Open interest (futures & options) watch for gold silver

ancona

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Epic as always SA. Thank you.

I look forward to Harvey Organ on Saturdays when I can see the carnage.
 

swissaustrian

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So the sale is gonna end soon? :(
TFmetals' take:
... so we turn to the silver commercials. The gross long position which, as a reminder has almost always fluctuated between 30,000 and 40,000 for as long as I can recall, grew again this week. For the reporting period, the Comm gross long position grew by another 2,300 contracts to a record 57,847. As of last night, it may have reached to near 60,000. All of the Spec selling allowed JPM et al to cover some more of their naked shorts. This week they covered another 3200, bringing their total position down to 76,350. Most importantly, the Silver Cartel net short ratio has fallen to 1.32:1. This is the lowest I've ever seen, exceeding the low of 1.34:1 on 12/27/11. That record low marked a bottom and silver proceeded to rally from $26 to $37 in nine weeks.

I SIMPLY CANNOT STRESS ENOUGH HOW EXTRAORDINARILY BULLISH THIS COT REPORT IS. We are clearly on the cusp of a major rally. Did it begin today? Maybe. Will it begin next week or the following week? Perhaps. All I know is that it will begin...and soon. Be ready.
http://www.tfmetalsreport.com/blog/4623/saturday-gold

The rally might have begun on Friday, maybe we're gonna trade sidewards for a few weeks. I don't know. But when pms get going, the rally is gonna be ultra violent due to the record high speculative short positions. I'm also totally convinced that the important support levels at 1526/26.0 are going to hold. BTFD!

-----

For the paper traders here at pmbug:
If you wanna make a hedged bet on the massive rally ahead, you can open a spread trade with a long bias. Buy July calls and July puts with a 2:1 call/put ratio, as described here:
http://www.pmbug.com/forum/f3/how-trade-silver-volatility-using-options-343/#post2409
 
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ancona

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Take a look at Harvey Organs site. It looks like someone is holding on no matter what. Silver shorts are nearly equal to long positions, something I think I've never seen. I have a feeling like the market is being set up, but for what, I don't know. If this is the doing of a government agency, they certainly are keeping deep under cover. If this is private hands, then I would suspect one of the deep pockets crowd who publicly derides the barbarous relic gold and his little whore stepsister silver.

Either way, I believe we'll see in the next week or so.
 

swissaustrian

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80% Chance Of 40% Silver Short Squeeze

In the last 20 years, Silver shorts (in Silver futures, based on the Commitment of Traders data) has only been as high as it is currently for five periods. Four of those five periods were followed by considerable rallies in silver prices. The one period where prices flatlined (fell modestly) was a slow and steady rise in shorts (as opposed to the spike-like move currently). Of course, with near record amounts on the short side of the boat, it would seem clear where Silver should go next but this time is different we will be told.

Jul 1997: +70% rise over 29 weeks,
Nov 2000: -13.5% in 53 weeks,
Oct 2002: +13.2% in 12 weeks,
Apr 2003 +19% in 24 weeks,
Aug 2005 +114% in 37 weeks,

Average +40.5%

http://www.zerohedge.com/news/2013-04-08/80-chance-40-silver-short-squeeze
 

pmbug

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I really need to stack some more this week.
 

swissaustrian

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Well, what a week. There's basicly no need to talk about the COT, because it is as of Friday and the game has completely changed as of today. The data below is completely useless. We have to wait until next Friday to know the impact of today's horror session:

 

swissaustrian

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To put it simply: That's not the COT we were looking for.

1. The herd, ie speculators, was right :flail: . They were record net short in both gold and silver last week and they made a fortune due to the crash. Then they decided to cover shorts at the bottom on Tuesday. Now they're net long at decent levels, not ultra long, but also not at such low levels that would cause a massive short squeeze once we get going to the upside. On the brighter side, it means that speculators are willing to bet on rising prices. However, should prices drop, the liquidation effect from speculators is gonna be more drastical. Overall, a riskier position than we would wish for.

2. The commercial hedgers, especially producers and merchants, didn't change their positioning a lot. They covered a bit in gold and raised their net short position in silver. They were obviously not convinced that the bottom is in on Tuesday. This reporting period covers the data until Tuesday when the bottom was put in overnight in Asia. Maybe commercials covered some shorts since then. If our analysis about the production costs of gold/silver is correct, then producers should be in the mood to cover once they think the bottom is in. Merchants should also have the intention to cover given the very credible reports about massive physical demand.

3. Next week's COT report will give us more data. We need to see commercial short covering. If they'd start building a short position, we'd be in trouble.
 

pmbug

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Trader Dan's take:
...
When open interest readings increase, it tends to confuse some as it seems to contradict the usual pattern that has become so familiar. What is leading to confusion is that the SPREAD POSITIONS of some of the LARGEST TRADERS are not taken into account.

I have graphed two of these categories for you to see and noted the price action in gold that occurred over this same period. The two categories are the SWAP DEALERS and the OTHER LARGE REPORTABLES.

This latter category includes the likes of CTA's (Commodity Trading Advisors), CPO's (Commodity Pool Operators), Large Locals from off the Pit Floor and other Large Private Traders. While these groups do not have quite the same impact as the enormous Hedge Funds, they are still large enough to affect trading.



