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SLV Weekly: Be Ready For A Short Squeeze

Orchid Research profile picture
Orchid Research


  • SLV undermined by a firmer dollar.
  • Speculative positioning becomes extremely stretched on the short side, the CFTC shows.
  • ETF investors continue to express a strong buying appetite for SLV.
  • Macro backdrop turns negative for SLV after hawkish Fed Chair Powell.
  • SLV is set to enjoy a powerful short-covering rally in the course of 2018.



Welcome to my SLV Weekly.

In this report, I wish to discuss mainly my views about the iShares Silver Trust (NYSEARCA:SLV).

To do so, I proceed in the same way as for my Gold weekly. I start by analyzing the changes in net speculative positions on the Comex (based on the CFTC statistics) and ETF holdings (based on FastMarkets' estimates) on a weekly basis to draw some interpretations about investor and speculator behavior. Then I discuss my global macro view and the implication for monetary demand for silver. I conclude the report by sharing my trading view on SLV.

While the CFTC statistics are public and free, the data about silver ETF holdings are from FastMarkets, an independent metals agency which tracks ETF holdings across the precious metals complex.

Speculative positioning

Source: CFTC.

According to the latest Commitment of Traders report (COTR) provided by the CFTC, money managers cut their net long position in Comex silver for a third week in a row over the reporting period (Feb 13-20), during which spot silver prices edged down 0.5% from $16.61 per oz, to $16.53.

The net spec length - at minus 1,491 tons (net short fund position) as of February 20 - dropped 316 tons from the previous week (w/w). This was driven by a combination of long liquidation (for a 6th consecutive week) of 186 tons and short accumulation (for a 3rd straight week) of 131 tons.

The net spec length is down 473 tons in the year to date after tumbling a massive 7,587 tons or in the whole of 2017.

Silver's spec positioning is extremely stretched on the short side, with its net spec length very close to its historical low of minus 2,091 tons reached in July 2015.

Investment positioning

Source: FastMarkets.

ETF investors bought ~85

This article was written by

Orchid Research profile picture
Orchid Macro focuses essentially on commodity and macro analysis, using quantitative tools. We conduct research on supply and demand trends across commodities. We also analyze global macro dynamics and their reflexive interactions with the commodity complex. With 10+ years of experience in macro and commodity research, Orchid Research seeks not only to deliver unbiased views and accurate forecasts, but also to identify trade opportunities generating α.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (17)

Orchid Research profile picture

A short squeeze is a phenomenon whose the degree of (forced) short-covering rally can vary. You cannot define a short squeeze with a scientific method. If you can do so, please share your methodology with the readers.
Exactly. Its on a spectrum.
Short covering can result sometimes in a short squeeze.
Yes, but it is very rare. A short covering rally is nothing close to a true short squeeze. It has to make you wonder if the author is new to the stock market.

Like the idiots who contend putting in a limit order will prevent borrowing of shares.
The author has no clue what a short squeeze is. It is much different than a short covering rally.
Jion profile picture
Trump's tariffs don't support a strong dollar therefore are bullish for precious metals.
Also they could add volatility to the markets which is also supportive for precious metals prices.
LightDollar profile picture
It seems to me that the best leverage play today is to buy a small call position in the Jan 2020. I did that a few weeks ago with the idea of buying 10 each of a ladder from 23-27 strike prices. Even with this modest increase, all are positive. My total cost was only about $1400 for 40 calls. I put them in a separate account where I would not “watch” it daily. My theory is sometime in the second half of 2018, PMs will begin to move and time premium is so far out, I’m at low risk with a short-term drop. In fact, it will be a great time to double down. If I go with the Jan 2019 calls in. May or June, I am thinking of staying with strike prices closer to the current price. Thanks for the article and I am now a follower as I plan to turn my attention to some of the cheap calls in silver mining stocks where the bid/ask spread is not absurd. Life as taught me to give as much time as possible to let an idea transform into reality. So, S/T Mild bear, L/T, 600 days or so, I am a Cautious Bull primarily because Fed Speak will start impacting the carrying charge of our incredible national debt preventing it from Fed Action bankrupting the DC crazy house. Next step is GLD.
badford's IRA profile picture
Something fishy is going on! Long precious metals and their miners! Cheers!
What does the picture of a plank of salmon have to do with an article about Silver? Pretty sure it's not one of the Ad slots in the article....
I love the smell of smoky wood cooked salmon with a fresh "squeeze" of lemon. :)
ok, you got me. I get it now.... don't mind me while I go feel stupid for a little while.

Agree salmon is tasty. I actually had it the next night after I originally commented.
astute pathways profile picture
Silver is range bound $15 to $18..and will take more than short covering to break out..
The short squeeze setup for silver was back in December. Silver is just muddling along right now.
The trading is showing itself today. Spot silver up more than one and one half percent but the SLV up only one tenth of a percent. Spot silver has strong support near 16 and eventually like a rubber band stretching it will snap back perhaps in a violent upward fashion. I too would not want to be short silver down here near the base line.
The Freak profile picture
bought the reversal yesterday in USLV. let's see what happens.
I guess Boris didn't notice the March 1, 2018 one-day Reversal in Silver , Gold, and Gold Miners such as GDX, NEM, and NUGT, simultaneous with sharp losses in DJIA (-420 points) and Nasdaq Composite (-92 Points), thus providing the Classical Negative Divergence between those two Classes of Assets which is likely to continue in the coming 30 months !. March 2, 2018 at 8:04 a.m. EDT.
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