As the silver CoT report data systematically, almost robotically degraded into the September 2012 top (despite the seemingly bullish coming of QE3) NFTRH used to ask week after week “Who are those guys?” doing its best Butch Cassidy while evaluating the gathering short interest.
Below is the CoT graph from NFTRH 203 dated September 9, 2012. Week after week ‘those guys’ were ganging up on silver and we all know what soon happened; a harsh bear market down leg for the precious metals.
Here is what #203 had to say about it at the time (keep in mind the charts of HUI, GDX, GDXJ, etc. were very bullish looking then off of their respective ‘W’ bottoms). I believe in letting subscribers bear witness to unpleasant things (rather than playing the happy bull here to take you to the promised land of monetary riches) and trust they will do what is right for them and their situations.
In 20/20 hindsight, anyone who took the below seriously in September of 2012 avoided the bear market, which is exactly what I did. Although it’s all about making money in this racket, I know. But first you’ve gotta be intact and ready for the opportunities.
Precious Metals Bottom Line (NFTRH 203 excerpt, 9.12.12)
Gold… bullish, but over bought short-term.
Silver… bullish, but over bought short-term.
Gold stocks… bullish, over bought, liking the economic backdrop that sees a potential for their product (gold) to out perform their cost inputs (oil, materials, humans, etc.) as well as the potential for panicked monetary policy which as of today, mostly remains a “potential”… and yes, that’s a caveat. Here is another caveat in the form of the CoT structures for gold and silver.
Folks, the goons did not blink last week. What happened was that after Monday’s big upward surge in the metals, the speculators got longer and the commercial traders increased their short positions.
The commercials are considered the smart money – at least they are considered that way by gold bugs when it suits their bias and commercial net shorts are moderate. Any gold bug now touting ‘TO DA MOON!’ had better not be leaving the CoT out of the analysis after back in early summer touting it.
If you start to hear the usual boilerplate about massive short covering to drive gold to 3000 and silver to 100, be all the more cautious for short-term turbulence. Dialing out to the general state of the precious metals it is difficult to see a bearish case on the big picture beyond any nearer term reactions. But the CoT structures are now quite bearish unless gold bugs are going to finally get their long awaited massive short-covering moon launch rally. For the sake of mental health, why not assume it is not going to be different this time? Again, CoT is in bearish alignment.
Current material resumes…
Today’s silver CoT is not nearly so systematic as it lunged, as if to compel Jack Chan, Clive Maund and your friendly blogger here – TA guys all – to make note of it in no uncertain terms.
But this time it came out of nowhere as opposed to 2012’s easily readable march toward a bearish state. Back then we took note of it and prepared for its worst case implications, which came about with the short structures against silver being a prime kickoff to the worst of the bear market.
But what do we make of the jagged, out of nowhere harpooning of the last 2 weeks? Is this a picture of desperation by operators using tools we can only speculate about? Is something broken out there? Is the mother of all inflations about to visit or maybe a deflationary episode? Or maybe it is just business as usual in the world of COMEX, some boyz playing spreads between metals and miners.
Point is, I just don’t know what to make of the macro at the moment (and I just said as much in an NFTRH update). But I do believe gold and silver are right in the thick of it and that what is going on today (during the termination process of QE3) is different from what went on in September of 2012 at the dawn of QE3.
Very very interesting markets my friends. So interesting that at this precise moment in time I would not even pretend to know fully what is going on. But this CoT is abnormal and with gold very over sold vs. silver there will be macro implications and you can bet I am going to figure it out before too long.