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.
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…
Submitted by T. Ferguson, TFMetalsReport:
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.