-- Posted Sunday, 9 May 2010 | | Source: GoldSeek.com
By: Gene Arensberg
COT report issued today, Friday, May 7, 2010 at 15:30.
Bottom line: COT report suggests COMEX commercials not confident in lower gold and silver prices. Gold +0.25% and the gold LCNS +2.3%. Silver -1.8% and the silver LCNS -1.8%. Details just below.
ATLANTA – One bizarre circumstance of yesterday’s 15-minute Big Market mistake meltdown is that it gives traders a cover-scapegoat to forget that the problems which had boiled to the surface in Europe had all markets under pressure at the time of the “glitch.”
“Oh, it was just a computer thing. Guess we can go play golf now…”
Wrong! The last thing an already nervous market needs is a confidence puncture, no matter where it hails from. Make no mistake, yesterday was a colossal confidence puncture for the NYSE and the NASDAQ. With red all over everyone’s trading screens and a nearly constant bombardment in televised financial media of “sovereign default contagion risk,” we can easily imagine that yesterday’s panic plunge was a last-straw event – for some.
Especially if Joe-Average-Investor was watching the events in real time, following the botched placement of a crude car bomb in Times Square. We can imagine thousands of thoughts by ordinary, non-high-speed-computer traders out in the heartland thinking along the lines of, “Yikes. It’s getting crazy again, I’m outta here! Martha, where’s our broker’s business card?”
For all of us cheap-loving Bargain Vultures (dare we say it?) … Naw, let’s hold that comment in reserve for now. We wouldn’t want to offend the Bargain Gods going into the weekend! Not while they are giving us so much “fun” with gold.
We here at GotGoldReport.com are not normally swayed very much by conspiracy and “black helicopter” theories. Some of the wild, uh, … we will call it “talk” out there on the Web today regarding the computer trading in financial markets is so farfetched it is patently ridiculous.
Having said that, yesterday does bring to the forefront an issue of just how fragile the amazingly complex computer-driven trading world might be. We don’t think it is too much to worry that a cyber attack could trigger an even more disastrous market plunge – or a lot worse. All we can say is that we sure do hope that the honchos at the Big Markets are smart enough to hire the very best in the cyber-counter-intelligence department.
We want to be sure our stops actually do what they are supposed to do, when they are supposed to do it!
Now onto this week’s COT Flash.
Gold COT
The Commodities Futures Trading Commission (CFTC) issued its weekly commitments of traders (COT) report at 15:30 ET today, Friday, May 7, 2010. The report is for the close of trading as of Tuesday, May 4.
GotGoldReport.com is focused on the changes in positioning of the largest futures traders in that report – the traders the CFTC classes as “commercial.” We refer to those commercial traders as “LCs” for “Large Commercials.”
For gold, as gold edged a net $2.94 or 0.25% to $1,171.09 COT reporting Tues/Tues, COMEX commercial traders increased their combined collective net short positioning (LCNS) by 6,064 contracts or 2.3% from 265,522 to 271,586 contracts net short as the open interest added 13,025 contracts from 538,591 to 551,616 contracts open.
Remember that is as of the Tuesday close, and on that day gold traded to a low of $1,167.43 before recovering slightly into the close. Gold printed the low for the week the next day, Wednesday, at $1,157.55, but has seen extraordinarily strong bidding action since.
Indeed we noted what we think is significant short covering style activity on both Thursday (in the $1,170s) and today (Friday) from the noon hour into the close (beginning in the $1,190s). Recall also that the Wednesday attempted sell-down for gold (to $1,157) was summarily stuffed and reversed back nearly $20 higher by the close.
Significantly, both gold and silver ended the week in moderate backwardation. More about that in this weekend’s full Got Gold Report which will either be published Sunday evening or Monday morning. This week the full GGR will be available to all, gratis!
Here's the nominal LCNS graph for gold futures:
We are frankly surprised that there was not more of an increase to the LCNS in this report. Even though the net change in the price of gold was tiny, with gold nearing $1,200 one might think that the LCs would be more than willing to take the short side of new long gold positions.
Our take away from this non-aggressive LC behavior is that the largest hedgers and short sellers of gold were just not all that inspired to take the short side of gold at the $1,171 level. Once again, note that the increase in the LCNS is less than half the increase in the open interest – a very short term bullish signal.
When compared to all contracts open, the relative commercial net short positioning (LCNS:TO - the most important graph we track) once again shows virtually no change as the LCNS.TO comes in at 49.23% versus last week’s 49.30% of all COMEX contracts open.
Here's the LCNS:TO graph for gold:
Once again, we do not see evidence of either aggressive short covering or the opposite, an over-sized surge in commercial “hedging”. (We use the term “hedging” loosely because the CFTC does.)
Since Tuesday gold has powered over $30 higher, to as high as $1,213 and is currently trading in the $1,208 neighborhood. We have no doubt that the LCNS has increased since Tuesday.
Pending our review of the data this weekend we are likely to maintain our short-term trading stops for gold, having just raised them to the $1,156 level earlier in the week. However, we will decide whether to change our positioning once we have worked through all the charts, ratios and data we update each weekend and report our findings in the full Got Gold Report.
The above is an excerpt of the full Got Gold Report web log update. To continue reading please click on this link:
And thank you for doing so.
A land developer, professional numismatist, self-taught bullion trader and investor since 1980, Gene Arensberg analyzes technical and fundamental developments in the precious metals markets. In 2000 Gene started sharing his own market research with fellow traders and fund managers. Those email reports evolved into his popular Got Gold Report, a biweekly look at important indicators for gold and silver published on the web. Gene’s more in-depth market reports, insights and trading ideas are available at www.GotGoldReport.com.
-- Posted Sunday, 9 May 2010 | Digg This Article
| Source: GoldSeek.com
