I know you all probably think I'm crazy, particularly after the action this week...but I'm here to tell ya, just below the surface, something is definitely brewing in the silver pit.
Let's start with gold where the changes were utterly predictable. For the reporting week, price fell about $40 while total OI rose by 2,156. As you'd expect, the Large Specs reduced their net long position by 5,900 and the small specs reduced their's by 6,800. Add them together and The Cartel was able to reduce their net short position by 12,700. The Cartel net short ratio is now a solid NEUTRAL at 2.47:1. (Anything near 2:1 is bullish. Anything near 3:1 has proven to be bearish.)
Silver is simply remarkable. Not so much this week by itself but in the total picture since the final QE∞ cap job in early October with price above $35. For the week, the only notable change was the Large Spec gross long position. These cats had hung in there for 10 weeks before finally succumbing (a little) this week. Large Spec gross long fell by 3,659 while their gross short also fell by 148 for a net reduction of 3,500. The small specs were actually 900 net positive for the week as they added 21 longs and covered 906.
And here's where it continues to get more and more interesting each week. Because the everyone-but-JPM commercials added 832 longs this week, JPM et al was only able to cover 1,752 shorts. This does reduce the total net short position by 2,600 but this is nowhere near what JPM would like. In fact, when we go back to the CoT of 10/2/12, the numbers for JPM are downright hair-raising.
For gold, the changes from 10/2/12 are exactly as expected. With price pushing $1800, The Gold Cartel was long 136,250 and short 405,520. By this past Tuesday, with price down well over $100, the Cartel was still long 137,780 but had reduced their short position by over 15% to 339,914. This entire drop in Cartel short interest, total open interest and price was entirely caused by speculators, both large and small, liquidating and closing contracts.
But check out silver! On 10/2/12, with price above $35, the total open interest was 139,117. As of Tuesday, it was 141,423. Hmmm. Now look at the details:
For the specs, the gross short positions are nearly unchanged. The gross long positions are nearly unchanged, too, with the Small Spec gross long only falling from 30,066 to 29,658 and the Large Spec gross long falling from 47,236 to 44,889 (and all of that drop came this week). So, it can be said that the reason JPM and their partners in crime haven't been able to cover in silver like they have in gold is because the specs haven't yet been chased out. Yes, you could say that, but you'd be wrong.
Check this out: On 10/2/12, the every-commercial-but-JPM crowd was long a gross total of 35,788 contracts. As of Tuesday, with price down over $4 in 11 weeks, the gross long position had risen to 40,347. That's an increase of 12.74%. So, the primary reason that JPM hasn't been able to cover shorts is that all of the other commercials are buying and, as we know, JPM is the seller/capper/manipulator of last resort! In fact, since 10/2, the total Cartel gross short position in silver has actually RISEN by over 2000 contracts from 93,628 to 95,686.
THIS IS UNPRECEDENTED!! NEVER BEFORE HAVE I SEEN THIS AND, FRANKLY, I DON'T KNOW FOR SURE WHAT TO MAKE OF IT. Ask yourself these questions this weekend:
- Have we finally begun "The Civil War" in silver?
- Is JPM increasingly and permanently isolated as the primary naked short?
- Why now? We've never seen this before so why is it happening now?
- What would happen to price if a "spark" set off a blaze that forced JPM to cover into a rising price?
Look, I know this is hard to believe, especially considering this week's deliberate and desperate manipulative takedowns. However, the silver market internals are increasingly bullish to the point where a huge 2013 is not only likely, it's a virtual certainty. At this point, all we need is a spark to set off an unquenchable fire of JPM short-covering where the silver market, for all intents and purposes, goes "offerless". The only question is: Will we get that spark? If we do, the outcome will truly be historic and explosive.
Have a great weekend.
TF
