    Its against my religion to short silver or gold, but it isnt blasphemous to short
    platinum, copper or even coffee to hedge against miner weakness . Or is the crazy volatility just going to turn all of this around in a day or 2 ??? Horrible !

  12. great post Dan. how strange that a market as small and unique as silver can be effecting the broader commodity market, eh?

    I found this interesting comment on zerohedge the other day:

    Things that make you go hmmmmm

    2004-(5) - Silver goes from $4.50 to $8.25 in 9 months for an 83% gain. Silver then crashes almost 30% to $5.50 in six weeks.

    2005-(6) - Silver goes from $6.50 to $15 in 9 months for a 130% gain. Silver then collapses 35% to $9.50 over a brutal eight weeks.

    2007-(8) - Silver goes from $11.50 to $21 in 7 months for an 83% gain. Silver then gets crushed by 25% to $16 over six weeks.

    2010-(11) - Silver goes from $18 to $49 in 8 months for a 172% gain. Silver then crashes x% for a loss of $yy over six weeks.

    I wonder how the pattern will complete this time.


    i think we're going to see $32, maybe even $27 if support at anything beginning with a 3 isn't there.

  13. Halfwit,

    I do not know what religion you are, but I simply do not know of ANY place in God's word, the Bible, that states shorting anything is blasphemous! Father is in control and I am sure that there are those that deserve his chastisement who are long surely as there are those who deserve chastisement and short.

    Also know that this is all a paper shell game in terms of COMEX silver and gold, and is NOT the price you will pay or get paid when you go to buy or sell. If you are holding physical, then pay no attention to the man behind the curtain. His day is coming, AMEN.

    And good job imaginer!! I harken back to the book of Ecclesiastes: "..there is nothing new under the sun"

  14. Even after this week's massive correction, silver is still up over 4 fold from the 2008 lows. In another 2-3 years we'll look back at current silver prices from $150 the same way we look back at $8 2008 silver today.


  15. THANKS TRADER DAN ! This is one of my favorite blog where I always get some useful information that always helps me in learning something new..Thank you very much ! Thank you for making such a great blog :))

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