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Who Is The Dumb Money In Silver?

Viking Analytics profile picture
Viking Analytics


  • The managed money traders always seem to be wrong-footed at the worst possible times.
  • Traders need to be aware that COT report data may take time to play out.  Lucy is very patient in tricking Charlie Brown.
  • If silver continues to hold above $16.20, and overtakes its 20 day MA, then we could see a reversal of the current downtrend.


Should we feel sorry for the managed money traders in silver? Their positioning always seems to be wrong-footed at the worst possible moments. When the market appears to be rallying significantly, they pile in long and then the market shifts lower. When the market appears to be heading lower, they add aggressively to shorts. And then Lucy pulls the football away and they land flat on their backs.

We can postulate why this dynamic seems to happen over and over. The managed money traders as a whole might be thought of as portfolio managers, and their “silver exposure” might be just a small percentage of the total portfolio. Many of these managers might be following technical trends that can be exploited by the commercial traders, who are laser-focused on the daily and intra-day price action.

A portfolio manager's recurring trading losses in silver may not even show up on the radar or affect his quarterly bonuses. In fact, the odd correlations in silver might even strangely help a portfolio manager’s quarterly report, because they were “diversified.”

The Hapless Managed Money Silver Trader

We could evaluate this dynamic over many time periods, and I would be happy to entertain alternative perspectives based upon different data sets. The chart below shows the weekly position changes in managed money traders over the past three months. The red bar shows when the managed money traders were adding or covering short positions. And the blue bar shows when the managed money traders were adding or selling long positions. Study the chart for a moment.

Source: CME Group

During the period December 5th through December 19th, managed money traders as a whole were aggressively adding shorts and liquidating long positions while the price was rising meaningfully.

During the period December 26th through January 9

This article was written by

Viking Analytics profile picture
Systematic and quantitative analysis.Rob McBride has 15+ years of experience in the systematic investment space and is a former Managing Director at a $14 Billion hedge fund. Rob has deep experience with market data, software and model building in financial markets. Erik Lytikainen has 25+ years of experience as an entrepreneur, business developer and financial analyst. He founded Viking Analytics in 2015 after selling a commodity production & trading company he co-founded in 2006.

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.

I am long PSLV

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 (56)

kesslerblvd profile picture
What is the fine print of SLVO? At 7.75, what happens if it drops in half, for example. Is there a threshold for share price. Would there be a reverse split. Also, the trust can't be that thrilled to pay out a 10% dividend.
Anybody who owns silver is dumb money....and I own silver. Stupid waste of decades
"Anybody who owns silver is dumb money....and I own silver. Stupid waste of decades"

There were some great selling opportunities, especially in 1980 and 2011. With silver mining stocks rather than SLV, silver doesn't have to rally that much to get nice gains. Notice how much AG rallied in 2016 for example.
Viking Analytics profile picture
One day, the endless avalanche of derivative paper sales of silver will come to an end. Until then, patience . . . good luck.
Scoutcar 42 profile picture
Unfortunately, not in your lifetime.
insightful?informed decider profile picture
BUT * I * can retire because of buying silver in the late 90's .
insightful?informed decider profile picture
RN,Yea maybe they don't know how to buy ,sell ,or trade silver like they should. But In can retire anytime I want because of buying silver in the late 90's .Most sure thing I have ever invested in Buy Low Sell High,rinse and repeat.
Ron Netz profile picture
The managed money traders are not even close to being the dumb money in silver. Here is the epitome of dumb money in silver:

Risk Professor profile picture
Is PSLV a better alternative to SLV?
Viking Analytics profile picture
PSLV, as a "trust" rather than an ETF, appears to have more direct allocation of bullion to each investor. And it trades at a discount to the value of silver. This is astonishing to me.


If I am short-term trading, I might still buy SLV, since it has better liquidity than PSLV.
Viking, I will discuss my roadmap using cycles, sentiment, and EW - however, the road map is just a guide and not an official long or short signal. Having just completed a review of my trading system for precious metal stocks, one thing that stands out is Silver commercial traders, the smart money, are NET LONG on current data, and using Larry Williams 6 month look back, they are still LONG, and even on the 3 year look back are NET LONG! This is very very rare, and will prove to be bullish but with a delay. Retail traders, the dumb money, are currently 40% bullish, and a little bit more bearishness is likely before a turn. Also, my views on the dollar have changed slightly from last week. It appears that the approximately 10 year cycle trough in the DXY still has another minor leg down. Given the multi-month timing low for this trough, the cycles can change a bit. I think the next 10-15 trading days will lead to the dollar moving down to target its final low in the 87.27-87.74 level which would equal waves 1-3X.618. If this roadmap is correct, then I would expect GDX to move up perhaps as high as 24.00 in this timeframe while GOLD moves up to or above the 1377 area to as high as 1409, and SILVER meets resistance around 17.10. While short term traders may benefit from going long GDX or playing the leveraged instruments for the next ten days, ultimately I still suspect my trading system may not set up for another major buy signal until the May or June timeframe for the miners themselves, given an expected bounce in the dollar toward the 95 area in that time window. It is my opinion based on cycles, that SILVER could see the 25 level before the end of 2018 with most of the upside move coming in the 2nd half of the year.
Viking Analytics profile picture
Hey Steve. I agree that the silver commercials are net long when we take into consideration the silver that is in the COMEX vaults. This is indeed a good sign for bulls . . . that as you mention could take some time to play out.

