Clive Maund

The purpose of this update is to commemorate the Large Specs having their first net short position in silver since the site started 15 years ago, and also to consider how we can turn this to our advantage. Before we look at silver’s latest extraordinary COT chart and consider its implications, we will first quickly review the silver charts.

We will start with an 8-year chart that shows the big picture and includes the entire bear market from the April – May 2011 peak. On this chart we see that silver is in the very late stage of a giant downsloping Head-and-Shoulders bottom and currently grinding sideways marking out a protracted Right Shoulder low. Because of its downslope, many observers think that silver’s bearmarket is ongoing and fail to spot that this is a giant base pattern, but the parallel Head-and-Shoulders bottom in gold is much more obvious because it is flat-topped, and it is this that helps give the game away. Also because of the downslope, silver is viewed by many as being less attractive than gold, but it is normal for silver to underperform gold towards the end of a sector bearmarket and into the early stages of a bullmarket. This results in silver and silver related investments becoming grossly undervalued and neglected, and creates the conditions for a powerful rally that appears seemingly “out of the blue”. One bullish factor that seems to have escaped the notice of many observers is that volume has been building steadily for many months, which is sign of increasing distress selling by frustrated longtime holders of silver, but since the price is no longer dropping it is clear that Smart Money is mopping up their offerings at an increasing rate too. While breakout from the base pattern will be signaled by a break clear above its downsloping “neckline” silver probably won’t really get moving until it breaks above the 1st band of resistance shown.