gene arensberg writes about the silver market:

Silver Breakout Watch

Over the years we have developed respect for when silver refuses to “answer” gold’s advances, and this time is no different. We remain on the sidelines with our short-term silver trading ammo for now, but today’s big, 70-cent short-covering style rally in silver (to the $18.30s net) and the snappy dip in the GSR to a 65 handle is certainly encouraging.

The minor change to the silver LCNS is a rounding error and does not suggest much to traders either way. Having said that, what we can also say is that we cannot point to any aggressive “hedging” by the commercials in this report and that means they are not at all confident in lower silver prices. If they were, we can bet they would have been aggressively “hedging.”

We still believe that if silver can thrust up through to the middle $19s or so, it would not be at all surprising to see a mini-explosion higher as both sell trailing stops and buy stops trigger in earnest. As of now we are on watch for exactly that. Such a harsh thrust by silver could easily challenge its former 2008 highs near $21 on its own momentum. A watch means that conditions have evolved to the point where the event is possible, not necessarily likely.

We will have more in the linked charts at the bottom of our next full Got Gold Report, which should be available either late Sunday afternoon or Monday morning.

In summary, although they remain very strongly net short (as expected), as of the Tuesday COT cutoff, the largest gold and silver futures hedgers and short sellers in New York are showing neither aggressive additional “hedging” and short selling, nor short covering. Therefore we can conclude that with gold in the $1,170s and silver in the $17.80s their expectations for lower prices were not, that’s not - elevated.

http://treo.typepad.com/got_gold_report/2010/05/cot-flash-may-7.html#tp