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  • Commercial Short positions at highest long to short ratio since July 2008
  • Commercial Short positions up 16,000 contracts in last three weeks
  • Contracted Silver Volume is now 619 Million ounces.
  • Excessive leverage :Comex has only 60 Million ounces registered for delivery. (more than 10-1)

The COT report for September 15th (released on Friday, why it takes three days to compile these numbers is only for the government to know) is showing a concerted effort by funds to buy into the silver market and a corresponding effort by the Commercial Traders to short cover. The last three weeks have been shocking on the order of magnitude of what is happening in the stock market with HFT.

Commercial Traders increased their short position by 15,811 contracts or 79 million ounces in just the last three weeks while dropping their long positions by 3,400 contracts. That puts the Short vs Long ratio at 3.48, the highest since July 11, 2008 when silver was 18.38 per ounce.

Large Speculators have bought heavily into the market, to the tune of 19,300 contracts or 96 Million ounces, however they have also increased their short positions by 1,900 contracts

Small Speculators are beginning to trend towards caution, both long and short contract positions increased by 1800 contracts.

It's clear that the Large Speculators and Commercial Traders are locked in a battle with dramatic withdrawls in Money Market funds (as reported with federal guarantees expiring) apparently looking for a home.

While not a surprise, the willingness of the Commercial Traders to short so many contracts in the face of rising prices to offset the sudden demand is curious in the least. This is especially true since the COMEX does not have the silver on hand to back up even 10% of the contracts that have been written.

This massive surge is the largest since last July when the Commercial Short position increased over a three week period by not quite 12,000 contracts. But at that time, the long position only dropped by 500 over the three weeks.

My advice is if you are in it for a long term and are comfortable with where you purchased it at, hang on. If you need a short term gain, now could be a good time to lock in the profits. This is like watching a couple of dinosaurs going at it with blood in the air. As a tiny mammal, there are safer places to be than underfoot. After being unchanged and even up last week, the indicators are pointing to a correction. I'm in it long, so I'm the first to admit that I'm underfoot on this one.

Disclosures: Long SLV, GLD, physical metals, retirement accounts