Silver Short Squeeze

After successfully triggering short squeezes in US stocks, supposedly Reddit users were attempting a short squeeze in Silver.  If there’s a Silver short squeeze is in process it will likely fail and may have already trapped traders going long Silver.

Its much harder to short squeeze a market as opposed to an individual stock because markets are much larger – it takes a lot more money for large price moves.  

Additionally, the main way to short Silver would be in Silver futures.  

The monthly Silver futures chart courtesy of BarCharts.com illustrates the  Silver short sellers.

Silver Commercials are almost always net short, they have to because its insurance for  falling Silver prices. Also note the recent Commercial short level is not extraordinarily large, a vital ingredient for a short squeeze.     

The recent price spurt stopped just below a .50 Fibonacci retrace of the 2011 to 2020 bear market.

Another reason to be suspicious of a big move up in silver is illustrated in the Silver/Gold chart courtesy of Trading View.

Gold and Silver usually trade close together.  During the  three-day Silver spurt up, Gold barely moved.  There’s a high probability that on 02/01/21 both Silver and Gold made at least a short-term top.

Should short positions be initiated in Gold and Silver? No.  The 11/26/20 post “Important Silver and Gold Bottom in December 2020?” illustrated that Gold is seasonally bullish from January to February and Silver is seasonally bullish January to  April. 

Also, the bulk of Golds decline from August 2020 has been slow and choppy, the signature of a correction within a larger bull move. 

What could be happening is a slow grinding bear move continuing  into 2022.  Both bullish and bearish Gold/Silver traders could be in for several frustrating months. If this scenario develops it will be discussed later in 2021.

We need powerful evidence  before taking a position, currently the evidence is mixed. Stand aside trading Gold/Silver. 

Published by Mark Rivest

Independent investment advisor, trader, and writer. Articles have appeared on Technical Analysis of Stocks and Commodities , Traders.com Advantage, Futuresmag.com, and Finance Magnates.

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