Open interest (futures & options) watch for gold silver

stockjockee said:

Sorry swissaustrian,
as I think you are gonna see one more major dip on Monday. This will start Sunday night. For what ever reason the stock futures will get Hammered before the open on Monday (Thats why they goosed the market today) (You would think the opposite would happen market down metals up. But we are dealing with criminal intent here and they have conditioned the masses that when the market deflates so do the metals. You know the old saying ? (Tell or telegraph a lie long enough and the masses will begin to believe it) Precious metals will take one more "MONSTER" plunge before the options expiry at the close of the market on Monday. Then Tuesday I still think you will see some pressure because that will be notice day (notice from the option holder that they elect to exersise the option and take physical delivery) The key for the Comex is to stop people from taking physical delivery. (I know the Comex does not settle in metal, but in cash. It's the psyc that counts) Then on Wednesday I see a start of a rebound. This whole paper market is a scam and I really think people are starting to see it. Buy half over the weekend, and half after Tueday would be my recommendation "Spread the Love" so you don't get smoked by the pressman in control of the printing press.

Good luck and thanks for the data ! :wave:

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swissaustrian said:

I respect your opinion, but let me provide you the link to the gold op/ex thread: http://www.pmbug.com/forum/f2/options-expiry-manipulation-gold-price-one-chart-229/
As you can see there, op/ex manipulations are usually finished before the day of the expiry. Historically, price management has been undertaken during the 5 prior trading days. I don't think that it's gonna be different this time. High Volatility at op/ex days is dangerous because it might trigger panic liquidations or short squeezes which both lead to higher costs of price manipulations. Additionally, op/ex days usually have high trading volumes, requiring a larger number of contracts to move prices. Mild volatility is therefore the cheapest way to achieve pre-managed prices at op/ex.

We could very well see a stock market plunge on Monday. The UK just got downgraded by Moody's. That has strenghtened the dollar afterhours. I don't think that it's going to rock markets like the US downgrade did, though.

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stockjockee said:

Good calls mate ! The metals held up well :wave:

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Eric King: “Jim, there are a great many pieces discussing the COT report, can you talk about that?”

Jim Sinclair: “I’m just going to ask you a question and give you a definitive answer: The question is, do you really believe the people (banks) who manipulated LIBOR are absolutely, totally, and completely honest on the figures that they render to the CFTC on the position of traders (COT)? The answer is, of course not....
Everybody in the trading industry, even those who should know otherwise, puts so much faith in looking at what they think is the commercials’ confessional. They believe they can read, through the COT, the commercials’ intentions. That’s just total nonsense. We’re living in a new normal, and one part of the new normal is that fabrication is a virtue.”

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Recent upside in spot gold has been attributed to renewed buying by CME names.

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Note: Spec Funds (Managed Money) have become net short silver futures as of this report. Note also the extremely low net short positioning of the Producer/Merchants for gold. The Producer Merchants, the category which includes bullion banks, have not had so few bets that gold would fall in price since the 2008 panic. That is the same thing as saying that the large commercial traders are currently the least fearful that gold prices will fall further since December 9, 2008, when they then held just 80,669 contracts net short with gold then near $776 the ounce.

In the DCOT table above a net short position shows as a negative figure in red. A net long position shows in black. In the Change column, a negative number indicates either an increase to an existing net short position or a reduction of a net long position. A black figure in the Change column indicates an increase to an existing long position or a reduction of an existing net short position. The way to think of it is that black figures in the Change column are traders getting “longer” and red figures are traders getting less long or shorter.

All of the trader’s positions are calculated net of spreading contracts as of the Tuesday disaggregated COT report.

If there is one particular chart of the many we review each week that we might want to call attention to, it would have to be the chart below - the gross short positioning of traders classed by the CFTC as Managed Money, aka the Spec Funds.



Because of that extremely high Managed Money silver short position, collectively the Spec Funds showed their largest ever net short, repeat net short position for silver futures since the inception of the CFTC disaggregated commitments of traders reports (data begins in 2006). As of April 2, with silver then showing a last trade of $27.26, Managed Money traders reported a net short position of 2,497 lots as shown in the chart below.



Managed Money traders have been net short silver futures before, for one reporting week on September 4, 2007, when they reported being 92 contracts net short with silver then changing hands at $12.09 an ounce. Two months later, silver had tested $15. Six months later, in March of 2008 silver had cleared $20 - just before the 2008 panic took control of the markets.


Perhaps as a "runner up" we might point to the chart below as important and noteworthy - the gross short positioning of Managed Money traders in gold futures as of Tuesday.



The Managed Money short positioning charts for gold and silver have something very much in common, in terms of what they represent.

Much more for subscribers in the chart updates this weekend.

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PMBug said:

So the sale is gonna end soon?

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... so we turn to the silver commercials. The gross long position which, as a reminder has almost always fluctuated between 30,000 and 40,000 for as long as I can recall, grew again this week. For the reporting period, the Comm gross long position grew by another 2,300 contracts to a record 57,847. As of last night, it may have reached to near 60,000. All of the Spec selling allowed JPM et al to cover some more of their naked shorts. This week they covered another 3200, bringing their total position down to 76,350. Most importantly, the Silver Cartel net short ratio has fallen to 1.32:1. This is the lowest I've ever seen, exceeding the low of 1.34:1 on 12/27/11. That record low marked a bottom and silver proceeded to rally from $26 to $37 in nine weeks.

