Hi all, I am new to this forum and this is my first post here. I started stacking precious metals (mostly silver but also some gold) in the beginning of 2017. I have also been studying these markets a little bit. I have downloaded two data sets: - The amount of silver futures contracts traded per day from the Commodities and Futures Trading Commission (USA government) since 2006. These are contracts of 5000 ounces each. Each number represents the amount of contracts traded in a single day. Remember that these are contracts, not physical silver. These are the so-called silver derivatives (paper silver). - The silver spot price in USD since 2006 from the Perth Mint. I plotted the two data sets onto one single chart and have attached the plot to this message. You see something very clear: - Until roughly 2011 the two lines very clearly follow each other. - Then after that they go opposite ways: price has a high in 2012 while the amount of contracts has a low (roughly), and after that the price keeps on going down while the amount of contracts keeps on rising. So clearly something changed in the derivatives market after 2011. Does anybody know what went on/is going on in these markets?
Let me make some clueless guesses - 1. A piece of paper is more precious than 155.517 Kg of useless metal. 2. People love paper more than useless metal. 3. Only Dimwits (me included.) buy these useless metal. 4. Each time Dimwits back up their trucks, the price goes down. 5. Paper is mightier than the useless metal.
https://www.bulliondesk.com/silver-...er-cme-group-raises-margins-third-time-30686/ http://www.reuters.com/article/businesspro-us-markets-silver-slide-idUSTRE7437XU20110505 if youre new to this please stay away from ideology and watch where the money is going edit: a word
This is T/A 101 at it's most basic level. Volume can used as an indicator of trend and price-move support. The strength or market support of any given price movement can be measured by the relative volume trade behind that move, ie. If a price movement is supported by higher or rising volume, then price movement momentum in that direction can be sustained, if a price move is not supported by higher or rising volume (falling volume), then the momentum of the price movement in that direction is at risk. So, you are correct - something did change after the price peak - MARKET SENTIMENT changed. You have demonstrated that this technical observation is clear, even to a novice. I have indicated the above explanation on your overlay-chart to try and show clearly what you have observed: Cheers
Your observation isn't new. I noticed that price - net futures position correlation somewhere in 2011. A quite straightforward explanation, for a correlation, simply is that the taking of futures positions is the dominant price driving factor at the time. Before 2011, and post 2009, this total net position was quite stable, and was relatively high nearly all the time during that period. Other kinds of buyers/sellers must then have been the dominant price driving factor. For ex, the stocks that Exchange Traded Funds buy/sell as to link the price of a derivative to the price of the underlying of the derivative. Without such a price link, the derivatives part of the market would become a zero sum market on its own - unable to "milk" the market of the underlying. During that period, ETF's purchased alot. Since then, their stocks just hung - nearly no new additions. And thus, the futures part of the market became the major price changer. For ex, last year the futures total net position sat well in the 100000+ range, a record high, corresponding to a (bogus) demand of 100000 x 5000 = 500 million ounces. That is about 50% of a worlds annual traded supply/demand. Some serious price effect, and that was the reason for the $15-$20 price sweeps. And why? Well, it's related to the futures market as such. The reason for its existence is to hedge. To avoid becoming the losing side of the buylow sellhigh that speculators attempt. It's all about timing. Dealers buy a quantity of the underlying, causing a price increase, then hedge that new stock, causing (along forward<>spot price arbitration) an extra price increase. Then customers (read: speculators) are supposed to buy that stock / pay that extra higher price. It's a futures market wide phenomenon, alot had big futures positions, why: the 2008 crisis raised alot concerns, alot bank savers became speculators, scared of serious/hyper inflation - willing to pay the extra
Welcome. Please either make or find another graph. Specifically, a graph going back to your same 2006 start date showing the spot price of silver in $US to remove exchange rate effects. Below this graph, add a neutral line and plot the net long Managed Money silver position above it and the net short Commercial position below it (Commercial being the sum of producer and swap dealer categories in the COT reports.). What you will see is that until peak prices in 2011, Managed Money simply accumulated longs and Commercials issued shorts, a big Mexican stand-off. At peak prices, a shooting war erupted, one in which at least one party was exempted from any laws or rules. You will note two things in particular during that war: 1. a general decline in prices. 2. a clear pattern of short term peak prices occurring when Commercials were peak short and Managed Money peak long, and short term price bottoms when Commercials are as long as they get (generally still short, but less so) and Managed one is peak short (which is still long but less so). If you contemplate this until you understand what it really means, ignoring the rubbish you will see from those that have no understanding, you will become one of the few truly Enlightened Ones. There will be many who will attempt to seduce you into another path. It is worth listening to them only as long as they make sense, then stop. There will be others who make no sense from the beginning, and it is important to be able to step over the rubbish they leave in their paths as they wander aimlessly in the wilderness. Most of these people will be the Losers, bitter about the losses they have incurred by stacking or trading during the last 6 years, and looking for someone other than themselves to blame. A much smaller number are the Trolls, who never had the money and/or the balls to take positions, either physical or paper. Finding and pursuing the path to Enlightenment is not easy. Good luck Little Grasshopper.
