Ted Butler: Silver’s COT Report Turns Bullish

This is an excerpt from Ed Steer’s Gold & Silver Daily Newsletter, with an overview of the latest COMEX silver futures market positions, quoting silver analyst Ted Butler:


The big, but very welcomed surprise was that the short position in the managed money category grew by a sharp 5,441 contracts to 37,724 contracts despite the price close above the 50-day moving average into the Tuesday cutoff. The most plausible explanation (assuming no reporting error) was that the short position was much larger before the rally into Tuesday. That the technical funds would hold such a large short position, the largest since last fall, while surprising, is unabashedly bullish because this is the rocket fuel of buying that comes when the moving averages are penetrated to the upside once again. And I can only conclude that more technical fund shorts were added on the late week sell off.

Just to put this into the perspective of equivalent silver ounces, the technical funds sold short an additional 27 million oz in the reporting week, increasing what is a purely speculative short position by definition to over 188 million oz. I’d like to see anyone try to explain how this could not be an artificial price depressant and how the CFTC and CME should not be put out of business for allowing it. That it will ultimately be bullish for price is almost beside the point.

So large was the increase in the short holdings of the technical funds that it initially sent me in an analytical direction that proved false and that I spent hours writing about before realizing I was headed in the wrong direction. In fact, I wrote paragraph after paragraph before recognizing my error. I was all about to tell you how the 8 biggest commercials drastically increased their concentrated short position until I recognized it wasn’t the commercials but the technical funds. I am assuming that the report is correct and I am handling the data accordingly. If there are big revisions, that is beyond my control.

I was all set to tell you how the commercial categories changed this week, but I’m throwing all of that out. Yes, the concentrated short position of the 8 largest shorts grew markedly, to nearly 350 million ounces, the largest level in years. But because the trader count on the short side of managed money dropped so much (from 36 traders in the previous week to 28 traders this week) and the gross short position of these traders increased so much (by 5441 contracts) it now seems clear that a number of managed money shorts have entered into the ranks of the 4 and 8 largest traders, something rarely observed. Usually, this is a commercial only group, but that can’t be the case this week.

Silver analyst Ted Butler: 02 May 2015


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