TLDR – my weather forecast has cloudy overnight with strong chance of torrential showers with a sunny sky tomorrow with rainbows. Bring your umbrella to be certain.

Like many others, I’m stupid crazy bullish silver, but over the last few years I’ve become battle tested against my underlying long term sentiment and my short term to mid term trading mentality.

The case lower

Last week, I had called for about $21 to finish the OpEx on Thursday. It closed around $21.27 or so at 1:25 Eastern Time. This was an analysis of where the calls and puts were, along with charts. $21 was calling too closely to me, so I had shorted. I did well, and then at $21.16, I felt there was some downside, and shorted again. A stupid short, in hindsight, as the price rose back up to $22 before I got out around $21.45. I need to be better with putting stops on shorts, as this price volatility is nuts. However, I got long at $21.50 as I felt the bottom had perhaps come in, and was stopped out (luckily) at $21.38 on the way down….to $20.75?

That, was a little further than I thought. Fundamentally, my mind hasn’t changed on the 200m oz deficit, the lack of primary miners, or the idiocy which is the green movement which has written checks on metals their asses cannot cash at these prices.

But there is another fundamental looming, and that is fear of recession. With this, silver can put on the identity of the industrial metal, at times. However, most have to remember that we are looking at the paper prices. I was worried about a close below likw $21.90 on Friday. I do believe in the psychology of the Fib retracements. The won’t precisely tell you WHERE it will stop, but you start to see battlegrounds here.

On the chart above, you see…

  • A downward arc formation
  • A possible double bottom at this level, but it’s a few cents higher than the last higher low. More on this below.
  • You can see a dotted line resistance/support line here that’s a little weak
  • We closed BELOW the 200dma
  • It was a hell of a strong run from Sep bottom to here, and needed cooling off (a wave 2?)
  • It crossed the .5 Fib, and is between the .5 and .618.
  • The .618 Fib is at a longer term trend line since September.
  • At these other Fib lines, I’m not seeing resistance until you get to the bottom at $17.60

This could be a decent short term short play to $20.28 on the chart, about a 50 basis point move, or $500 for a micro contract. I’ve been playing two micros. Given how it ended Friday, I don’t see a ton of enthusiasm with PMs right now. Everyone knows it is cooling off. But then the question is, where does the fall stop? I am not seeing people post “I’m going all in on miners at these levels”! No, it’s more like “I hate miners and the second I break even, I’m getting out”. They are just waiting for others now to do the heavy lifting.

On my Kinesis account, I’m working to fund buying some ounces of physical vaulted at this level. The last few weeks many of us have been worried about the SEC moves with anything to do with crypto, and it happened with TD. It’s disappointing, because I feel my government needs to understand the difference between a shit coin and a metals-backed digital currency, but many of us knew the waters were choppy and look forward to getting a new partner moving forward. My point is this – I can short the paper games on the chart to hedge my mining stock losses, AND I can also see this level as a buying opportunity to stack silver in a vault.

To me, the charts paint a downside to AT LEAST $20.28, so my shorts will go on tonight. I’ll put some stops at perhaps $22.10, which gives me $.35 upside loss at my cap, or $700 with my 2 micros. Sometimes the overnight gets a push up, then you can see London open and smash, and then 8:30 can also smash. So I have a cushion to absorb overnight up moves perhaps $.20 to $.25 before London and NY rug them to perhaps $20.28.

I’m NOT saying $20.28 is the low, but this is where you might see a battleground. It could be an arm wrestling event the next three to four weeks down to $17.x. This is the downside reality that is there with paper games.

What we might NORMALLY do is also look at the COT chart – but this data is ALMOST A MONTH OLD

You can see they were net short as of 1/31 about 6,000 contracts. They could have just smashed it the last few weeks and they might be back to 10,000 net short. NO ONE KNOWS.

The case for higher

You can frame charts sometimes from different perspectives. If you look above, it’s about a 6 month time frame. This is your “short term” trading. You are looking at the daily movements. But if you go further back, let’s take a look at a bigger structure.