http://www.cftc.gov/MarketReports/CommitmentsofTraders/HistoricalViewable/index.htm http://www.cftc.gov/files/dea/cotarchives/2011/futures/other_lf051711.htm 17/05/2011 34017 $34.26 Producer/Merchant/Processor/User Long 12152 Short 50733 Net: -38581 SwapDealer Long 18133 Short 13569 Net: 4564 ManagedMoney Long 21071 Short 5537 Net: 15534 OtherReportables Long 9865 Short 7964 Net: 1901 SmallTraders Long 28781 Short 12199 Net: 16582 http://www.cftc.gov/files/dea/cotarchives/2011/futures/other_lf042611.htm 26/04/2011 42534 $45.94 Producer/Merchant/Processor/User Long 9301 Short 51644 Net: -42343 SwapDealer Long 19284 Short 19475 Net: -191 ManagedMoney Long 30538 Short 7295 Net: 23243 OtherReportables Long 12540 Short 10788 Net: 1752 SmallTraders Long 36144 Short 18605 Net: 17539 Over those 3 weeks, the spot price dropped from $45.94 to $34.26. Over those 3 weeks, the futures markets total net position dropped from 42534 to 34017, which represents a price impact of a mere 42.6 Moz. An estimation based on long term averages from #positions per price dollar movement indicates that a single price dollar change requires a supply/demand change of around 70 Moz. The spot price dropped over those 3 weeks nearly 12 price dollars. This clearly proves that the futures market was a minor element in 2011's april-may peak reach and collapse to a (then) bottom. Other elements had a multiplicated price impact, and should have summed up to a rough 750 supply demand change, which could result from (for example) a drop of 325 Moz in demand combined with an increase of 325 Moz in supply. And frankly, that is hardly surprising - it would be a situation/trend just typical for a decades-record peak price market. A mass stupidoes willing to pay that price, combined with a mass experienced taking advantage of them. At some point even the stupidiest stupido starts to realize that a silver price increase of $1 every day of the week, 2 months ago $32, risen to higher $4x level, with prices in supermarkets and pubs just staying, isn't "normal". So, at some point (the repeat of the historical $1980 peak) the stupidoes started to become reluctant to pay even more for an ounce. Demand collapsed. And then, the more experienced, that at the same time had their fists hovering above their Place SELL Order buttons, all hammered the fists down. Supply peaked. That "What you will see is that until peak prices in 2011, Managed Money simply accumulated longs and Commercials issued shorts, a big Mexican stand-off." ... is just bu ll sh it. 17/05/2011 34017 $34.26 Producer/Merchant/Processor/User Long 12152 Short 50733 Net: -38581 SwapDealer Long 18133 Short 13569 Net: 4564 ManagedMoney Long 21071 Short 5537 Net: 15534 OtherReportables Long 9865 Short 7964 Net: 1901 SmallTraders Long 28781 Short 12199 Net: 16582 10/05/2011 41336 $39.14 Producer/Merchant/Processor/User Long 11237 Short 52450 Net: -41213 SwapDealer Long 15511 Short 15634 Net: -123 ManagedMoney Long 22250 Short 4793 Net: 17457 OtherReportables Long 11989 Short 5960 Net: 6029 SmallTraders Long 31043 Short 13193 Net: 17850 26/04/2011 42534 $45.94 Producer/Merchant/Processor/User Long 9301 Short 51644 Net: -42343 SwapDealer Long 19284 Short 19475 Net: -191 ManagedMoney Long 30538 Short 7295 Net: 23243 OtherReportables Long 12540 Short 10788 Net: 1752 SmallTraders Long 36144 Short 18605 Net: 17539 18/01/2011 45368 $29.17 Producer/Merchant/Processor/User Long 6054 Short 50244 Net: -44190 SwapDealer Long 18891 Short 20069 Net: -1178 ManagedMoney Long 25430 Short 4045 Net: 21385 OtherReportables Long 14580 Short 6312 Net: 8268 SmallTraders Long 28833 Short 13118 Net: 15715 A change of a couple thousands positions on a fluctuation of many tens of thousands, is nothing. Then, lets look at some other data set. ETF Inventory Build (derived as Inventory Build minus Exchange Inventory Build) 2004 0 2005 0 2006 132.9 2007 54.8 2008 101.3 2009 153.8 2010 132.6 2011 -11.8 2012 -24 2013 1.6 2014 1.4 What is clearly seen is that before 2011, ETF's (the physical backed ones of course - not the futures positions based ones) were big buyers. In 2011, they ceased so. Well, that was such (see above) a big demand drop.
