Shocker: April's silver rise WAS a short squeeze, NOT a speculative frenzy, the COT numbers bear this out......

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mrgneiss
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Shocker: April's silver rise WAS a short squeeze, NOT a speculative frenzy, the COT numbers bear this out......

I don't know how much discussion this has garnered on the previous blog, but it is shocking how the myth of a silver speculative frenzy has been perpetuated in the MSM and on many blogs, forums, etc.

Speculative longs decreased their positions throughout April, but short covering increased - in my book that is a short squeeze, and it ended when the short covering stopped.

http://pragcap.com/short-covering-not-speculative-buying-led-to-silvers-parabolic-rise

http://www.gotgoldreport.com/2011/05/hedge-funds-show-lowest-net-long-silver-positions-since-february-2010.html

http://seekingalpha.com/article/273824-long-speculators-return-to-silver-market?

http://silverdoctors.blogspot.com/2011/06/jp-morgue-and-hsbs-added-2000-new.html#more

Edited by admin on 11/08/2014 - 06:09

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lilbromarky1
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Thank you for this other

Thank you for this other view.  I guess I had assumed that when everyone said 40 to 50 was an intentional move by the EE in order to make the rug being pulled out from under that much more dramatic, that it was the truth.   Good to see another perspective. 

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Fighting Gael
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i beg 2 differ

the margin speculators in silver were the longs...
that is y silver got lambasted when margins were hiked...

if the speculators were short...
then the margin hikes would have have pushed silver to 65-70 easily...
as the shorts ( or margin players) would have had 2 cover.....

so i believe the/yours/their interpretation is incorrect...

lilbromarky1
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re

Fighting Gael wrote:

if the speculators were short...
then the margin hikes would have have pushed silver to 65-70 easily...
as the shorts ( or margin players) would have had 2 cover.....

Can you explain how that works exactly?  Having trouble imagining it.  Can you show an example with some easy made up numbers?

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mrgneiss
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The links that I posted

The links that I posted clearly show that spec longs, aka managed money, were decreasing their positions all through April.  Last time I checked, selling long positions should have downward pressure on price, not upward pressure.  Can you please explain to me how longs reducing positions can increase price?  If you can then I believe you will turn everything we know about markets on their head.

In case you didn't notice, the majority of the margin hikes happened AFTER the major drop in price.  And it wasn't speculators who were short, HELLO, it was the commercials.  So I believe you should go back to "Analyzing COT reports 101", no offense if you just don't know, but if you are a troll goodbye!

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mrgneiss
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I believe that both premises

I believe that both premises can be true; the EE suckered in a bunch of newbies and accomplished that by short covering and killed two birds with one stone.

The point is, it had nothing to do with any sort of investor frenzy, which seems to be the accepted reason in the MSM, what a surprise, and at least from the point of view of the COMEX the longs WERE decreasing, but certainly many got burned by other investment vehicles such as AGQ, SLV, SLW, etc etc.

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inchhigh
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COORDINATED EFFORT

I think the combination of the Sunday Night Takedown and the series of Hikes does support his conclusion.  Without the Takedown it is likely that some Shorts would have had to cover but thanks to the takedown they were In The Money and under less pressure.   Each of the series of hikes forced another Tier of longs to sell, allowing another set of Shorts to cover a portion at a gain and use the newfound cash to Short again at the higher Margin rate.  

If there had been a spike Sunday night rather than a takedown the snowball might very well have started rolling down the other side of the hill, forcing the shorts to cover and giving the longs new cash to pile on the pain. 

If there had been a single larger Margin hike it might have forced too many shorts into trouble for the size of the takedown.

The two actions together crushed the longs and emboldened the shorts, who may very well have been in the more precarious position when the market closed on Friday.

Inch

mrgneiss
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The rise was due to short covering.......

inchhigh wrote:

 Without the Takedown it is likely that some Shorts would have had to cover but thanks to the takedown they were In The Money and under less pressure. The commercial short position decreased by about 5000 contracts through the month of April, before the takedown. So obviously they were furiously covering before the takedown.

 Each of the series of hikes forced another Tier of longs to sell, allowing another set of Shorts to cover a portion at a gain and use the newfound cash to Short again at the higher Margin rate.  As illustrated by the COT for the spec longs, the majority were out way before the margin increases started, but the margin increases did scare a few of the remaining ones out.

If there had been a spike Sunday night rather than a takedown the snowball might very well have started rolling down the other side of the hill, forcing the shorts to cover and giving the longs new cash to pile on the pain.  I think part of the reason for the margin increases was that the Comex WAS getting worried about the exposure of some shorts, at least the ones without a direct line to Ben's printing press, and the margins were to protect the exchange from some shorts blowing up.

If there had been a single larger Margin hike it might have forced too many shorts into trouble for the size of the takedown. I agree.

The two actions together crushed the longs and emboldened the shorts, who may very well have been in the more precarious position when the market closed on Friday.  I agree it crushed the remaining longs and emboldened the shorts, but that was not the point of this thread, my aim was to point out that the FACTS point to short covering as being responsible for silver's rise in April.

Inch

I was actually quite surprised when I read these links - at how wrong the MSM was on this story.

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inchhigh
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Sorry,  I should have

Sorry,  I should have included the quote.  The conclusion I was referring to (I think the combination of the Sunday Night Takedown and the series of Hikes does support his conclusion. ) was in fact, your conclusion.

