One thing I haven’t mentioned recently, but that I have written about in the past, is that when we get to extremes in managed money selling and commercial buying like we’ve gotten to now, the historical record indicates it’s not long thereafter before prices rally. In other words, on a historical basis, after the commercials lure as many managed money technical fund traders to the sell side, it’s not long before the commercials rig prices higher. At least over the past year or two, more time transpires as the commercials trick the tech funds into selling longs and going short, than in the time the commercials allow the technical funds to buy. I mention this because this last sell-off from the end of October in which the managed money traders were tricked into selling record levels of gold contracts and near record amounts of silver contracts, because it occurred in a much shorter time frame than usually, sets the stage for any even quicker and more powerful rally should past patterns prevail. At least, that’s the recent historical pattern.
In summary, silver and gold look prime to rally sharply, as does copper, platinum and palladium based upon current COT market structures. And while the actual supply/demand fundamentals in crude oil continue to look bearish, the near record managed money short position has undoubtedly contributed to the dramatic decline in price. I don’t want to start handicapping oil prices, but I will say that any rallies will likely be fully explained by technical fund buying and short covering.
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