I SIMPLY CANNOT STRESS ENOUGH HOW EXTRAORDINARILY BULLISH THIS COT REPORT IS. We are clearly on the cusp of a major rally. Did it begin today? Maybe. Will it begin next week or the following week? Perhaps. All I know is that it will begin...and soon. Be ready.

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80% Chance Of 40% Silver Short Squeeze

In the last 20 years, Silver shorts (in Silver futures, based on the Commitment of Traders data) has only been as high as it is currently for five periods. Four of those five periods were followed by considerable rallies in silver prices. The one period where prices flatlined (fell modestly) was a slow and steady rise in shorts (as opposed to the spike-like move currently). Of course, with near record amounts on the short side of the boat, it would seem clear where Silver should go next but this time is different we will be told.

Jul 1997: +70% rise over 29 weeks,
Nov 2000: -13.5% in 53 weeks,
Oct 2002: +13.2% in 12 weeks,
Apr 2003 +19% in 24 weeks,
Aug 2005 +114% in 37 weeks,

Average +40.5%

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When open interest readings increase, it tends to confuse some as it seems to contradict the usual pattern that has become so familiar. What is leading to confusion is that the SPREAD POSITIONS of some of the LARGEST TRADERS are not taken into account.

I have graphed two of these categories for you to see and noted the price action in gold that occurred over this same period. The two categories are the SWAP DEALERS and the OTHER LARGE REPORTABLES.

This latter category includes the likes of CTA's (Commodity Trading Advisors), CPO's (Commodity Pool Operators), Large Locals from off the Pit Floor and other Large Private Traders. While these groups do not have quite the same impact as the enormous Hedge Funds, they are still large enough to affect trading.



Can you see the big spike higher in their spread positions back in August 2011, when gold shot up to $1924 and then collapsed all the way to $1535 before it stabilized? Now look at this past week's spike higher. See a pattern here? By the way, the sharp increase in the number of spreads put on by the Large Reportables Camp ( 87,178) was the largest single week increase for that camp on record. The increase in the Swap Dealers' Spread position (+49,768) was also a weekly record.

There is your REASON for the SURGE IN OPEN INTEREST.

There is a strategy behind this which I will not get into right now in detail due to time constraints ( soon coming attraction) but suffice it to say for now that it is an attempt first to get downside protection and cushion losses for those who are long and are on the wrong side. Second - the proper use of a spread position can be very advantageous to traders who can time the markets accurately enough to leg into and leg out off these spreads. It requires considerable skill however to pull this off and trading accounts large enough in size to allow for the jump in margin requirements as one leg of the spread is lifted.

IF we leave off the impact of these spreads in the overall open interest numbers, it would have only seen an INCREASE of +14,460 compared to the previous week. This was based on the bullion banks increase of both their long and short positions (which incidentally favored more longs at this point than shorts) and an increase in the SHORT positions of the small specs, the general public who sold down into what might turn out to be a hole. When we take into account the sharp increase in the number of spreads, we see a completely different picture with open interest increasing over 154,000 contracts this week alone.

Therein lies the "mystery" for the open interest readings for the past week. If gold stabilizes here and begins to base build, watch for these spreads to be drawn down.

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Trader Dan said:

A brief summary - All classes of speculators, hedge funds, other large reportables, and the general public, were net sellers of gold this past reporting period.

The other side of the equation, the buying, was done by the commercial category (bullion banks, etc,) and the swap dealers. ...

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As shown below, on a month over month basis, US Bank & Large Trader long positioning has increased dramatically, with short positions being covered at the greatest rate of speed ever recorded:

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Additionally, when looking at this trend from a “total-position” perspective, we see an even greater accumulated move being made on both the long and short sides. Short positioning by US Banks & Large Traders has been collapsing since the beginning of 2013, while long positions are being steadily accumulated:

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Scorn if it pleases you, but know this. Gold is soon to become the friend of the market manipulators, and then the enemy of the dollar. ...

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DSAbug said:

SA.. This is the lowest short exposure the commercials have had since the bull market began!

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Brief Bottom Line:
“Look Martha, the bullion banks are way longer in gold than they were in 2008!”

Despite very large changes in the positioning of the Swap Dealers and Other Reportables, which we find incredibly interesting, but unreadable, there is still a tremendous amount of heavy short covering firepower now via the traders we least associate with the short side of gold, the traders the CFTC classes as Managed Money, Other Reportables and smaller Non-Reportables (although there are 37,000 less OR shorts as of this week).

Relying on the Legacy COT for our own guidance, the COT remains strongly contrary bullish. We do so with the understanding and experience that teaches us that the COT is an imperfect, but still very valuable tool to use, especially if trading as a contrarian in the futures markets.

Right or wrong, our read of the Legacy COT is that the largest, best funded and presumably the best informed traders of gold futures have positioned for higher, not lower gold prices.

The fact that U.S. bullion banks are now the most net long we have ever seen them is icing on the COT cake. That simply and certainly says bullion banks are the least fearful of a falling gold price since at least 2008 and probably in 2001, when gold was bottom scraping in the $270s.

The relative commercial net short position or LCNS.TO remains near historic lows despite a rather large one week jump this time. The Big Hedgers are not only not aggressive, they are predominantly net long!

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