If you want to know where silver is headed, the best guess at the moment is that traders are moving to hedge their bets. It's kind of like watching people prepare for a hurricane, some are taking steps to protect their investment, others are betting that the storm either won't hit them or won't be strong enough to do major damage.
COT traders moved massively into spread positions this last week, in the biggest jump in spread levels since at least May of 2008. Over 4600 contracts were added to spreads while Large Traders shed 3000 long positions and Commercial Traders dropped 3100 short positions. The market as a whole cleared 14.5 million paper ounces of silver, leaving 411 milion ounces still outstanding.
The jump to spreads is the largest increase since mid-August of 2008 when over a two week span, the number of spreads increased by 5,000 contracts, then dropped by 3800 contracts the week of August 23, 2008.
Small Traders meanwhile stayed pat, contract numbers virtually unchanged from last week, in an indication that they are staying on the sidelines while the bigger fish battle things out. Economic indicators are mixed at best for the moment and smaller traders, with less excess capitol to invest, are looking for direction. At the moment, small traders are more optimistic about the upside of silver and are holding a higher spread between longs and shorts than at anytime since about February of 2009.