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Old 06-28-2012, 08:29 AM   #1
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Unhappy Deciphering Silver - Trader Dan

Quote :
... Hedge funds are building short side exposure to silver. I have only included the last 18 months worth of data but as you see, a mere month ago and this category of traders has been as bearish as they have been in a good while.

If we draw out the chart a bit longer, it becomes quite insightful. Notice back to the summer of 2008 when the credit crisis first erupted. The outright short position of the hedge funds is now even larger than it was at that point.

If you combine this with the fact that even as hedge funds are LIQUIDATING long positions in silver there is at the same time, some funds in this category whom are now building SHORT positions, it does not take much market understanding to realize why the price of silver is moving lower. ...
http://traderdannorcini.blogspot.com...ng-silver.html

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Old 06-29-2012, 10:47 AM   #2
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OMG, "deflationary spiral" and self-fullfilling prophecy in silver prices! Help us Uncle Ben, print some more $, you are our only hope... Erm, I am preaching to the wrong guy, am I?

To quote Metallica: "so f..g WHAT?!". Just give it some time, and the more I see, the more certain I am, that the eventual unwinding of the PM spring upwards, will be a hell of a sight . The spring is getting wound tighter every day.
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Old 07-01-2012, 05:54 PM   #3
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Commercials (JPM, et. al.) continue to reduce their short exposure. Large speculators (hedge funds) continue to build short exposure:

http://www.silverdoctors.com/silver-cot-report-62912/
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Old 07-01-2012, 06:01 PM   #4
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Trader Dan's take:
Quote :
...
What has been happening is that hedge funds have been liquidating long positions across the entirety of the commodity spectrum and building short positions in anticipation of further declines in the growth of the global economy. The craven capitulation by German Chancellor Merkel to the demands of the beggar nations of Spain and Italy, roiled the markets and scared the hell out of the shorts and enticed a huge wave of fresh buying to boot.
...
Hedgers, which is what these folks are, cannot hedge anything in this sort of wild market environment. Their hedges get all blown to hell and force margin calls to them just like any other trader has to deal with. With these almost incessant price reversals, both up and down, reading the markets has become nigh an exercise in futility for risk managers. How are they supposed to hedge future production or future costs in an environment in which prices reverse 10% in a single day. Is this a change in the trend? If the market going to reverse? Have the market dynamics of supply and demand changed? What happens if we read this wrong and institute our hedges and then the market totally re-reverses on us again?

More and more commercials are no longer comfortable using futures contracts for risk management. Instead they are entering into private forward contracts innoculating themselves from this new brand of fools known as hedge funds. While the exchanges may pat themselves on the back for opening their doors to the HFT crowd, the hedge fund crowd and the quant crowd, ultimately they will merely watch the backbone of the futures industry slowly begin to exit. That will empty the playing field of the hedgers and leave the casino with only more of these other parasites to prey off of one another.
...
If risk is out the hedge funds turn sellers, then look for this index to drop lower with silver going along for the ride and losing ground against gold.

If silver is going to get anything going to the upside, it will first have to mount a successful challenge of today's high near $28. Above that, resistance lies near $29 and then another dollar higher at $30. If silver can get a handle of "3" on it and keep that, then we will have a chance of seeing some fireworks.

If that is the case, EXPECT bullion bank selling and swap dealer selling to meet this rally. This is when that segment of traders will sell the silver market, on the way up, not on the way down as some of these "blame everything on Morgan" advocates continue to assert. ...
More: http://traderdannorcini.blogspot.com...el-silver.html
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Old 07-01-2012, 06:27 PM   #5
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The COT data is only covering the preceding week until tuesday (6-26), i.e. the massive drop on thursday and the short squeeze on friday are not included in the data. Next Friday's COT is going to show what went on the during the last two days of the week.
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Old 07-05-2012, 11:40 AM   #6
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Gene Arensberg's contrarian take.

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Old 07-05-2012, 03:45 PM   #7
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I don't get it. After going on for ~8 min on how shorts are at a historic low, he calls for a super short squeeze...with no shorts, how is that possible?

But most of these guys use totally flawed logic spun to agree with their thesis.
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Old 07-05-2012, 04:06 PM   #8
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While there are not as many shorts, there are still in fact a lot of short sellers. If they get their nuts squeezed hard enough, they will have to buy and cover. I believe however, if they get squeezed hard enough, JPM will paper the market with a blizzard of naked shorts to cap the price. What we really need is real organic buyers demanding delivery of the metal they already hold paper on at the comex.
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Old 07-05-2012, 04:21 PM   #9
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Commercials (ie. JPM et. al.) have reduced their net short positions. Large speculators (ie. hedge funds) have historic high net short positions.
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Old 07-05-2012, 04:40 PM   #10
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Originally Posted by PMBug View Post:
Commercials (ie. JPM et. al.) have reduced their net short positions. Large speculators (ie. hedge funds) have historic high net short positions.
This is the key.

There are different categories of shorts:
The commercials are supposed to be hedgers, i.e. producers, merchants, bullion banks, recyclers etc. (in theory) they use paper shorts to offset physical longs. JPM is also part of this category because they CLAIM to be hedgers.

The speculators on the other hand are in paper only.

The swap dealers do the opposite of their counterparties, so they're hedgers too. Swap dealers beeing net LONG at historicly high levels is sign that the over the counter derivatives market is also heavily short.

As Mr Arensberg explains, the current setup of very low hedging activity combined with massive paper shorts by speculators has historically been indicating bottoms. Hedgers usually know best when to cover shorts. Speculators (as a group) get it wrong, both on the long and the short side. If they get a trade wrong they need to get out quickly because they don't have an offsetting gain on a physical position.
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