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Tuesday, April 2, 2013

Silver's Weak Hands Standing In Open Ground

While silver's not dead in the water, it could be vulnerable over the short-term.  The weak hands, some expecting an immediate bullish outcome, are standing in full view in open ground controlled by snipers (trend managers) occupying the surrounding hills.  NRWA's up tick from 17% to 38% since late February reveals a growing bullish expectation without capitulation; highly-volatile markets such as silver often display weak hand capitulation before bottoming.  Unless the physical market overwhelms the paper market here and now, the snipers have a high probability of sending NRWA toward capitulation (0%) as price falls (chart 1).

Chart 1: Silver London P.M Fixed and the Commercial (C) & Nonreportables (NR) Traders COT Futures and Options Stochastic Weighted Average of Net Long As A % of Open Interest


Silver's also primed for an extra push as the global economy weakens.  A short signal on copper since early February 2013 illustrates a weakening global economy (chart 2); this reduces silver's industrial demand on the margin.  This only enhances the accurracy and range of the snipers above.

Chart 2:  Copper (JJC) And Copper Diffusion Index (DI)


Patience reigns until a clear signal is generated.


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