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Metals

  #101 (permalink)
Sagal
Strasbourg, France
 
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The author of the first post on reddit was recommending to read the following one (from "jobead"). I read it and I didn't find flaw in it. It is for me a low probability but still a possible long term squeezing scenario based on the current available data:
https://www.reddit.com/r/wallstreetbets/comments/lc8vgo/slv_is_not_going_to_get_squeezedslv_is_the_trojan/?utm_source=share&utm_medium=ios_app&utm_name=iossmf

A good recap of what happened since last Wednesday for Silver
https://seekingalpha.com/article/4403938-silvers-reddit-surge

PS As a side note I was quite impatient (not such a good discipline but I bought lower than I previously and lower than I previously exited) and couldn't wait for my planned entry that has been anyway reached (26.1 and 1080 respectively) but I'm back in Silver and Platinum micro and futures...

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  #102 (permalink)
 
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 SMCJB 
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Sagal View Post
The author of the first post on reddit was recommending to read the following one (from "jobead"). I read it and I didn't find flaw in it. It is for me a low probability but still a possible long term squeezing scenario based on the current available data:
https://www.reddit.com/r/wallstreetbets/comments/lc8vgo/slv_is_not_going_to_get_squeezedslv_is_the_trojan/?utm_source=share&utm_medium=ios_app&utm_name=iossmf

There's a lot of people who consider SLV to be paper Silver just like COMEX Futures and Options. I agree SLV does have physical silver backing it but the redemption and creation process for SLV is actually very similar to the delivery process for COMEX contracts. The big thing this analysis could be missing is hedging. Having worked (actually run) a dealer desk in the oil markets I can tell you that we were always short futures no matter what our actual trading position was. Why? Because we were long financial swaps from oil producers and short futures to hedge those positions. Oil could double. As long as the swaps and futures settle against the same index (in most cases they do) it doesn't matter. You make a lot of money on one deal and lose it on the other. The real risk in a situation like that is credit risk not commodity risk. If there is a squeeze on the physical what will happen is that spot prices will start trading at a premium to forward prices. Then short term forward prices will trade at a premium to medium term forward prices. This is what we call backwardation, or a backwardated forward curve. This is actually what happened for one day last week. SLV since it holds physical silver, in a squeeze situation, could definitely trade at a premium to forward silver (futures). but at some point those prices do converge, as forward contracts eventually become spot, and delivery is required. This is very different to the way forward prices are now, where the further forward in time you go, the higher prices go. ie prices are currently in Contango. I believe that while unlikely a silver squeeze could definitely happen, and if it does SLV prices could appreciate more than Futures. I do not believe though that in that situation the futures market collapses and becomes completely detached from the spot market.

Just curious what he would think of oil if he performed the same analysis. Crude Oil open interest last night was 2.46M contracts. Cushing storage capacity is about 70M barrels or 70k contracts. Is that a 3500% short ratio?

Enjoying the conversation, but I am clearly a skeptic.


Sagal View Post
PS As a side note I was quite impatient (not such a good discipline but I bought lower than I previously and lower than I previously exited) and couldn't wait for my planned entry that has been anyway reached (26.1 and 1080 respectively) but I'm back in Silver and Platinum micro and futures...

I scale up sold over half my silver position (and all my Platinum position) on Friday/Sunday/Monday last week. Thursday/Friday I bought half of what I had sold back. So around 70% (50% in PL) of initial position now. I also sold Silver 'Futures' Butterflies (sell one spread, buy another spread, ie HKN, KNU etc) on Monday at levels we didn't get close to the last time Silver was at $30. (This was the backwardation, or spot premium mentioned above blowing out). So from a Silver and Platinum perspective it was a good week for me. Unfortunately I lost more money in the Gold sell off than I made on Silver and Platinum, so from a Precious Metals perspective, it was a bad week!

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  #103 (permalink)
Sagal
Strasbourg, France
 
Posts: 126 since Mar 2019
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SMCJB View Post
... I believe that while unlikely a silver squeeze could definitely happen, and if it does SLV prices could appreciate more than Futures. I do not believe though that in that situation the futures market collapses and becomes completely detached from the spot market.

Just curious what he would think of oil if he performed the same analysis. Crude Oil open interest last night was 2.46M contracts. Cushing storage capacity is about 70M barrels or 70k contracts. Is that a 3500% short ratio?

Enjoying the conversation, but I am clearly a skeptic.

... so from a Precious Metals perspective, it was a bad week!

Oil is not in the same situation:
1 Production can be increased very quickly particularly (Saudi Arabia, Russia, US) if prices are going up 2 There is still an excess quantity (in different tankers offshore etc.) simply stored and waiting to be sold which will make an attempt to squeeze the market unsuccessful. 3 of course the size of the market is not comparable.

