Ouch! I haven't seen a sell-off in silver like this in awhile! If you're into silver, hold tight. It's come back, but it may be spring before it happens.
Dumb Money Gets "Super - Bearish" on Silver
By Alex Roslin
Yikes, what carnage Monday has brought to the precious metals. Sharp selloffs like this morning’s are one of the reasons it’s so hard to trade many commodities—the “ulcer factor” is just too high. Here’s a typical scenario: After weeks of happy upside drawing in lots of latecomer small investors to the party, a spot of bad news sparks a vicious run, and the little guy jumps ship, feeling burned. Then, the market recovers and rises again! Doesn’t it feel like the market’s raison d’être half the time is to trick and punish you?
I did away with a lot of these psychological head games I used to play with myself when I developed better risk management strategies, and then I eliminated them almost entirely when I switched to mechanically trading the markets with the Commitments of Traders reports. These are the free government reports issued weekly by the U.S. Commodity Futures Trading Commission, which detail futures and options positions in all the major markets.
The latest COTs report issued last Friday, Nov. 9, shows the small traders in silver futures and options hitting a historically bearish extreme in their net position as a percentage of the total open interest. The “dumb money” little guys have suddenly reduced their net long position to the lowest it’s been since Nov. 2005. Shortly after, silver exploded out of an 18-month trading range, nearly doubling in price over the ensuing half-year. The latest positioning of the wrong-way crowd, whom I trade opposite to in my setup for silver, has given me a renewed bullish signal for silver. This means I’m staying long iShares Silver (SLV).
Sadly, the COTs numbers show in grim relief what’s going on as the little investors try to outguess the markets—and end up losing their shirts.
Dumb Money Gets "Super - Bearish" on Silver
By Alex Roslin
Yikes, what carnage Monday has brought to the precious metals. Sharp selloffs like this morning’s are one of the reasons it’s so hard to trade many commodities—the “ulcer factor” is just too high. Here’s a typical scenario: After weeks of happy upside drawing in lots of latecomer small investors to the party, a spot of bad news sparks a vicious run, and the little guy jumps ship, feeling burned. Then, the market recovers and rises again! Doesn’t it feel like the market’s raison d’être half the time is to trick and punish you?
I did away with a lot of these psychological head games I used to play with myself when I developed better risk management strategies, and then I eliminated them almost entirely when I switched to mechanically trading the markets with the Commitments of Traders reports. These are the free government reports issued weekly by the U.S. Commodity Futures Trading Commission, which detail futures and options positions in all the major markets.
The latest COTs report issued last Friday, Nov. 9, shows the small traders in silver futures and options hitting a historically bearish extreme in their net position as a percentage of the total open interest. The “dumb money” little guys have suddenly reduced their net long position to the lowest it’s been since Nov. 2005. Shortly after, silver exploded out of an 18-month trading range, nearly doubling in price over the ensuing half-year. The latest positioning of the wrong-way crowd, whom I trade opposite to in my setup for silver, has given me a renewed bullish signal for silver. This means I’m staying long iShares Silver (SLV).
Sadly, the COTs numbers show in grim relief what’s going on as the little investors try to outguess the markets—and end up losing their shirts.
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