A Nice Set Up


". . .you can have a nice set up and still be in a manipulated market."

A number of different factors have converged, creating what could be a lift-off point for the price of silver (and gold). This confluence of readily verifiable factors shows the silver market to be in a low-risk and high-reward situation. The factors involve both the paper and physical silver markets. The only question, as always, is if the manipulators can thwart the set up once prices rally.

The structure in the paper markets is extremely bullish on any objective historical basis. This means that the commercials, as a whole, have a greatly reduced total net short silver position after the recent engineered sharp sell-off. Normally, when the commercials have forcibly liquidated as many leveraged longs as possible, prices stop declining and begin to rally. This is the rhythm of the market.

The latest COT and Bank Participation Reports, for positions as of April 7, show the smallest total commercial net short positions in gold and silver since Feb 17-24, when gold was $1,000 and silver $14.50. Since those highs, on the $150 gold price decline and a $2.50 silver drop, the commercials have reduced overall gold shorts by over 40,000 gold contracts and 9,000 silver contracts. This is subjective, but those reductions, particularly in silver, look complete. Not at all subjective is the observation that the only reason for the price declines over the past six weeks was to effect the liquidation of the maximum number of leveraged longs on the COMEX. This is the rhythm of the manipulation.

Despite the big reductions in net commercial short positions, the ongoing manipulation in silver (and gold), based upon a freakish short concentration, is still evident. In COMEX gold futures, the four largest shorts hold more than 98% of the entire commercial net short position. In silver, the four largest traders in COMEX silver futures hold a net short position almost 50% greater than the entire total commercial net short position.

Let me be clear here - you can have a nice set up and still be in a manipulated market. The current set up, in both the paper market structure and the physical world, should be the start of something good, price-wise. Whether it runs into increased manipulative short selling on a rally remains to be seen. I know many feel this pattern won't be broken, but a true physical shortage will trump any and all paper games. When this baby goes, it will be a sight to behold.

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