gene arensberg makes the point that even though silver has had a huge run in recent weeks, the commercial shorts don't seem willing to take short positions at these levels, at least not compared to gold. here's hoping it will be late 2005 all over again:

Silver COT

As silver jumped a whopping $1.36 or fully 9.3% COT reporting Tuesday to Tuesday (from $14.61 to $15.97 on the cash market), the large commercial COMEX silver traders (LCs) only added a teeny 195 contracts, or 0.5%, to their collective net short positioning (LCNS) from 42,779 to 42,974 contracts of net short exposure. The total open interest ROSE a big 6,866 contracts to 104,986 COMEX 5,000-ounce contracts open, after adding 2,041 contracts the week prior.

Source for base data CFTC for LCNS, London Silver Fix for silver from LBMA until 2-26-08 then cash market

For context, the chart below compares the silver LCNS to the total number of open contracts on the COMEX, division of NYMEX (LCNS:TO). When compared to all the contracts open, the commercial net short positioning in silver futures ACTUALLY FELL 2.7% for the week to a less than fully bearish 40.1%.

Source for base data CFTC for LCNS, London Silver Fix for silver from LBMA until 2-26-08 then cash market

What in the Sam Hill is going on here? At the same time that the Big Dogs of the futures world are all over the short side of gold, they are not really piling on the short side for silver. At least not nearly to the same extent they are with gold. While the commercial traders are very close to historic highs in LCNS:TO for gold, it is a case of “not so much” for silver. And, as silver just got through jumping and jumping big price wise, the LCNS:TO fell? Really? That is very interesting and could be a very important signal to us all.

If the biggest hedgers and short sellers are not convinced enough that much lower prices for silver lie ahead; if the big nasty COMEX “controlling” bullion banks are not piling on the short side for silver after the metal has already advanced as much as 90% off its October lows; if the big commercials are not “hammering” silver with an avalanche of net short positioning with silver at obvious resistance near $16, then there must be a reason for it.

To this analyst it suggests that the market is beginning to price in the coming, almost certain news of a shortage of commercial physical silver. Either that or it is beginning to worry that such an incendiary news event surfacing in the mainstream media is at least possible. Otherwise we would have expected the relative commercial net short positioning to be much higher, similar to the action in the gold market.

With silver so close to obvious and material implied resistance we need to keep our trading stops in close and tight, with an “at resistance” strategy. A strategy that allows for reasonable daily and weekly volatility, but gets us out to the sidelines in the event the market turns hard against our long positioning strongly and violently. At the same time, however, we caution that the current lower-than-expected LCNS:TO is a surprise, which warrants we also issue a cautionary breakout watch.

Mentioned now out of an abundance of caution, should silver trade convincingly to and through about $16.10 and stick it, that would very likely trigger both buy stops and a big wad of short trailing stops and the advance for silver could be explosive in both velocity and in amplitude. While we don’t really expect it right away, we certainly want to alert our readers to the possibility. And, the positioning of the large commercial traders shown just above shows we are not the only ones looking at that $16 line in the sand.

http://www.stockhouse.com/Columnists...