Call me crazy but it looks like one of the best days in 30 years for silver, and this on the day of COMEX options expiry. Its like getting a stay of execution and winning the lottery on the same day for the metals, as many people (including myself) had been expecting a selloff into this key day. Based on the rising price trend into the close it sure looks like some of the small specs got burned today, and covered shorts at big losses. In fact, given the closing price today I suspect that the vast majority of open contract holders are making money right now. There were some people that opened positions above $42 in April but my guess is that most of them were blown away in May by the margin increases. And anyone that has been short since the bottom of the correction is feeling the squeeze more by the day. I think this will support the silver price in the weeks ahead.

The mining stocks were still not much interested in the session even while the metals are going bananas, but I note that SLW was very strong today. SLW is a very good bellweather for the sector and when it is up, it is usually leading silver higher. This too is a positive omen for the next week or so. And I have a lot of SLW leverage so I watch that one carefully.

Overall, I look at the action this week as very constructive. I was expecting a miracle DOW rally into the close but it seems the market manipulators prefer to show weakness heading into the weekend and I have no doubt they are cooking up some kind of stimulus package to dangle when it looks like things are breaking down. This would instantly add another big chunk of upside to gold and silver even as the overall markets recover. And I think oil is a great way to play any new stimulus spending since that sector is hit even harder than the metals right now, and oil too will instantly bounce on any new spending initiative.

For ECU the players have brinkmanship down to a fine art, and it sure looks like the shorts are betting on the deal falling apart. I have seen no indication yet that may happen. Watch for the mother of all crosses to show up immediately before the merger deadline, and that will cover off most of the reported institutional shorts. I can think of one participant with many millions of shares that could possibly have swung a deal on the quiet to transfer over their position to the shorts, and backstop the beatdown in this stock over the last few weeks since the deal was announced. It is the most logical explanation on why the shorts would take on so much risk now with the deadline so close. Either way, I do expect the merger to happen, and the share price to recover once it is settled.

Have a great wknd!

mike