Silver COT Report 7/27/12: Commercials Add 1.6 Million Ounces to Net Shorts

Submitted by SD Contributor Marshall Swing:

Silver COT Report 7/27/12

Commercials sold off  -1,016 longs on the week and covered -696 shorts to end the week with 44.42% of all open interest, down -1.36% in their share since last week, and now stand as a group at -77,275,000 ounces net short, about 1,600,000 more net short ounces from the previous week. 

Large speculators sold off 1,860 longs while grabbing 1,357 short contracts adding to their net long position to 40,795,000 ounces, an increase in their net long position of over 2,500,000 ounces from the prior week.

Small speculators gave up -263 longs and covered -80 shorts for a net long position of 36,480,000 ounces a small  decrease of about 915,000 ounces net long from the prior week.

We will start with the small speculators who only gave up -80 shorts.  Remember two weeks ago they had collected 2,659 shorts ending at $26.77 and then covered -2,156 of them last week ending around $27.26 on the price rise which tripped their stops.  That left a difference of just over 500 contracts and I am surprised they did not unload all of them this reporting period as they had ample opportunity into the week’s close at about $26.90.  No doubt their short positions are gone now into the price rise from Wednesday until today at $27.70.  They probably missed their best opportunity for a profit and hopefully did not take too big a loss.

Truly interesting are the large speculators who took huge new long and short positions.  Remember they had added 1,123 shorts last period and here they add another 1,357 positions.  No doubt they have lost all of those positions into the price rise late this week.  Their picking up those 1,357 contracts is no doubt why you see the swap dealers with a new 1,314 long positions taking advantage of shorts bought at the wrong time.  Their losses on these shorts will no doubt further dampen their interest in the market.

This was my quote from last week:

I think it is a safe bet that price is on the way up next week as the commercials will swoop in to clean up those large speculator shorts and the remaining small spec shorts.

Well, I was right on price but on the overall short tallies not so good.  Better to be right on price, I think.  Tallies can be deceiving since those short positions could have been covered during the week and then repurchased.

Where is price going next week?  A couple of clues here, first the swap dealers picked up 728 shorts but probably lost them towards the end of this week.  Second, the swap dealers and the large specs both picked up a lot of longs but we do not see a corresponding purchase of shorts by the producer merchant so an attack from the producer merchant may be muted until later.  When price rises and the commercials do not purchase shorts on the way up it is the same as blowing the trumpet that they want price to rise.  However, my guess is they bought shorts from Wednesday to Friday so I expect to see a raid soon.  There are a lot of new longs out there that need to be collected.

As always, for your convenience, if you would like to contact the CFTC and express your views to them, I have provided you their phone numbers and I hope earnestly that you fill up their phone lines: http://www.cftc.gov/Contact/index.htm and email addresses as well:

ggensler@cftc.gov  Chairman Gensler

bchilton@cftc.gov  Commissioner Chilton

jsommers@cftc.gov  Commissioner Sommers

Somalia@cftc.gov  Commissioner O’Malia

mwetjen@cftc.gov  Commissioner Wetjen

dmeister@cftc.gov  Director Meister

See you next week!

Marshall