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Could Silver Test Its Lows?

November 5, 2015

Unfortunately no one is around for a market wrap today so I will be posting some articles that I think should be considered.

We all wonder is the bottom really in for the precious metals. No one knows for sure but here is a look at the silver charts and Commitment of Trader (COT) reports to address this.

Click here to visit the original posting page.

We see a bearish evolution in precious metals. It is evidenced mostly by the price action in silver, combined with the COT report in the silver futures market COMEX.

First and foremost, our key indicator when it comes to the short and medium term outlook for precious metals, is the rate of change of net short positions from commercial traders. Note that we are referring to “rate of change”, not the net position per se.

If the rate of change is high, then it serves as “stopping power” to a rally. Alternatively, with a low rate of change of net shorts, the rally is not capped by commercial traders, and there is room to the upside.

The first chart makes the point, specifically the black circle at the right. It shows the fast accumulation of net short positions by commercial traders (red bars).

silver_cot_oct15

Source: Sharelynx

Moreover, by observing what happened in the last 9 years when the same net short levels were achieved, we conclude that in all except one case the rally was capped, and lower lows followed. The only exception is the fall of 2010, where silver started a monster rally. Note that conditions were truly different in COMEX silver, in the sense that the net short position was already extremely high for a year.

Given the above, it appears that our key indicator, which is the “rate of change”, is the key determinant.

Next to that, when looking at the price chart of silver, see below, we conclude that silver was not able to hold about its 200 day moving average (DMA). Also, the reversal that took place above the 200 DMA was extremely sharp, which is a bearish signal.

Silver-PRICE-Oct15

Source: Short Side Of Long

This does not bode well for the short and medium term. We anticipate at least a test of the recent lows; even a lower low is in the cards. However, the good news is that it could become the final (washout) bottom, setting up for a huge buying opportunity!

Discussion
20 Comments
    Nov 05, 2015 05:26 PM

    Criminaly corrupts, absolute criminality corrupts absolutely!

    Tad
    Nov 05, 2015 05:11 PM

    I’m betting on it being the ‘final washout bottom’ !
    Been of this mind since March.

    Nov 05, 2015 05:43 PM

    Could Silver Test Its Lows? Yes or No?

      Nov 05, 2015 05:31 PM

      No.

      Tad
      Nov 06, 2015 06:41 PM

      Yes

    Nov 05, 2015 05:14 PM

    Oil related news. Saudi F15 was shot down by Yemen.

    Nov 06, 2015 06:38 AM

    Smash down does happen as predicted. Always vertical down. I hope people see the obvious gold price suppression. It is the only reason the gold price down under money printing for the last couple of years.

      Nov 06, 2015 06:18 AM

      On the bright side, the other shoe has been drop.

      Nov 06, 2015 06:59 AM

      A lot of famous gold traders recommend stops. The problem is that no support the shorts don’t love to attack. The critical one like 1100 is particularly attractive. If you set stop loss order, you are almost for sure to be stopped out with bigger loss than you thought. The fill price will be very low under vertical price move.

    Nov 06, 2015 06:11 AM

    SILVER GOING TO NEW LOW
    PROBABLY BY DECEMBER OR 1Q 2016

      Nov 06, 2015 06:20 AM

      See, people gets bearish immediately when the price is down.

      Nov 06, 2015 06:22 AM

      THEN THERE WILL BE ……………….400 SHORTS” PAPERS” SILVER OZS………TO ONE OZ. PHYZ.

        Nov 06, 2015 06:31 AM

        Producers have been losing money and production has been down for two years. Any prolonged price weakness will force some of them to close down. We know, silver has to be produced either by silver miners or base metal miners. They are both suffering. This creates a scenario of supply crunch. It has to be since this is only thing logical. Any weakness now will induce silver super spike in the future.

          Nov 06, 2015 06:40 AM

          That is logical, I agree…….but, we are dealing with illogical people.

            Nov 06, 2015 06:52 AM

            But illogical people cannot create physical silver. With this stupid paper market, we will face sudden death. It is detrimental to industry.

            Nov 06, 2015 06:02 AM

            You are 100% correct……………

      Tad
      Nov 06, 2015 06:43 PM

      The last low.

    Nov 06, 2015 06:31 AM

    EIGHT (8)….traders control the comex. on silver…….,according to some reports.