- Jul 4, 2011
Silver: COT Levels into
Technical observations of RossClark@shaw.ca
(click on images to
Posted Jul 7, 2011
The Commitment of Traders data for futures contracts is released
by the CFTC each Friday. The data is compiled as of the preceding
Tuesday. For each long futures contract there is a short position.
Unlike equities that have a fixed number of shares issued
by a corporation, there can be an unlimited number of contracts.
For each new buyer and new seller a contract is created (called
open interest). In a strong uptrend the open interest will expand,
identifying that new buyers are stronger than new sellers. In
a rising trend with declining open interest it identifies that
the market is being pushed higher by more short sellers exiting
positions than new buyers establishing positions. When
the last of the undercapitalized short sellers have exited their
positions the market becomes vulnerable.
The COT report breaks down the positions based upon the type
of market participants. In our analysis we monitor the net positions
of non-commercials (speculators) and commercials. The total level
of positions can be significant, however, what interests
us more is the rate of change in positions. When there is a dramatic
decline in positions of both commercial and non commercial participants
due to a shift in market direction it serves as a buy alert.
As of last week commercials have reduced their shorts by 48%
and non-commercials by 61%. This produces the ninth cluster of
alerts in the data (available from the CFTC back to 1986).
For those investors with deep pockets is it time to begin
accumulating bullion and related stocks.
Jul 4, 2011
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