You can see zooming out with a longer time frame that silver is in an arc that should be moving up yet, and this potentially is back testing against a wall for another move up soon. If you look at the 200dma, the last time it fell below the 200dma when the 50dma was well above it, it looked like a false breakdown, and then came right back up in a V formation. Additionally, you can see the daily RSI in the red circles at the bottom is at like historic lows. The last time it was this low was July 2022, before that May 2022, and before that March 2020. Unfortunately, the RSI isn’t THAT reliable when it comes to moves, but you can see that with the March 2020 low, it was a massive slingshot up. May 2022, you had a bounce, the a further move down. July, a nice bounce before a further move down. So even if my BEAR case is $17, one has to realize we might have a bounce here to $22 or $23 before a move further down. The three red candles to close the week also might suggest a bounce is coming for at the very least a day or two to get more spec longs in before rinsing them out.

However, Monday is first notice. This might be an issue for shorts. As some have pointed out, the Volume of those still interested in holding is quite high.

I was one of the red squares at the top. My trading account doesn’t allow for settling in silver for physical, so they closed me out automatically on Friday. It was my fault that I picked the March rather than the May contract on my most recent long. C’est la vie. It helped me understand these numbers better – as I can imagine THIS number is your people like me just playing the paper games. These all seems to then rollover into May 2023. I didn’t join them, yet.

But what this does show is 7,665 are still looking for metals on Monday. Now, can there be some that get out of this yet that don’t actually want the metal? Sure, but you figure they would have rolled over by now, like what kinda happened to me. If you were with my trading firm, they FORCED you out. I’m ok with that, I didn’t want delivery.

But this shows that they may want to take into their possession 38,325,000 oz. OK. However, the COMEX registered has…

31,873,973 oz……

Wait a sec. You’re telling me there are people who sold this, and STILL have an active contract, but do NOT have metals? Yeah. But could they have it in eligible? Yeah. Could this have been part of the movement we saw to add to the eligible above? Maybe. Could we use the eligible for sale? Yeah. But why is it in eligible and not registered? Your guess is as good as mine, but my guess is metals here do NOT WANT to sell at THIS PRICE. Meaning, come Monday, these guys can be 7m oz short?

Now with this, we have seen a lot of EFP games – where it looks like they send this settlement to LBMA, which I THINK might be where a portion of this eligible is, which may even be tied to SLV. Remember how they say ALL of the metal may not be there? Remember how Andrew Maguire calls these ETFs a “flywheel”? It’s very possible they just use metal tied to that allocation, and put an IOU in there. Since they changed the prospectus, they don’t HAVE to have 1:1 backing, right?

So is the COMEX dying Monday? No, as I feel they can potentially source these materials. However, could we see a STRONG bounce up from this as people need to perhaps entice people from eligible to sell? This could push spot up higher and take futures up. A lot.

If we go FURTHER out, you can see that silver is sort of in an upward rail. This is in LOG form, so I wanted the long term price in perspective here.

Why I believe we see upward rails on a lot of things over the 20-30-40 year time frames is due to monetary inflation in the system. These rails are accounting for “standard” inflation. At certain times like 2011 (yellow oval), you can see how inflation expectations shot silver far above this rail, but collapsed down at the talk of QT and how “inflation was trapped in the system”. However, as we all know, inflation recently has probably been over 12-15% for most items we see day to day, and inflation is killing miner margins. This is the environment to see it spike far above the channel. On this chart, it’s showing the lower rail at $17 something, and we are at a 45 weekly RSI.

So should I get my longs on with the fireworks on Monday? YES!

Conclusion

Wait, I just said I’m putting a long AND a short on? Ooops! Yeah, both cases to me are strong, but on Monday, the day of first notice, typically this has led to rallies which I documented in this chart.

These trends work, until they don’t. This chart essentially showed the gimmicks every month that were happening, and how the “recovery” that could have been first notice, started a new up trend with momentum.

