this was dated before the recent onslaught..but suggests COT is such that another leg up is in the works................

The big question on the minds of silver investors and especially silver traders is whether the meltup in silver has run its course, or whether it has further to go. On Monday last week we saw temporary burnout with a Reversal Day showing up on the chart at a point where silver was fantastically overbought. On the basis of this, and also the extremely bullish public opinion on silver and extremely bearish public opinion on the dollar (the public are normally wrong) it was reasonable to conclude that silver had either topped out or that a correction was imminent, and that is what we did conclude.

However, the situation is now complicated by the fact that the latest COT figures reveal that Commercial short and Large Spec long positions have been dramatically scaled back just over the past week, which is not what you would expect to see ahead of a drop - what should happen is that Commercial short positions either ramp up or least remain constant. This latest COT chart by itself portends another upleg soon. To make life even more interesting we had a bizarre divergence between the performance of gold and silver on Friday, with gold soaring and silver reacting back by about 50 cents.

Even though they theoretically shouldn't, gold and silver normally move as if joined at the hip in their day to day fluctuations, so this huge divergence was most unusual. What can we put it down to? - well, silver has stalled out at its 1980 highs, and even though the 1980 highs are 31 years ago so we wouldn't expect much resistance at this level as very few will have held on for all those years, it is still a psychologically important level because a break above it means silver attaining new all time highs, and these highs happen to coincide with major "round number" resistance at the $50 level.

Therefore, if silver gets above this level we can expect the meltup to accelerate even more, and the COT chart does suggest that this level will soon fall. This is why silver held back on Friday even as gold advanced strongly - the $50 level is hugely important.