Friday, April 23, 2010

COT Flash April 23

COT report issued today, Friday, April 23, 2010 at 15:30. 
Bottom line:  COMEX commercials short bets for both gold and silver ease lower, but not very much. Gold -0.9% and the gold LCNS fell by 2.3%.  Silver -2.1% and the silver LCNS declined by 2%. 
Details just below. 
As the United States Congress mulls a bill to create yet another regulator and another oversight bureau, opponents of even more government regulation were given a shot in the arm today as apparently some SEC employees were caught with their pants down so to speak.  According to news reports it seems about 30 of them spent their daytime watching porn on our dime (with at least one filling up his computer hard drive with graphic images) instead of doing the people’s business.  Apparently going after guys like Bernie Madoff and Alan Stanford just isn’t as interesting as watching hard-core video and such.  (Just the most recent high-profile cases of government regulator fumbling.) 

At least we have more information now to understand what SEC rank and file consider as high priorities during a sure-enough financial crisis.  Why does Elliot Spitzer come to mind now?  He didn’t even work for the SEC. 

Normally we wouldn’t “schtupp” so low as to, uh, "bring it up," or mention that the SEC is now the butt of a bunch of really off-color jokes ... but dog-gone it, we just don’t need another regulator in the U.S.  We don’t need more regulations and more big government.  We have plenty already, thank you very NOT. 

What we need is for the agencies and regulators we already have to, oh, maybe actually do the work they are paid to do and oh, maybe enforce the regs already in place... 

Enough about that, we have a new COT report to look at as both gold and silver regained the ground they lost on Friday one week ago.  Remember the cutoff for data is the previous Tuesday, in this case Tuesday, April 20 and gold and silver had just begun to see a bid following the SEC’s party-line split decision Friday to go after the Goldman machine in New York.  That Friday morning surprise announcement gave the Big Sellers of gold and silver a chance to knock the weakest of the longs out of the game – until now. 

With that, uh, “short” intro, let’s take a look at what the largest of the largest traders of gold and silver futures in New York did right after that sneak attack on the House of Blankfein, aka Goldman Sachs.  

Gold COT

The Commodities Futures Trading Commission (CFTC) issued its weekly commitments of traders (COT) report at 15:30 ET today, Friday, April 23, 2010.  The report is for the close of trading as of Tuesday, April 20. is focused on the changes in positioning of the largest futures traders in that report – the traders the CFTC classes as “commercial.”  We refer to those commercial traders as “LCs” for “Large Commercials.”  
For gold, as gold dipped a net $10.34 or 0.9% to $1,140.56 COT reporting Tues/Tues, COMEX commercial traders reduced their combined collective net short positioning (LCNS) by a smallish 6,088 contracts or 2.3% from 263,484 to 257,396 contracts net short as the open interest fell by a slightly higher 7,518 contracts from 528,856 to 521,338 contracts open.

Remember that is as of the Tuesday close, before the Goldman damage control stories were getting out very much and before we learned that the decision by the SEC to take on GS was anything but unanimous. 

Here's the nominal LCNS graph for gold futures:

Not really very much of a change by Tuesday in other words.  Remember that gold had tested as low as the $1,130s on Friday, April 16 and as low as $1,124.19 Monday, the day before, so this COT reflects gold back on a $15.00 rise following a take-down.  

When compared to all contracts open, the relative commercial net short positioning (LCNS:TO -  the most important graph we track) actually fell about half a percentage point from 49.82% to 49.37% of all COMEX contracts open.  The LCNS:TO really didn’t move very much on the SEC shot across Wall Street’s bow in other words and we cannot point to either aggressive selling or covering in this report.

Here's the LCNS:TO graph for gold:


What can we say when there is nothing much to say, except that we cannot see evidence of either big short covering on the manufactured dip or the opposite, a surge in commercial short selling or aggressive “hedging” to help fuel the sell-down.   (We use the term “hedging” loosely because the CFTC does.)   We see neither this week and so we will be looking to some of our other indicators for guidance in the full report we hope to file on Sunday afternoon.   

Pending our review of the data this weekend our sense is that we will likely stay put with trading stops in the $1,120 equivalent. 

For silver, as silver fell a net 39-cents or 2.1% to $17.84 on the cash market COT reporting Tues/Tues, COMEX commercial traders covered or offset a tiny 1,072 contracts (2%) of their collective net short positioning from 55,389 to 54,317 contracts net short.  This, while the open interest ROSE 3,018 contracts to 126,679 contracts open.

Here's the nominal LCNS graph for silver futures:

We find it interesting and somewhat bullish to see the LCNS falling on an increase in the total open interest.  If we think about it, as the number of silver contracts rose by 15 million ounces worth, the largest commercial traders actually reduced their net short positioning by contracts covering 5.4 million ounces of good-delivery bar silver. 
We compare the nominal LCNS to the total open interest.  That gives us a better idea of the relative positioning of the largest hedgers and short sellers instead of just tracking the nominal amounts.  (We use the term “hedgers” loosely because the CFTC does.)   

When compared to all contracts open, the relative commercial net short positioning (LCNS:TO) for silver fell from 44.8% to 42.9% of all COMEX contracts open. 

Here's the LCNS:TO graph for silver:

We’ll have more in the linked charts at the bottom of our upcoming full Got Gold Report, which should be out sometime late Sunday afternoon. 

So, as of the Tuesday COT cutoff, the largest gold and silver futures hedgers and short sellers in New York ever so slightly reduced their collective net short positioning for both gold and silver following last week’s Friday SEC surprise gift to the Big Shorts, but not really by very much. 

We think today’s gold action looked a lot like short covering ahead of the weekend, but we won’t know for sure until next week’s report.  We did see aggressive bidding for gold in Thursday’s early sell-down attempt in New York to the low $1,130s and noted it in our daily journal:  “Major buyer steps in at $1,133 in size.” 

Again, pending our review of the dozens of charts, ratios and data Got Gold Report tracks this weekend, our intention is to stand pat with trading stops for gold in the $1,120 equivalent and silver in the $17.50 equivalent, with an eye to allowing a bit more weekly volatility than normal again.   

Scorecard:  Gold -0.9% and the gold LCNS falls 2.3%.  Silver -2.1% and the silver LCNS dips by 2%.

That is all for now.  We are planning a full GGR by Sunday evening.  Have a great weekend. 


The Original
Vulture Speculator

Trading gold, silver and mining shares since 1980 with a focus on taking advantage of volatility extremes, Gene Arensberg analyses the markets through a basket of technical and fundamental indicators and shares his findings from time to time here at Got Gold Report. Mr. Arensberg has been quoted in the Wall Street Journal, Dow Jones MarketWatch, USA Today and dozens of other news organizations.

"I've been a huge fan of Gene and his amazing work for years..."

Brien Lundin, CEO, Jefferson Financial, Host of the annual New Orleans Investment Conference and Publisher of Gold Newsletter

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