Last Friday's CoT for the Comex Metals was
rather interesting from a historical perspective. Because of this...and
because we know that not everyone listened to Friday's podcast...it
seemed appropriate to type up this written summary today.
Before we begin, it is VERY important to note
the restrictions that have been deliberately placed on this info by the
CFTC. Even though the Commitment of Traders reports are surveyed at the
Comex close each Tuesday, the CFTC purposefully waits 74 hours before
releasing the data to the general public. As you consider the degree to
which the "regulators" at the CFTC are complicit in the ongoing price
management and manipulation, ask yourself why it takes a handful of
dedicated public servants 3 days to crank out these spreadsheets:
http://www.cftc.gov/dea/futures/other_lf.htm
Also, we are going to assume that this data is
accurate. There have been occasions in the past where the CFTC has put
out some numbers that seemed odd and inconsistent to those of us who
follow the reports weekly....only to have the CFTC come back the
following week and correct their "mistakes".
And lastly, never assume that
this data is sacrosanct and honestly reported by The Banks. Over just
the past three years, JPMorgan has been fined on several occasions for
knowingly submitting false data:
OK, now that we have that behind us, let's take a look at last Friday's report and point out a few of the important points.
Let's start with Comex Digital Gold (or as we
call it here, "CDG"). As you assess where price may go from here, please
consider the following:
- Over the past three reporting weeks, price has fallen by $35 or nearly 3%.
- During this time period, the Large Speculators in CDG have reduced
their NET long position by over 71,000 contracts or about 37%.
- As of last Tuesday, when this latest CoT was surveyed, the Large
Spec NET long position was just 126,724 contracts and the Commercial NET
short position was just 142,859 contracts. These are the lowest NET
positions since the CoT survey of February 21, 2017.
- At 142,859 contracts NET short, the Commercial NET short position
has been trimmed by more than 1/3 in just the past three weeks.
- Perhaps most importantly from a historical perspective, at the
recent price highs of July 5, 2016, the NET long position of the Large
Specs was 316,037 contracts and the NET short position of the
Commercials was 340,207. Ask yourself how high might price rise if these
200,000 Spec longs return to the Comex over the next few months?
Finally, for CDG, consider this chart:
Now let's turn our attention to Comex Digital
Silver or "CDS" for it's here that the changes are rather eye-opening.
Let's lay some of them out as we did above for CDG:
- Over the past five weeks, price has fallen by $1.58 or about 8.6%.
- During this same time period, the Large Specs have reduced their NET long position by over 62,000 contracts or about 59%.
- As of last Tuesday, the Large Spec NET long position was just 43,004
contracts and the Commercial NET short position was just 57,337
contracts.
These are the lowest NET positions since February 2, 2016.
- At 57,337 contracts, the NET short position of the Commercials has
been cut almost exactly in half over the past five weeks from an alltime
high total of 114,4141 contracts on April 11.
As you can see, just as in Comex Digital Gold,
the recent CoT changes in Comex Digital Silver are significant. But,
there are a few more remarkable datapoints you need to know. Again,
these are from the report surveyed last Tuesday and released late last
Friday:
- Here at TFMR, we like to look at what we call "The Large Spec
Net Long Ratio" when we consider the "bullishness" or "bearishness" of
the survey. All we do is take the summary positions from the silver
report and divide Spec longs by Spec shorts. The lowest ratio we've ever
recorded came from the CoT surveyed July 21, 2015. On that report, the
Large Specs in silver were long 66,576 contracts and short 62,331. This
produced a ratio of just 1.07:1.
- On February 28, 2017, we observed the highest ratio we've ever seen
at 6.04:1. This ratio was still 4.99:1 five weeks ago with the CoT
surveyed April 11.
As of last Tuesday, the ratio is all the way
down to just 1.75:1 and this is the lowest Large Spec Net Long Ratio
we've seen since
January 19, 2016.
- At 112,949 contracts, the GROSS short position of the silver Commercials is the smallest since the CoT of April 5, 2016.
- The GROSS short position of the Large Specs stood last week at
57,138 contracts, up from 26,454 contracts five weeks ago. But that's
not the interesting part. Consider this: At 57,138 contracts, this is
the
largest Large Spec GROSS short position in silver since the CoT Survey of August 4, 2015.
As in CDG, let's put this data onto charts. See below:
In the end, what does all this mean?
Well, I suppose you could make the case that
these most recent selloffs have washed out any "excess Speculator
bullishness" that might have been present a few weeks ago. The CoT could
also imply that upside potential now outweighs downside risk. However,
for the reasons listed back at the beginning of this post, no one should
ever make a trading or physical purchase decision based upon CoT info
alone.
That said, given the similarities the current
CoT structure has to the CoTs of late 2015 and early 2016, it seems safe
to conclude that the prices of CDG and CDS are very close to...or have
made...new bottoms. History suggests that the turnaround may not be
immediate but the next price move from these lows could once again be
substantial.
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Our Ask The Expert interviewer Craig Hemke began his career in financial services in 1990 but retired in 2008 to focus on family and entrepreneurial opportunities. Since 2010, he has been the editor and publisher of the TF Metals Report found at target="_blank" TFMetalsReport.com, an online community for precious metal investors.
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The author is not affiliated with, endorsed or sponsored by Sprott Money Ltd. The views and opinions expressed in this material are those of the author or guest speaker, are subject to change and may not necessarily reflect the opinions of Sprott Money Ltd. Sprott Money does not guarantee the accuracy, completeness, timeliness and reliability of the information or any results from its use.