I was replying to this post:

"the margin speculators in silver were the longs...

that is y silver got lambasted when margins were hiked...

if the speculators were short...
then the margin hikes would have have pushed silver to 65-70 easily...
as the shorts ( or margin players) would have had 2 cover.....

so i believe the/yours/their interpretation is incorrect"

I think it is the shorts who were trapped and needed saving. They were covering the whole way up and it was running away from them.  Without the Sunday Night Takedown, a Margin hike would have sealed the fate of the remaining Shorts and delivered the Longs a boatload of cash to continue the pummeling.

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Mr. Gneiss,     Not the way

Mr. Gneiss,  

Not the way I would go about defending my position in an intellectual discussion on the merits of a thesis I'd posited for review and discussion with my peers.  But, WTFDIK.  

Your anaylsis ignores crucial aspects of the COT data.  Any market analysis requires consideration of the amount of, in this case, futures contracts trading hands (volume) and also the number of contracts in play, Open Interest (OI).  If a short book was being closed out OI would drop would it not?  If a large number of shorts were being covered, volume would be robust right?  

The volume was thin and got even thinner as April wore on.  Not the type of environment that signals a major participant covering their short position.  Also, there is a category of trader referred to in the COT reports as "small specs".  Small specs are retail speculators such as us denizens of Turdtown.  The small spec position increased during the month of April until it was at an historical extreme.   

My conclusion from these observations is that big money, both short and long, got out of the way during April and that the buying, on thin volume, was concentrated in the small spec category.  Inexperienced participants, geared up on margin, fueling a speculative blow off top.  I will cite one source, but it is a source rich in links supportive of its own work.  If you take the time to read it in its entirety, and read it carefully, I think you will find it enlightening.

http://fofoa.blogspot.com/2011/05/costatas-silver-open-forum.html

I'll also direct you to https://victorthecleaner.wordpress.com/  for more insight into, and analysis of, the workings of the PM futures markets.

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bensgone
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Very, very good thesis and argument

Fully supports the manipulative aspect of the PM's price suppression scheme which I believe was the cause of the subsequent smackdown at the beginning of May. This is an excellent post. Thank you !!!

bensgone
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Regardless the runup and smackdown were orchestrated

The evidence is overwhelming that manipulation is a 24/7 preoccupation of the EE, regardless of the specific mechanics of the futures and options aspect of the trading in Pm's, and who the players might have been at any particular time during this engineered event. The run-up was just as as planned and executed as was the smackdown in the PM's. So critical to the integrity and maintenance of the global fiat dollar con, the entire global financial system, and markets, that at all cost the PM's must be manipulated and the price suppressed.  The key concept here is thin volume, without which the subsequent smackdown would not have been possible, because with high volume the price would not have been possible to suppress.

mrgneiss
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Wow, and people call me condescending..........

Boardwalk Millionaire wrote:

Mr. Gneiss,  

Not the way I would go about defending my position in an intellectual discussion on the merits of a thesis I'd posited for review and discussion with my peers.  But, WTFDIK.  

Your anaylsis ignores crucial aspects of the COT data.  Any market analysis requires consideration of the amount of, in this case, futures contracts trading hands (volume) and also the number of contracts in play, Open Interest (OI).  If a short book was being closed out OI would drop would it not?  If a large number of shorts were being covered, volume would be robust right?  

The volume was thin and got even thinner as April wore on.  Not the type of environment that signals a major participant covering their short position.  Also, there is a category of trader referred to in the COT reports as "small specs".  Small specs are retail speculators such as us denizens of Turdtown.  The small spec position increased during the month of April until it was at an historical extreme.   The COT report for the last week of April shows the small specs at 33,144, whereas they are usually around 30,000, so I would hardly call 10% higher than the norm some kind of "extreme".

My conclusion from these observations is that big money, both short and long, got out of the way during April and that the buying, on thin volume, was concentrated in the small spec category. I agree with this sentence, it is not really different from what I am saying, but propose that it was as you say the shorts leaving the market, the short covering that drove the market up, not the small specs who as you say bought on thin volume, thin volume does not drive markets up, but massive short covering does.

Inexperienced participants, geared up on margin, fueling a speculative blow off top.  I will cite one source, but it is a source rich in links supportive of its own work.  If you take the time to read it in its entirety, and read it carefully, I think you will find it enlightening.

http://fofoa.blogspot.com/2011/05/costatas-silver-open-forum.html

I'll also direct you to https://victorthecleaner.wordpress.com/  for more insight into, and analysis of, the workings of the PM futures markets.

For the workings of PM market, I think this book is more instructive - "The Prince" by Niccolo Machiavelli

Umm, this is not the Harvard Business Review nor am I defending a dissertation, so please remove the object from your nether regions that is causing you to be so uptight.

I found it interesting how you chose to insult me before laying the groundwork for your rebuttal, so I replied in kind.

This is not a position formulated by myself, it is one formulated by others much more knowledgeable and I just happen to agree with it and wanted to share it.

All parameters of the COT data WERE analyzed at when reaching these conclusions, but I disagree with you, open interest is more instructive than volume, while volume is not to be disregarded.

The commercial short position was 25,412 on April 5th, and it declined to 20,613 by May 4th.  That is 4799 contracts or 24 Million ozs covered in a four week period - that is significant short covering - how can that be disputed - and it was by the commercials, and more contracts covered than the small specs bought so I argue it had a more significant impact on price - which was up.

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