I am becoming convinced that the macro picture points to a continuing decline in the value of the USD. I would love to see silver hit 25!
$25? I would love to see silver get to135+. The 1980 $50 silver high adjusted for inflation is around $150. With gold at $1350, and silver mined at less than 9 times the rate of gold, a gold/silver price ratio of 9 would give a silver price of $135. Of course I expect gold to get much higher, so silver might get well over $200. In the late 1490s, silver had the purchasing power per ounce equivalent to around $1,100 of today's dollars. Silver is so much more useful now than it was then.
Scoutcar 42 profile picture
Keep dreaming. Gentleman's bet...you will NEVER see silver prices at $135 , $150, or $200 an ounce in your lifetime. In fact, you'll be lucky to see $25 silver before you expire. There's too much physical silver in the public's possession, in the metal exchanges of the world, and in un-mined areas of the world that will prevent silver from ever reaching your dream level. Technology someday will allow metal recovery from landfills that will also add to the supply. I hope I'm wrong in my predictions, because I'm one of "those" people who own a ton of silver that I too would like to cash-in at much higher levels.
astute pathways profile picture
Get a monthly check from SLVO.....Holding Physical silver pays no dividend or intrest,and you have the risk of it being stolen
never heard this before....
Cloudy66–“Holding physical silver pays no dividend or interest, and you have the risk of it being stolen.”

You don’t have to pay a tax on physical silver like you do with monthly dividend checks (at least not until you sell). As for it being stolen, good luck carrying away more than one monster box. While you’re struggling to escape with it, I’ll have you in the sights of my Glock 20.
astute pathways profile picture
I do agree on taxes. no escaping it......I think if you sell under $600 a day in physical silver to[ maybe a pawn shop], then it would not have to be reported...I could be wrong
Esoteric people know that the Crimex is nicknamed that for a reason , because in layman’s terms they are selling silver contracts ( 5k ounces per contract ) That is not in their vaults !!! If investors would all want to take the 1,000 oz bars that they legally own then massive chaos would occur and silver would soar !!!! Long physical Gold and Silver outside of any institution 😏
Jeolla profile picture
Is it possible to take physical delivery of a 1000 oz contract? It is only $16,500. If people took actual delivery, wouldn't that stir things up?
Viking Analytics profile picture
Jeolla - there are actually physical deliveries every month (although they are small in comparison to the total market).
Eventually the contracts are settled by either being closed out or physical delivery.
Alessio Calcagno profile picture
Can SLV be exploited if lag spot?
Viking Analytics profile picture
I have little doubt that the large traders can arbitrage values in SLV with positions elsewhere. On the other hand, the "arb" is probably so small that I don't believe that it matters too much.
insightful?informed decider profile picture
I'll never understand why an investor would buy SLV .If I want an ETF I will buy USLV when silver bottoms(Friday made 5% same day),and yes that's gambling. If i want to purchase silver I buy physical. If i am really long silver and want to hedge I will use ZSL. What's the point of an ETF to buy and watch it erode? Just buy the real thing if that's the goal.
I went through this with someone on another article. What you fail to mention is the USLV is highly leveraged. You dont say what happens to the USLV when the trade goes against you. I own physical silver (for decades). I have to pay for safety deposit boxes to keep it in. Every method of ownership has some draw backs. I understand about the SLV but I would rather just hit the sell button than have to transport my silver to market or pay someone to store it for me.
slv is like day old chewing gum imo
There has to be something going on with short positions in the SLV. Friday silver was up about one and one half percent but the SLV barely moved. Eventually the SLV does catch up but it can be frustrating watching the day to day moves.
Viking Analytics profile picture
It is shocking to see number of bids and asks in SLV. Lots of liquidity, and usually more "asks" than "bids" . . .
Eric Peterson profile picture
The settlement time for silver futures is 1:25 pm ET, while SLV closes at 4 pm. There is a two and a half hour difference. And guess what? The futures went up one and a half percent between 1:25 pm and 4 pm on Thursday. Friday's price change quotes for silver are measured from Thursday's 1:25 pm price, while SLV's Friday price change is measured from 4 pm Thursday.

This explains your observed mis-match between price moves in silver and SLV on Friday. No funny stuff is going on, just comparing different time periods.
You are making my point for me on the time lag. There is also a stock market component where people can short the SLV but they are not shorting silver itself. Likewise buyers can jump in and push up the price of the SLV. While the two trade closely, they dont trade in tandem. And some banks not long ago were fined for manipulating the price of silver, so that in effect manipulates the price of the SLV.
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