Originally published March 3rd, 2013.

The big story with silver is that the Commercials are continuing to unwind their earlier massive short position at a very rapid rate, and of course booking massive profits in the process. We had pointed out in the last update that until their short positions eased further, silver was likely to back and fill and that's what happened last week, as after a 4-day rally into Tuesday, silver dropped back for the rest of the week to make a new intraday low on Friday.

We can see this latest action on the 8-month silver chart below, which shows that after the high-volume capitulation panic low of the preceding week, silver staged a 4-day rally towards a resistance level before turning lower again and heading back to the vicinity of its lows. On Friday it bounced back quite strongly from intraday lows, leaving behind a bullish 'spinning top' candlestick on its chart, like gold, which is a bullish sign, especially as it occurred at a support level and at its channel support line - this may mark the final low for this downtrend.

While there has been much bearish talk doing the rounds in recent days and general gloom and despondency, we can see on silver's 3-year chart that it still looks alright. It HAS NOT broken below the key support at the bottom of its large trading range, and is thus considered (by us) to be in an ongoing large consolidation pattern within its major long-term bullmarket.

The support at the bottom of the large trading range is so clearly defined, so strong and so obvious that we need to be careful regarding the placing of stops. If we can see this you can be sure that Big Money can, so it is just possible that they will run silver briefly below this support to trigger the stops that are clustered beneath it, and mop up all the remaining holdings that they haven't already netted before a sudden and dramatic reversal back above the support, but the reality is that they don't really need to do this - they've squeezed most people out already, and all the indications are that this support will now hold, especially as the outlook for gold is now so positive.

We mentioned the COTs at the start, so now let's end by looking at the latest COT chart. While the Commercials' short positions in gold increased somewhat last week, albeit from a low level, they continued to plunge in silver, which is very good news indeed for silver bulls - and this was despite silver having rallied for 4 days into last Tuesday when this data was last logged. This is a sign that the Commercials are scrambling to book their large profits and get out of the way before a rally starts. When the price dropped again from Wednesday through Friday, you can bet that their short positions were continuing to be closed out for a massive profit at a very rapid rate, resulting in considerably lower readings than are shown on this chart. We can thus allow that Commercial short and Large Spec long positions have dropped back sufficiently to clear the way for a big rally to gain traction before long.

The conclusion to all this is that silver, like gold, is believed to have bottomed or to be very close to doing so, and to be readying for its next major uptrend that should break it out of its large trading range and take it comfortably to new highs. It may have hit bottom on Friday.