• 7 hours 3 Restaurant Stocks In Full Recovery Mode
  • 15 hours Bitcoin Is Driven By Testosterone
  • 5 days Quantum Computing Is The Newest Megatrend In Silicon Valley
  • 7 days How To Invest In The Cybersecurity Boom
  • 8 days Investors Are Patient With Unprofitable Giants
  • 10 days Wells Fargo Back In The Scandal Spotlight Once Again
  • 12 days 5 Stocks To Keep A Close Eye On This Year
  • 14 days As Auto Giants Flail, Look To Chip Stocks For Gains
  • 14 days Central America Is Ready For The Bitcoin Hustle
  • 16 days China’s Video Game Restrictions Unlikely To Slow Down Booming Industry
  • 17 days Top Performing Stocks As Inflation Fears Grow
  • 18 days US Airline Stocks Take A Beating On New EU Restrictions
  • 19 days This IPO Could Open Sustainable Fashion Floodgates
  • 20 days Crypto Crime Nets Another $2B Fraudster
  • 22 days This Week’s Hottest Meme Stocks
  • 24 days Why World Markets Should Be Watching Germany Closely
  • 26 days Could ‘Cultured’ Meat Rival The Plant-Based Megatrend?
  • 28 days ‘Easy Money’: Crypto Is Still Attracting Newbie Investors
  • 30 days Foreign Syndicates May Have Stolen Up To $400B In COVID Benefits
  • 31 days Gold Jumps Above $1800 Ahead Of Jackson Hole Summit
What's Behind The Global EV Sales Slowdown?

What's Behind The Global EV Sales Slowdown?

An economic slowdown in many…

Another Retail Giant Bites The Dust

Another Retail Giant Bites The Dust

Forever 21 filed for Chapter…

Dan Norcini

Dan Norcini

Dan Norcini is a professional off-the-floor commodities trader bringing more than 25 years experience in the markets to provide a trader's insight and commentary on…

Contact Author

  1. Home
  2. Markets
  3. Other

Whither Silver?

In a bit of a surprise today, crude oil somehow managed to pop high after falling below $35 at one point. It seems like it was more a case of running out of sellers rather than aggressive new buying.

Part of the reason for the move higher was that same pestilential macro trade that seemingly surfaces every single time the Dollar moves lower, namely the macro boyz start buying commodities in general.

Even that however, did not allow pressure to abate all that significantly across the broader commodity complex. While the grains were higher on account of Dollar weakness, the meats could not get out of the way of falling cattle prices with the hogs dragged lower as a result. There was also weakness in the softs today as well as weakness in copper, gold and especially in silver, which managed to take out another downside support level as it set a fresh 6 year low.

Daily Silver Chart
Larger Image

At this point I have no idea how low silver prices might yet fall, but in looking at the monthly chart, there does not seem to be a whole lot of downside support in the market until one gets closer to the $12.65 level. It has already retraced every single one of the major Fibonacci levels from the 2008 low to the 2011 peak meaning that by definition, it should move to erase the entirety of the upmove off of that 2008 low. That is near $8.40. Could it get that low? Who knows? But one thing is certain, namely this is one ugly chart.

Monthly Silver Chart
Larger Image

Here's the problem with Silver... these hedge funds are still holding a significant number of long positions in the market.

Hedge Funds Outright Long Positions as % of Total Open Interest
Larger Image

For some odd reason, in much the same manner as the oddity of the hedge funds remaining on the long side of the crude oil market as it has collapsed, the hedgies remain married to the long side of silver. In and of itself, that is not necessarily a problem. The problem arises when DOWNSIDE CHART SUPPORT levels are being taken out, as is the case now. Those hedge funds are now going to be forced out.

Silver CoT
Larger Image

Hedge Funds Outright Positions in Silver
Larger Image

As you can see, hedgies have been increasing their short side exposure to silver, which is what one would expect them to be doing given the horrible technical chart pattern the metal is displaying but look at how SLOWLY they are reducing the number of their outright longs. The simple truth is the dark blue line on the second chart is ABOVE the red line meaning that there are more long positions in silver being held by hedge funds than there are short positions.

The further this thing goes south, and more importantly, the more downside technical support levels are violated, the more selling fuel there is in this market as that heavy long position goes deeper and deeper and deeper under water.

I realize that the hedgies have deep pockets but being long silver is draining those pockets very quickly!

One last chart...

Dow Jones/UBS Commodity Index Daily Chart
Larger Image

Look at the LONG TERM CHART:

Dow Jones/UBS Commodity Index Monthly Chart
Larger Image

Lastly, a long term view of both the Commodity Index and the Silver price. Given the chart of the Commodity index, why would anyone in their right mind be bullish silver when they are fighting a trend lower? That is why I cannot understand how the hedge funds have so screwed up this particular trade. Amazing...

Dow Jones/UBS Commodity Index and Silver Monthly Chart
Larger Image

 

Back to homepage

Leave a comment

Leave a comment