Another Silver Short Squeeze Looms

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

16 Comments

Orange's picture

Slow Day

Okay, I will take first

silver66's picture

second

heading to the LCS

Silver66

ArtL's picture

thurd!

thurd!

Marchas45's picture

Not 4th Again ?????

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

nadgeskaul's picture

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's picture

So

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

nadgeskaul's picture

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's picture

The gift that keeps on giving - Interview w China Premier

http://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's picture

@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's picture

@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 callssmiley

Safety Dan's picture

Flu Vaccination

Flu Vaccination Information

The Flu Shot Isn’t Working Well This Winter

CDC: Flu shot less effective this year because current virus has mutated

Flu vaccine barely working this year, CDC says

CDC: this season's flu vaccine only 23% effective

CDC says flu shots may not be good match for 2014-15 virus

So let's sell it to a 3rd world country where they can use it and not know how well it works!

This is a picture of an advertisement for flu shots in La Trinidad, Benguet, Philippines. The town is located about 3 km from Baguio. Most Filipino's only have access to internet from an internet cafe. They are not well versed on the CDC and Flu Vaccine Effectiveness.

The charge for the 'not good match' 'only 23% effective' 'vaccine barely working' flu shot is 450 pesos, or $10. Doctors will make about $4.00 per shot. A days wage at minimum is 300 pesos.

Do you think Big Pharma puts you and others first over their income and profits?

GuerrillaCapitalist's picture

China's Long Term Goal

SamSchlepps

Thanks for the interview. My conclusions that China has been learning our system and using it against us were reinforced with this quote: "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..."

I have always maintained that it is in China, Russia and other nation's best interest to not destroy the US markets or economy, but  to replace the petro-dollar and allow for the western economies to be subordinate to China and Russia.

Times are going to be vastly different, but I think prosperity is possible for those positioned properly. We all know what to do and as long as we keep dumping metal into the ponds, lakes and waterways of this once grand nation we'll have a fighting chance.

NW VIEW's picture

Off Topic, Field report from the NW View

Yes, I am off to work.  We are forming and pouring three house foundations this week.   We have been home builders for many years.  This industry has really changed and I need to rant a bit.   First, "where are the American born kids who what to work and know how to work?"   They are not on the job sites.  The Russians and south of the border people have taken over the trades.  The old times have quit, moved on to fishing and grabbed their social security checks.  (I like that ss check also as that fiat jumps into my account every month and has for several years.

The cost to find anyone to do the subcontracting is way to high.  I obtained a few bids for the labor on these simple foundations and they average about $4000+.  My son and I bought a new hauling trailer, new panels at a cost of $9000.  We built, poured three foundations quickly, saves $13,000 and the trailer, panels and tools were paid for with $4000 extra in our pockets.  We are now starting three new home foundations and it will take us two weeks.  Yes, we will save another $13,000 for two weeks work.  There are builders that are looking for anyone who can speak English and put in a foundation that is square, level, and complete.   We only work for our own customers who want homes.

YOUR KIDS ARE GOING TO COLLEGE, SPENDING HUNDREDS OF THOUSAND OF BUCKS, MOST WILL NOT FIND ANY EMPLOYMENT AND WE TWO CAN MAKE $26,000 PER MONTH IN LABOR INCOME.  The biggest problem is "who wants to or knows how to work?"   (Yes this old man is still packing panels).

Everywhere I look, I see big bucks for those who know how to get out of their pickup truck, turn off the computers and get involved.  Here I am, should just completely retire, not needing to work at all and golden nuggets all across the construction industry just screaming at me "Come do this job and I will pay you big time". 

Oh well, my morning rant is over, I need to meet my son at the foundation.  We will be pouring at 8 a.m. tomorrow if you want to learn a trade.       Jim
 

tyberious's picture

@Flu Vaccination

This is just a case US Pharma med dump. The good thing is most Pinoys have to pay for meds out of pocket, the bad thing is most Pinoys have to pay for meds out of pocket.

When I was there, I was told time and time again that this person need to sell their property to buy meds or pay for healthcare. It was very troubling but they took it in stride and I accepted it as the way it is there, plus they trust the government less than we do.

Orange's picture

'Dangerous' radioactive material stolen in Mexico

Well, I wonder who would want that? 

http://www.bbc.com/news/world-latin-america-32332271

Safety Dan's picture

Guess Who Is #193 In Countries Comparison For Net Trade in 2014

COUNTRY COMPARISON :: CURRENT ACCOUNT BALANCE

Current account balance compares a country's net trade in goods and services, plus net earnings, and net transfer payments to and from the rest of the world during the period specified. These figures are calculated on an exchange rate basis.

https://www.cia.gov/library/publications/the-world-factbook/rankorder/2187rank.html

192 UNITED KINGDOM -$117,900,000,000  2014 EST.

193 UNITED STATES -$385,800,000,000   2014 EST.

Balance of trade - Wikipedia, the free encyclopedia

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