Can you see the big spike higher in their spread positions back in August 2011, when gold shot up to $1924 and then collapsed all the way to $1535 before it stabilized? Now look at this past week's spike higher. See a pattern here? By the way, the sharp increase in the number of spreads put on by the Large Reportables Camp ( 87,178) was the largest single week increase for that camp on record. The increase in the Swap Dealers' Spread position (+49,768) was also a weekly record.

There is your REASON for the SURGE IN OPEN INTEREST.

There is a strategy behind this which I will not get into right now in detail due to time constraints ( soon coming attraction) but suffice it to say for now that it is an attempt first to get downside protection and cushion losses for those who are long and are on the wrong side. Second - the proper use of a spread position can be very advantageous to traders who can time the markets accurately enough to leg into and leg out off these spreads. It requires considerable skill however to pull this off and trading accounts large enough in size to allow for the jump in margin requirements as one leg of the spread is lifted.

IF we leave off the impact of these spreads in the overall open interest numbers, it would have only seen an INCREASE of +14,460 compared to the previous week. This was based on the bullion banks increase of both their long and short positions (which incidentally favored more longs at this point than shorts) and an increase in the SHORT positions of the small specs, the general public who sold down into what might turn out to be a hole. When we take into account the sharp increase in the number of spreads, we see a completely different picture with open interest increasing over 154,000 contracts this week alone.

Therein lies the "mystery" for the open interest readings for the past week. If gold stabilizes here and begins to base build, watch for these spreads to be drawn down.
http://traderdannorcini.blogspot.com/2013/04/gold-commitment-of-traders-explains.html
 

swissaustrian

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I have to keep it brief today:

This week's COT is definitely looking better than last week's:



Gold: Commercials covered shorts aggressively into a rising market. It seems they don't think that there is a big chance for another crash. And why should they, they know gold trades close to production cost. Speculators actually reduced their net long postions. They're not convinced to cover shorts yet. We're climbing a wall of fear :mrt:

Silver: The Picture is a Little different, because silver fell from Tuesday to Tuesday. Commercials didn't cover shorts that much. Speculators also didn't change positions to the extent they did in gold. Silver is still looking a little heavy.

Keep in mind: The data is as of Tuesday with gold at 1412 and silver below 23. Things might have changed quite a bit in the meantime.
 

pmbug

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pmbug

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...
As shown below, on a month over month basis, US Bank & Large Trader long positioning has increased dramatically, with short positions being covered at the greatest rate of speed ever recorded:

...

Additionally, when looking at this trend from a “total-position” perspective, we see an even greater accumulated move being made on both the long and short sides. Short positioning by US Banks & Large Traders has been collapsing since the beginning of 2013, while long positions are being steadily accumulated:



...
http://bullmarketthinking.com/us-ba...hest-rate-on-record-short-positions-collapse/

Scorn if it pleases you, but know this. Gold is soon to become the friend of the market manipulators, and then the enemy of the dollar. ...
http://www.jsmineset.com/2013/06/11/outright-war-called-finance/

:paperbag:
 

swissaustrian

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Brief look at the recent COT as of last Tuesday:

Commercial hedging in gold is at very low levels, ie they're convinced that downside potential is very limited. Silver commercials are still reluctant to cover massively. Speculators in both metals are at low levels, but not at record lows.
 

DSAbug

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SA.. This is the lowest short exposure the commercials have had since the bull market began!
 

swissaustrian

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BIG moves in the gold COT this week, while silver positioning barely changed :flail:

The gold producers and merchants seem to be totally confident that there is basicly no downside potential.
They`re at just 4414 contracts net short and covered close to 10000 contracts in one week. This is certainly an all-time low short position by the producers and merchants.
Overall open interest (number of outstanding contracts) shrunk by 10% in one week, that`s a BIG move.

Just to put this into perspective, here is the positioning as of last Christmas (12-24-2012), seven months ago:



Positioning has drastically changed, but open interest stayed approximately the same.
 

Unobtanium

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This is a rather good but long and detailed read. See link for charts and data. The conclusion:


August 11, 2013
COT –Other Reportables get the Willies, Dump 54% of Gold Shorts
http://treo.typepad.com/files/20130811-ggr-cot-notes.pdf


Brief Bottom Line:
“Look Martha, the bullion banks are way longer in gold than they were in 2008!”

Despite very large changes in the positioning of the Swap Dealers and Other Reportables, which we find incredibly interesting, but unreadable, there is still a tremendous amount of heavy short covering firepower now via the traders we least associate with the short side of gold, the traders the CFTC classes as Managed Money, Other Reportables and smaller Non-Reportables (although there are 37,000 less OR shorts as of this week).

Relying on the Legacy COT for our own guidance, the COT remains strongly contrary bullish. We do so with the understanding and experience that teaches us that the COT is an imperfect, but still very valuable tool to use, especially if trading as a contrarian in the futures markets.

Right or wrong, our read of the Legacy COT is that the largest, best funded and presumably the best informed traders of gold futures have positioned for higher, not lower gold prices.

The fact that U.S. bullion banks are now the most net long we have ever seen them is icing on the COT cake. That simply and certainly says bullion banks are the least fearful of a falling gold price since at least 2008 and probably in 2001, when gold was bottom scraping in the $270s.

The relative commercial net short position or LCNS.TO remains near historic lows despite a rather large one week jump this time. The Big Hedgers are not only not aggressive, they are predominantly net long!
 
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