CFTC COT data in major buy territory for Silver

Profile of COT data in Silver is characteristic of major lows — will it be this time?

As readers of this blog know, I have been a pretty consistent bear on Silver ever since the April 2011 top. In fact, long-time readers know I called the absolute top. I have been a nemesis and the destination of hate of Silver bulls ever since.

The chart structure in the metals — Gold, Silver and Platinum — all remain negative. Major chart top have been completed, trends are strongly down and no signs of a bottom have appeared. Additionally, lower chart targets exist. However, I am tempering my view of Silver substantially. I am NOT a bull. But, I can no longer be a bear.

Several technical developments are worthy of note.

First, the decline in Silver reached hit the target of $20 to $22 I identified two years ago.

Second, the CFTC Commitment of Traders Data cannot be ignored. As shown on the chart below, the commercial hedger has one of the smallest short positions since the 2001 bottom. The small spec (really never much of a factor, but worthy of note) has, according to my records, the smallest net long position in history. The large spec (mainly managed futures and hedge funds as well as prop trading operations) has an extremely small long position, characteristic of price lows.

As a chartist I would need a 10 to 12 week or longer pattern in order to go long Silver. Obviously this does not exist. But, the on the basis of the COT data itself I must declare myself to no longer be a bear.

5.16_SI57_weekly

 Note: It must be emphasized that the market need not bottom because of the COT data. In fact, these COT data points can become much more pronounced, especially because we are in a dominant bear trend. Yet, there is real reason for not becoming emotionally attached to the short side of Silver. If you are short, remain short, but be alert.

$SLV, $SI_F

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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