The foundation for one of the biggest short squeezes in history is well underway seen through this week’s COT report. The short covering by the commercial banks looks like it’s well underway with a dramatic reduction in the net short position of 4,831 contracts (24.155m ounces). Even more exciting is the huge decrease in adjusted net open interest, falling by 5,005 contracts. It is now apparent something has startled all of the commercial’s as we see a decrease of 1,861 in the net short position of the 4 largest and a decrease of 1,220 in the net short position of the 8 largest. While the concentration levels of the 4 and 8 largest actually increased, that is only due to the fact net open interest fell by much more their net short positions. This is the most bullish report I’ve seen thus far in any COT report as there now appears to be structural changes taking places. The trend of increasing open interest has been the trend for a very prolonged period of time, thus it is encouraging to see such a dramatic decrease in this number. Remember that this report ended Tuesday the 14th, so it won’t be until next week’s report that we confident the structural changes in the COT are here to stay. Finally, before getting to the actual data, it is worth noting that this bullish report came in the face of increasing margin requirements. To me, the change in the margin requirements were done in order to buy the commercials more time to unwind their short positions and avoid catastrophic losses. As you can see the following data is very encouraging, especially when taking note of the trend:
While there is still quite a bit of unwinding to do, I think all silver investors will have high hopes for this metal in the weeks and months ahead. This reinforces my previous week’s arguments that there is currently a short squeeze in the making in the silver market. Summing this week’s Silver COT report up, things are looking good on all fronts except concentration levels which I think will begin to die down before too much longer. Despite this one negative, everything points to higher prices ahead in the medium and especially long term.
Silver: $27.35