Look at a graph of 2006 to present, as I discussed, not just the month of the crash. Dropping ETF demand was a consequence of the price crash, not the cause.
Why would anyone look at 2006-2011 data, to explain a price trend in 2011 that was a +$20 in 2.5 months followed by a -$20 in 2.5 days ??? Despite your so called "crash", 2011 still had the highest silver price average in history ($35), implying a highest total ounces purchased and/or a lowest total ounces sold. Remember that the price was driven well beyond $4x again, but instead of due to real demand, it was due to futures. And hence that correlation total net position/price since. Before, the opposite occurred, the total net position on the futures market dropped, while the spot price was rising. Go figure! The problem is that you mess around with time frames, and that way, one can pre-draw any "conclusion", any claim.
Nevertheless, be my guest to show me any data that supports your: "Below this graph, add a neutral line and plot the net long Managed Money silver position above it and the net short Commercial position below it (Commercial being the sum of producer and swap dealer categories in the COT reports.). What you will see is that until peak prices in 2011, Managed Money simply accumulated longs and Commercials issued shorts, a big Mexican stand-off. At peak prices, a shooting war erupted, one in which at least one party was exempted from any laws or rules." There is a crucial element that gets ignored (on purpose?) alot: bringing a long position into existence, implies bringing a short position into existence. Any statement based on a focus on any trader classes or single traders longs, or shorts, is therefore useless, misleading. What matters is the total net of a trader class, or a single trader. And even aside this, that "money managers" trader class, basically is just a middlemen class in the trading. They don't trade for themselves, they perform the trading on their clients behalf. Alike one would ask a neighbour to buy something in some shop for them. The CTFC classifies traders into trader classes, but actually they base this choice on a current trading behaviour. If some entities bought big silver stocks during some past period, in that past period they would be classified in a demand side class, and if those entities would later on sell off those stocks, they would be reclassified in a supply side class. It's a dynamic story. For what it all matters, because in the end, the entire futures part of the market just serves to allow to temporary increase a price / to frontrun speculators as to make these fail to get free dollars (buy low sell high) from them. If common people would cease to speculate on the commodity, a futures market for it would be a pointless zero sum story doomed to starvate into the void, abit like a bunch wolves with as food fellow wolves instead of sheep. You say people to look at graphs, but do this: download all the cftc historical data for silver, calculate every years weeks net positions, calculate years average positions, and THEN you have some ground to make claims about the futures markets impact on the price trend. If the futures markets total net position would be zero, that impact would be zero too. And with that zero being possible with zero longs + zero shorts, or a million longs + a million shorts. Because for the price, the net total of all on supply side (and implicitly the inverted on demand side) matters, not some selection of longs or shorts or trader class(es), AND at THAT moment on the price trend. Because some base claims on present price trend on past price trends. Being a capital error (or misleading?), because people can foresee things to happen, act already in the present, effectively putting a future price change expectation already in the present price. Being described as "already in the market".
