Another Silver Short Squeeze Looms

15
Wed, Apr 15, 2015 - 12:09pm

Back in March, Comex silver prices surged 13% in just 6 days as a massive Spec short position was squeezed. Could the same setup be appearing again, primed for squeezing later this month? It certainly appears that way.

Recall first the circumstances surrounding the squeeze last month. Conventional wisdom held that the FOMC meeting of March 17-18 was going to precede some sort of announcement of an imminent Fed Funds rate hike. In anticipation, momo-chasing Spec fund money came flowing into the short side of Comex silver.

In the three weeks between February 24 and March 17, Commitment of Traders data shows that the Large Spec GROSS short position in silver grew from 20,009 contracts to 37,238 contracts...an increase of over 86%...all while price was declining from a 2/26 intraday high of $16.62 to a 3/11 intraday low of $15.36. This massive buildup of Spec short positions left silver ripe for a "short squeeze" and, when the FOMC Fedlines of March 18 failed to include the anticipated rate hike language, it was off to the races.

Over the six trading sessions from March 18 through March 26, price rallied from $15.40 to $17.40, or roughly 13%, and over this same time period the Large Spec GROSS short position declined by nearly 15,000 contracts, back to near 22,000.

What has happened in the time since? Despite all of the lousy US macro data, including the awful employment data of two weeks ago, conventional wisdom has once again decided that rate hikes are imminent. To this end, silver has fallen back to near $16 and, with it, silver open interest and Spec shorting is rising once again. As of last evening, total Comex silver open interest now stands just 1,300 contracts below the all-time high of 179,123 set on March 18. Check this out:

DATE TOTAL OI CLOSING PRICE

Feb 27 160,392 $16.56

March 18 179,123 $15.54

April 2 168,308 $16.70

April 14 177,877 $16.16

To me the conclusion is quite clear. The risk in silver is NOT to the downside with a drop through $15.50. Instead, the risk is being taken by the Spec shorts. They are being set up once again for an epic squeeze. This move is not yet imminent and it may be timed instead for the next FOMC meeting in two weeks. This would coincide with May silver contract expiration and the mandatory Spec short-covering that would naturally occur anyway.

Therefore, could another squeeze and panic develop, similar in size and scope to March? Certainly. And could you profit from this move? Absolutely! Those willing to gamble in The Casino and confident enough to take a contrarian stand against the momo-and-headline chasing Specs, will very likely be richly rewarded. These profits can then be used to acquire additional physical metal to add to your stack in preparation for the eventual end of The Great Keynesian Experiment.

TF

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turd [at] tfmetalsreport [dot] com ()

  15 Comments

Orange
Apr 15, 2015 - 12:24pm

Slow Day

Okay, I will take first

silver66
Apr 15, 2015 - 12:25pm

second

heading to the LCS

Silver66

ArtL
Apr 15, 2015 - 12:49pm

thurd!

thurd!

Marchas45
Apr 15, 2015 - 1:13pm

Not 4th Again ?????

Yep!!!! Damn This Is Really Getting Old Time for a Break. No More Posting For A While. Lol

nadgeskaul
Apr 15, 2015 - 1:16pm

Uncanny Marchas

Great post, Turd. You have no idea how many investment decisions I have made based on your CoT and spec analysis...most CORRECT.

Kudos.

Nice 35 degree positive slope in metals and miners today; a rare treat. Oil certainly helping out.

Marchas45
Apr 15, 2015 - 1:17pm

So

How Do I Trade Some Longs?????? Lol

nadgeskaul
Apr 15, 2015 - 1:33pm

Longs

Well, I temporarily dumped my miner hedges this a.m. and it's helped profoundly.

Long-wise, I continue to dollar cost average into my favorites whilst adding a bit of a hedge. Waiting for the big break above 1360 or the melt-down below 1050 to start unwinding the hedges.

SamSchlepps
Apr 15, 2015 - 2:10pm

The gift that keeps on giving - Interview w China Premier

https://news.xinhuanet.com/english/china/2015-04/15/c_134154333.htm

Transcript of Premier Li Keqiang’s Interview with Financial Times Editor Lionel Barber

Its released now for maximum effect - and it subtlety yet so obviously 'scolds' and identifies the bad guys - USA. Yet it also opens up doorways for PTB to go through and validates some existing structures: AIIB and ADB , UN and sort of TPP. It speaks of China's GDP as slowing because simply we move to a more consumption focused economy and puts some size out there - 10 trillion.

Yet to me the money quote as is follows: " ...Mankind has successfully kept a large world war at bay in the past 70 years. We believe it is because lessons have been drawn from that part of history in which mankind acted stupidly ..." I don't know, maybe a few more skirmishes to keep the military happy, but does that mean WW is to be averted?

And then he (to me) clearly identifies the fall guys (going down in this pre-written play we are enjoying so much) - " ... Just now I mentioned the “stupid war”. What I mean is the stupid war of aggression waged by those militarists. We have the highest respect for all anti-Fascist fighters.

China has been so careful to keep its hands clean of the western bad parts and here seems to have put out a dividing line and assuming some responsibility - seems a change

"...I wish to emphasize that the AIIB and ADB can work in parallel in promoting Asian development. And the initiative of AIIB is not to reinvent the wheel. Rather it is intended to be a supplement to the current international financial system. China wants to work with others to uphold the existing international financial system. And we are ready to continue to play our role in building the current international financial system. And if there is a need for reforming the current system, we are also ready to work with other countries to help make the system more just, reasonable and balanced.

Barber: So Premier, you don’t share the view that I sometimes hear in China that we did not build the liberal post-war financial system, so therefore we have to create a new order. You are saying to me this is complementary, not a challenge, to the World Bank, the Asian Development Bank.

Li Keqiang: Let me first emphasize China was deeply involved in establishing the post-war international order from the very outset. China was a permanent member of the UN Security Council and a founding member of this world body. Although afterwards for some years China closed its door to the outside world, since the day it reopened the door, China has been playing its due role in the international economic and financial systems. At the same time, the current international economic and financial systems have opened up broad dimensions for China’s development. For example, we gained advanced experience from working with the World Bank and other institutions, and our WTO membership has also helped Chinese companies gain deeper knowledge about how they can compete with others under international rules. So China has been a beneficiary of the current international system in terms of both peace and development. Still China is a developing country, and we still have a long way to go before we can achieve modernization. We still need to draw upon the advanced technologies and managerial expertise of other countries. Past progress shows that pursuit of mutual benefit makes all winners. And that is in China’s fundamental interest. So there is no such thing as breaking the existing order..."

Last Comment - There seems to be so much here - just look at that last sentence above, so very very telling

Fred Hayek
Apr 15, 2015 - 9:17pm

@samschlepps -- nice words for consumption abroad

What's he supposed to say? "Die, round eye! We will bury you! Your imminent misery has all been our doing. Hahaha!"

And maybe his true sentiment is that there's no such thing as breaking the existing order because it's already broken.

SamSchlepps
Apr 15, 2015 - 10:54pm

@fredhayek - seemed a change in message

I agree with the need to consider audience and guess i was trying to note that yes we will bury the bad guys and that they are being clearly identified as the neocons - so we have our fall guys.

And in my review of items, China has been very careful to steer clear of any Western organization / infrastructure to the point of creating their own SWIFT, bank, etc. Yet they have asked to be part of the IMF SDR and now they take responsibility (by the Premier) for the UN and Security council. And then they say the existing order is not to be broken - just usurped?

Reading too much into it or change in messaging because somebody caved recently say at Iran talks - don't know, they never return my calls

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