"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


Friday, August 31, 2012

Hedge Fund Silver Shorts getting Squeezed Out

Take a look at the following charts of the positions of the hedge fund community in the silver market and notice what has happened to them as a result of the break of overhead resistance levels on the technical price charts. Shorts are being forced out as fresh longs invade the market.

You should also note that this data does not include today's HUGE move higher which no doubt caught a large number of fresh top pickers off guard.


  1. Very appreciated, Dan.
    Do you have an opinion about the hugely deteriorated Commercial position in the COT in the last two weeks?

    ps: isn't it incredible that the world's fastest routers are placed as close to the exchanges as possible to benefit in the micro or even already nanosecond-ranges, but at the same age, where all positions are availble with the press of a button, we have to wait until Friday to get a picture of the COT at last Tuesday! IMO this alone is a scandal for itself.

  2. Endzeit;

    Keep in mind that a build in the both the swap dealers' and in the commercials' short position has been the norm in both silver and gold for more than a decade now anytime we get a run higher. Hedge fund money comes in on the buy side and that is what drives these markets higher. I never worry about a build in the commerical short position unless a market begins to lose momentum to the upside and then violates a downside support level. That is when the potential exists for a bigger downdraft.

    Over the last decade I have had to deal with a constant barrage of top callers in the precious metals community who seem to ascribe to themselves the magical ability to decipher the COT as some sort of Holy Grail, that is an infallible guide to predicting declines. Most of these guys could not trade their way out of a wet paper bag. They end up costing the folks who follow their useless advice a lot of money.

    Let the markets tell you when they are going to decline. When you do a get large build in a commercial short position and a very large opposing speculative long side exposure, then you become alert but you do not dump your entire position. Who is to say the market cannot continue going higher?

    Good traders periodically book profits into a market moving higher as they lighten up and cash in some gains but they leave the rest of the position on the board and let it run as long as the market trend is higher. Only when the support levels are taken out does one then move out and wait for another entry point on the next test of support.

    On the currentness of the COT Reports, I am with you on that. In this day and age we should have a much more timely report. It has definitely improved since when I began trading as we used to have the report come out every TWO weeks only!

  3. Steven:

    Thanks for the compliment. I do my best to be objective even though I am a long term bull on both silver and gold. Markets rarely move straight up without any pauses and many times even the longer term bull trend will be interrupted by an intermediate bearish trend that needs to be accounted for.

  4. Hi Dan, Great charts as always!
    I was wondering if you could help me understand how the price is easily moved up or down on light volume, I would think that high volume would move the price more???

    Also concerning manipulation, I was watching very closely near the end of june when the price of silver hovered around $26.11/oz. It was there awhile! How much silver would need to be sold to trip the $26 level? I would think that if someone wanted that $26 level to be tripped to trigger all those stop loss orders below, that would have been the time to do it, but it never happened. I wonder how much silver would need to be sold to make it go down 12 cents!!!!

  5. Dan,
    thank you for your great explanations! I never thought of seeing the COT relative to the current trend of the market. Great thoughts to chew on.

  6. Dear Dan,

    May I dare ask you where do you find those very useful charts, so that we can follow them any time by ourselves?
    They seem to me extremely useful!
    Thanks a lot if you can share :)


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