Silver shines in ETF purchases

I read last week that silver ETFs added a whopping 717 metric tons of silver to their holdings last quarter. Of those, SLV is the largest with about 9,742 metric tons. Total silver holdings for all exchange-traded funds (ETFs) are just 2.9% below the record high of 18,639 metric tons reached in April 2011 when silver hit a high of $49.820 per ounce. And take a gander at how big money started changing to a bullish posture back in early 2011.

December 2012 silver opened last week at $34.520 and closed the week at $34.577. A close above $35 and the next stop very well could be $40, possibly with a pullback before it gets there. 

Looking at the daily chart, you can see how over the past two weeks ADX dropped from 60 all the way down to 26.5, reflecting a large drop in strength of trend. It almost looks as if silver exhaled and is preparing to take another deep breath up. You can see how DI+ has now crossed over DI- and is rising. MACD over the past two weeks dropped below the signal line adding a small amount of divergence, and Stochastics corrected from overbought territory, but are once again overbought. Keep an eye on ADX. (A number of you have asked about the ADX I use, it is a modified ADX so you will not be able to recreate this on Trade Station or any other programs.)

Proceed to Page 2 for the latest COT Data...

On the weekly chart, you can see how this past week on the legacy report Commercials are now at a 52-week net short low of -51,659 contracts. The more transparent disaggregated report shows producers adding to net shorts now at -43,740 contracts. Swap dealers are now net short -7,919, (look back to early 2011 to see the last time this happened), and Managed Money increased net longs to 31,354 contracts.

If you need help understanding how to understand how to use the NEW COT report to your benefit get instant access to my new e-book "What Lies Beneath ALL Trends". It is filled with eye opening information.Commercial Net Tracker instructions: This form tracks the Commitment of Traders (COT) data for the commodity futures market. This form "looks" at the most recent five weeks of COT data and provides visual indications of the data. A) If the current value is at a 12-month low, the cell will display a red/burgundy background. B) If the current value is at a 12-month high, the cell will display a green background. C) If the current value went from net negative to net positive, the cell will display a blue background (indicating a bullish condition). D) If the current value is both a 12-month high and also went from a net negative to a net positive, the background will be green. You should view the data with green backgrounds to determine if they also went from net negative to net positive.

Proceed to Page 3 for this week's detailed fundementals...