Posted July 12, 2015
On Tuesday the silver market made its lowest close since 2009. The COT data shows a net short position of 14,319 commercials and net long position of 6,793 non-commercials (speculators) in the futures market. These are levels not seen last November. Many interim lows in silver have occurred with the speculative longs between 1,000 and 8,000 AND Commercial shorts between 10,000 and 25,000 as experienced this week.
However, the major bear markets of 1986, ’92, ’97 and ’01 ended with a more negative bias. The non-commercials positions were a net negative and commercials held fewer than 8,000 net shorts.
Aside from the absolute level of the COT positions we are interested in the rate that the positons change. Typically, the end of a price trend will result in a spike in the positions. This results in RSI(14) readings moving out of the 65/35 range. It also pushes them outside the Bollinger Bands. Both measures came close to minor buy signals this week.
The COT data in gold has reached outright levels last seen eighteen months ago. Those preceded the low at $1186 by two weeks and subsequent rally to $1392 in March 2014. However, every bear market (price below a declining 100-week average) has bottomed after the commercials were net-long and non-commercials net short for an extended number of months*.
So the bottom line is that if prices reverse to the upside from here we can anticipate a tradable seasonal bounce, but not likely the beginning of a bull market. However, a more severe decline in the next few weeks would set up much stronger buy signals.
*Available data from the CFTC only dates back to 1986.
The opinions in this report are solely those of the author. The information herein was obtained from various sources; however we do not guarantee its accuracy or completeness. This research report is prepared for general circulation and is circulated for general information only. It does not have regard to the specific investment objectives, financial situation and the particular needs regarding the appropriateness of investing in any securities or investment strategies discussed or recommended in this report and should understand that statements regarding future prospects may not be realized.
Investors should note that income from such securities, if any, may fluctuate and that each security’s price or value may rise or fall. Accordingly, investors may receive back less than originally invested. Past performance is not necessarily a guide to future performance. Neither the information nor any opinion expressed constitutes an offer to buy or sell any securities or futures contracts. Foreign currency rates of exchange may adversely affect the value, price or income of any security or related investment mentioned in this report. In addition, investors in securities such as ADRs, whose values are influenced by the currency of the underlying security, effectively assume currency risk. Moreover, from time to time, members of the Institutional Advisors team may be long or short positions discussed in our publications.
The above are the Technical observations of Ross Clark for Institutional Advisors
on Friday, 17 July 2015 02:00
Posted July 12, 2015
BOB HOYE, INSTITUTIONAL ADVISORS