Submitted by SD Contributor Marshall Swing:
Silver COT Report 10/12/12
Commercial coffers increased a mere 396 longs on the week and covered a minor -440 shorts to end the week with 46.06% of all open interest, a decrease of -0.45% in their share since last week, and now stand as a group at 285,020,000 ounces net short, which is a decrease of just over 4,000,000 net short ounces from the previous week.
Large speculators continued heavy buying adding 2,162 longs and added just a few 455 short contracts increasing their net long position to 199,125,000 ounces, an increase in their net long position of just over 8,500,000 ounces from the prior week.
Small speculators sold off -1,638 longs but increased 905 short contracts for a net long position of 85,895,000 ounces a massive decrease of 12,715,000 ounces net long from the prior week.
Silver was down over $1 during the reporting period and for the first time in two months the small and large speculators appear to have divergent strategies or results. If in fact there is such a thing as precious metal manipulation, then the commercials now have the speculators right where they want them with large specs buying a huge chunk of longs and the small specs selling their huge chunk. It could well be the small specs do not believe this silver rally has any legs left. As of Friday afternoon, price has deteriorated to $33.47 which is well below the roughly $34 price the large specs bought their longs. If price is raided again, we will see some significant long selling.
Few silver bulls doubt the cartel raided price this week with a massive short covering but interestingly the numbers for the commercials do not show that much action by those commercials, on the surface. What these numbers do show us is that if the commercials covered massive short positions to drop the silver price then they bought those positions back at lower prices just as hard as the speculators bought longs at lower prices.
Other than that theory, the only plausible explanation is so-called raid was actually the small specs selling their longs engaged in profit taking followed by the large specs buying. I do not subscribe to this theory as the total number of longs sold by the small specs is too high and would indicate some coordination in their selling. I tend to believe stops were tripped Friday afternoon continuing into Sunday trading in Asia.
So, overall, we have minimal powder expended by the commercials and a more than $1 drop in the spot price.
Conclusion, it will take some serious long buying resolution on the part of the small specs for this rally to stabilize or move up in price, otherwise, expect significant price deterioration in the near future.
As always, for your convenience, if you would like to contact the CFTC and express your views to them, I have provided you their phone numbers and I hope earnestly that you fill up their phone lines: http://www.cftc.gov/Contact/
[email protected] Chairman Gensler
[email protected] Commissioner Chilton
[email protected] Commissioner Sommers
[email protected] Commissioner O’Malia
[email protected] Commissioner Wetjen
[email protected] Director Meister
See you next week!