To me, I think the most compelling piece of information for a trade on Monday is the 38 million sold, versus 31m in the registered. While it’s possible this number is knocked down to 20m sometime on Monday, that is still 67% of the registered that would change hands? Not likely. If there were gaps in the silver market, like 200m, would it be possible this is THE place many now need to go to source metals and we could see 5, 10, 20m leave the COMEX in the next 1-2 weeks? IF that is the case, this would be rocket fuel for silver.

So I can get cute here, which is usually a bad idea. I can short overnight with perhaps a $.10 stop, and then when I wake up at 5AM Monday, AFTER London opens, I can close the short and go long. This might get me a move from $20.75 to perhaps $20.41 overnight, and then NY coming to live and people realizing – “oh, shit, I need to buy a lot of silver on spot to satisfy my contracts”. It is ALSO possible a lot of these longs who WANT silver get cashed out. They WANTED silver, they could not get it, so what do they do? Rush to the spot market to try and beat others there.

Monday has a rally written all over it, but the Monday overnight might have down movement.

These things are RARELY this clean. It COULD be that buying on spot starts overnight in Shanghai and pushes metals up, with the anticipation of a run to physical happening on Monday. Monday NY open, you could see the price up $1.00 overnight and NY sells May contracts into it to capitalize on the $1 overnight move and rug everyone.

Don’t take this as trading advice or financial advice. I just wanted to show that however much I LOVE the shiny, the long term price of this has been kneecapped by those slinging paper. Doesn’t paper beat rock in that silly game? Well, it seems life has played out like that, for now.

What everyone needs to keep in mind is that a 200m oz deficit from 2022 doesn’t go away. You cannot substitute copper for silver in electronics without completely redesigning a product due to heat buildup. While a recession IS looming, no one can doubt that, the main issue in reality here is this deficit doesn’t disappear with a recession, at ALL. Short of a strong depression, the silver requirements in reality only increase with solar and EV increases in production. It is true that the used car market is dying, but that is silver already used. New cars aren’t really slowing MUCH these days, but in reality the ICE may be declining, but EVs are increasing – and they use 3x the silver as an ICE. Remember, new homes in California all need solar.

Lastly, also remember that the BRICS nations appear to want to take on the USD. You can clearly see central banks buying gold, but I believe India was standing up a gold exchange and in this past year I think I read they were bringing in 300m oz of silver themselves. So…these lower PAPER prices could also be how nations are getting out of USD and exchanging them for paper depressed prices, which are making those in NYC money shorting the shit out of things into dust.

The miners may appear to be short term losers on this, and precisely why there are no real silver primaries left. PAAS is called a silver primary, but they produce 26% of their revenues in silver. Many of these companies have switched to gold as their primary metal, and PAAS is now primarily a base metal company with a strong silver and gold kicker.

IF the miners will continue to be short term losers, one can reasonably predict lower share prices ahead. To me, these are STRATEGIC buying opportunities. This isn’t “oh, they are getting smashed, I’m sick of people talking about buying opportunities”. These are industries that produce precious metals that are seeing their margins squeeze through high fuel and supply prices. Recessions here may bring down their operating costs and when higher metals prices come soon, their margins will be extraordinarily good. Today, is not that day. Today, I’m looking at a metals price move for perhaps the wave 3 to start, but I would not discount a ST move to $20 on silver and $1785 or so on gold. Perhaps this could be an overnight smash down on May paper so banks can then buy physical cheaper on spot tomorrow. IF you have to source a million oz, and you can smash price $.50 to knock over dominoes overnight with May paper, you can then perhaps source metal tomorrow to save half a million dollars and buy back your May contracts at depressed prices.

Weather forecast seems like torrential downpour overnight with high chance of sunny skies tomorrow AM at NY open. We all know weather forecasts can be wrong, so be sure to bring your umbrella (stops) for added protection.

I am doing the futures because my miners don’t trade overnight and with this, I’d like to get my beak wet on overnight action. Additionally, IF there is downside coming yet with miners, I would like to make money on silver going down with a few micros. This helps PRESERVE what I have. The trick then is – IF you are short, and it starts spiking, you need to be out to capture the up move. This is an art form you need to do yourself. Stops need to be set to YOUR risk appetite.

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