The reason to look at 2006 to 2011 and 2011 to present present is because that was the question that was asked at the beginning of the thread, i.e. what changed in 2011. I provided a link to such graphs, use it. Enlightenment is not given, it is earned. Others can only show you the path. What has been your average ROI for PM trading the past 5 years?
It is clear that you do not see in these graphs the same things I see. Few do, despite my recent efforts to share it. Many, like you, are more interested in disagreeing than learning. However, my Thai wife has been trading gold futures on the Thailand exchange for about 4.5 years now based on it. If you research what I have written here and on Silver Doctors (and NO, I will not dig them all out for you, but my name on Silver Doctors is "Faranginkorat"), you will see that we recently went long gold at $1230 just before the bottom, and then doubled the position at about the same price a few days after the bottom. (The TFEX stopped silver future trading a few years ago because volumes were too low - no interest. I will be re-activating a long dormant account in the States soon so we can trade silver, as it is much more dynamic than gold presently.) Those positions were liquidated Friday at roughly a 10% gain, much less than it would have been in $US as the THB strengthened rapidly and significantly during that time, and we do not hedge the exchange rates. On my advice, a Chinese friend bought her first long silver contracts on the Shanghai Futures Exchange when the silver price was about $16.30, days before the bottom, and doubled her position at about the same price a few days after the bottom. She still holds them (ag1712 contracts), and is happy so far. Her only previous trading experience was a single stock that has lost over 80% of it's price. Immediately prior to the above trades, we did a one day short that added 2-3% to the account, but I don't recommend anybody short PM . That was the only time we shorted in the last 6 months. Before that, for 4 years, we were short as often and as much as we were long. Wife's current account balance plus what has been withdrawn over the past four and a half years is about 16 times the initial capital. How have you been doing?
What changed in 2011 is about 2011 not after and not before. Supply/demand (read: price) trend changed in 2011 (being an all time peak average price and thus demand/supply year) You provided no link You wrote: " Welcome. Please either make or find another graph. Specifically, a graph going back to your same 2006 start date showing the spot price of silver in $US to remove exchange rate effects. Below this graph, add a neutral line and plot the net long Managed Money silver position above it and the net short Commercial position below it (Commercial being the sum of producer and swap dealer categories in the COT reports.)." ... that's all. I provided the CFTC site source for this historical data, and gave some 2011 samples that denied your Managed Money claim. That same CFTC is (of course) used as source by other sites. An example is finviz.com. http://finviz.com/futures_charts.ashx?t=SI&p=m1 Those green red blue trendlines below are the from aboves data calculated total net position as it is released weekly. ... which even denies your "What you will see is that until peak prices in 2011, Managed Money simply accumulated longs and Commercials issued shorts, a big Mexican stand-off." ...claim. In reality, the futures market entities took a rough 50000 position and mostly held it all the time over that period, as indicated by the large area between the neutral / zero line and the green (or sum of red and blue) trendline(s). So during those years, they inflicted the then-silver buyers an artificial higher price (read: less ounces for the dollars). Since it was a bull market, they weren't confronted (yet) with big sales back. Which changed in 2011 (the years average - total of the 52 reported total net positions divided by 52) as indicated by the small surface area. Since end of bull market (speculators tend to become wiser after hard lessons), the futures part of the market largely drove the price, as indicated by the correlation that this topics creator noticed (just like I did in the past). Who are those futures market entities? Well haha, silver dealers, alike Silver Doctors, and other vested interest clubs, that need suckers willing to pay whatever to then blame others instead of the mirror? They always talk about short short short positions manipulation price wars and flag every price uptrend as a breakout of real market forces overcoming manipulators etc etc. In reality, that "breakout" is just them re-taking futures positions themselves, for a next milking round attempt. Your previous post just confirmed that, and lol, I don't even want to be you. Instead, I give some info/data as to avoid others making costly decisions based on bogus stories of those clubs out there...