Platinum would be another good possibility by the way...

Even if you disagree on the final outcome with the author of the topic on Reddit, you are not saying as recently a famous banker that it is impossible. It is therefore worth taking note of that even if it is a very low probability event.

It was a bad week for me because I was not able to react as I should have (close the Silver position near 30 on Monday or at least as I woke up and I had a look 1 hour after the opening) and I waited too long for that...It is difficult to not get engaged emotionally when you trade the same family of assets on short term and on mid/long term...

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  #104 (permalink)
Sagal
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Posts: 126 since Mar 2019
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The best analysis of the week (maybe of this year so far) is in the following link:
https://seekingalpha.com/article/4405668-crazy-days-for-money
The implication on the position changes for the "swap dealers" (assigned to the big banks by the author) and the "other reportables" as well as the "Money Managers" since January is leading me, as a first step, for precious metals (contrarily to the other commodities) to start studying more the disaggregated report than the legacy one.
https://seekingalpha.com/article/4405668-crazy-days-for-money

What the author: "Goldmoney" is describing can be noticed in the attach graph of the latest COT for Gold

Attached Thumbnails
Click image for larger version

Name:	GC Disagr report fut only 2021-02-13_12-37-15.png
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Size:	260.2 KB
ID:	309288  
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  #105 (permalink)
Sagal
Strasbourg, France
 
Posts: 126 since Mar 2019
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The original author at WSB has been authorized again to post a topic on Silver. Here is the link to it.
https://www.reddit.com/r/wallstreetbets/comments/lnzeho/the_silver_short_squeeze_is_glaringly_obvious_to/

I am glad that Copper is currently leading the way to the PM and there was an article on Zerohedge quite alarming about a shortage situation
https://www.zerohedge.com/markets/goldman-warns-historic-shortage-copper-explodes-higher

On a side note: Gold situation is a little bit worrying specially when looking at "things which shall not be named" at 55K but maybe maybe...we have just passed the bottom and maybe a monthly EW 5 is starting (objective: 2300 to 2600 usd). I'm still holding on to my micro Silver futures (May contract) and to my Platinum CFD (April contract) and on top of that I invested directly in an ETF physical Platinum from ZKB. Objective: 1450 usd for Platinum this year or in 2022. So I missed the 4% increase in Copper on Friday but I'm indirectly invested into it anyway...

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  #106 (permalink)
 
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 SMCJB 
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Didn't have much platinum, sold it all hoping to buy back in a dip and hence missed half the move.
Still long Silver, have some nice spreads on as well.
Gold is hurting. By far my biggest Metals length.
Long Bitcoin (and Ether) as well. This kind of makes everything else irrelevant so far this year.

Big fan of Real Vision. Raoul still thinks gold will do very well over the next two years but Julian Silver will outperform it.

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  #107 (permalink)
 
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 SMCJB 
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Not a good day for the metals, or oil, or equities, infact not a good day to be long any commodity other than Milk Futures! ... Gold at 8 month lows (ouch!) ... Silver almost back to where it was in January pre-Reddit rally, 12% off highs... Platinum down 8% in 2 days but unlike the others still in its uptrend channel.

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  #108 (permalink)
 
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 Schnook 
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I know you know this but the meltdown in treasuries obviously hurt precious metals, as the whole "store of value" thing suddenly got some competition from yield. Rates could find some near term support here as higher yields attract cross-asset buyers but longer term, say Q2 / Q3 I feel like we'll be looking at a 2-handle on 10s and potentially 3% on the bond.

But I also found the action in copper very interesting as well. Despite a huge spec long position it was behaving squeezy, with producers reporting huge purchases from China (see Rio Tinto's recent earnings, for example). But now on the weekly chart copper prints a big, ugly, high volume shooting star. Feels to me that the highs are likely in for now and I think this could be true for a lot of commodities. At the very least I think we're due for a breather. Either way I'll be looking to fade rallies here in the next week or two.


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  #109 (permalink)
 
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 Schnook 
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Anybody trading or watching copper today? Biggest one day range in years. Heavy volume but liquidity nearly non-existent. Bottom just fell out. Just curious what other traders are seeing or thinking here

Edited to add: Here's a screenshot showing numbers bars (footprint chart) on a 5 tick range bar periodicity around 2:30pm NY time. Yes London had gone home at that point but this liquidity is atrocious. Imagine having to trade a hundred lot in this mess


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  #110 (permalink)
 
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 SMCJB 
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Risk off day. Everything in the toilet except US Dollar and Crude!

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