Hi, Thanks for all your answers. They raise a number of other questions: - What exactly is a net short position? Is that short plus spread or short minus spread? Idem for a net long position. - What are Prod_Merc, Swap, M_Money, Other_Rept, and NonRept_Positions positions? - I noticed the following: Tot_Rept_Positions_Long_All is the sum of Prod_Merc_Positions_Long_ALL Swap_Positions_Long_All Swap__Positions_Spread_All M_Money_Positions_Long_ALL M_Money_Positions_Spread_ALL Other_Rept_Positions_Long_ALL Other_Rept_Positions_Spread_ALL Similarly, Tot_Rept_Positions_Short_All is the sum of Prod_Merc_Positions_Short_ALL Swap__Positions_Short_All Swap__Positions_Spread_All M_Money_Positions_Short_ALL M_Money_Positions_Spread_ALL Other_Rept_Positions_Short_ALL Other_Rept_Positions_Spread_ALL Why is the spread position a part of the long and short positions? In other words, what exactly is a spread position? - I also noticed: Open_Interest_All = sum of Tot_Rept_Positions_Long_All NonRept_Positions_Long_All Open_Interest_All = sum of Tot_Rept_Positions_Short_All NonRept_Positions_Short_All So we can conclude that the total amount of short positions is always equal to the total amount of long positions? Thanks heaps for all your help!
A "net short position" is a confusing word combination, because the "short" or "long" is dependent on the result of a calculation all longs minus all shorts whose outcome decides "short" or "long". A "total net position" is a better wording, and it is simply the sum of all positions that a certain person or company or group / class of traders holds. Imagine a company named ABC It has 44 long positions on the silver futures market (ie a 5000 ounces per contract). AND It has 33 short positions on that same silver futures market. Then that company ABC has a total net (longs+shorts) position of 44-33=11. Since that "11" is a positive value, the company is net LONG 11 positions. If it had been a swapped situation, it would be 33-44=-11. That "-11" is now a negative value so the company is now net SHORT 11 positions. The entirety of this silver futures market, also has such a net total position. There is a (dominant) supply side. There is a (dominant) demand side. With both sides categorized in "trader classes". Supply side (also called "Commercials") has 2 such classes - Producer/Merchant/Processor/User (also called "Commercial Hedgers" by finviz.com) - Swap Dealers (also called "Commercial Hedgers", but actually aren't really hedging - they are middlemen supply-demand with ex Money Managers as their counterparty)) Demand side has 3 - Money Managers (finviz.com names these "Large Traders") - Other Reportables (finviz.com includes these also in that "Large Traders") - Nonreportables (finviz.com calls these "Small Traders") Something worth noting: the supply side of a certain futures market doesn't need to be total net = short. They can also be total net = long. For ex the copper futures market. http://finviz.com/futures_charts.ashx?t=HG&p=m1 2002-2005 the supply side hedgers were net short. 2006-2009 net long. 2010-2012 net short. 2013-2016 net long. 2017 net short. It illustrates something about the futures markets in general: the supply side goes against speculators on the cash market. The reason is quite obvious: speculators are people that built up a stock of something. That stock can appear for sale, so adding to supply, and is competition for the "original" supply side. So the latter hedges against the former. Which is the very goal of futures. Back to the silver market: imagine silver wouldn't be bought anymore by speculators. Well, its futures market would become useless. No hedging needed. "Spreading" = total long (or short) positions of a trader minus his net total. Could be described as his throttling "room" when hedging - price exposure can be changed without adding new or have to wait for expiration of existing. For example, if a non-commercial trader in Eurodollar futures holds 2,000 long contracts and 1,500 short contracts, 500 contracts will appear in the "Long" category and 1,500 contracts will appear in the "Spreading" category. These figures do not include intermarket spreading, such as spreading Eurodollar futures against Treasury Note futures. Also see the "Old and Other Futures" section, below.
Forgot to say: the last sentences were quoted from http://www.cftc.gov/MarketReports/CommitmentsofTraders/ExplanatoryNotes/index.htm The first one is unclear to me. If that "Long" category references the COT report data, then it would mean that this data column would be a net total (2000 longs minus 1500 shorts -> 500 listed under Long). But that would be contradictional, as far as I know the COT report doesn't contain any direct net total, not in sections not in total. Apparently finviz.com also handles it like this, since their net totals (green, blue, red trendlines) match the calculation results.
