The complete and utter rout of the spec side silver longs – thanks to the antics of the exchange who decided to bail out their member firms who had played cute and shorted silver all the way up and bled out a large portion of their trading accounts, is now contributing to further pressure across the entirety of the commodity complex, regardless of fundamentals in several of the markets.
Even the grains, are getting smashed as hedge funds and other large specs incur huge losses in silver and are now dumping everything as a result. Panic selling tied to paper losses takes on a life of its own so until the Comex exchange is finished wiping out the trading accounts of the longs for the benefit of their pals, the market will keep falling. When the selling does run its course, and it will at some point, several of these commodity markets are going to stage very sharp reversals to the upside since the algorithm-related selling is overdoing it to the downside in those particular markets with very strong fundamentals.
Remember, hedge funds are technical animals whose algorithms do not care one whit about fundamental factors. It is all about money flows and those are tied to the last price tick.
I have noticed this morning that silver’s demise was finally too much for crude oil to bear and spec longs in there had no choice but to now cough up their longs in that market as well. At least that is welcome news to drivers who can get their gasoline a bit cheaper than last week.
The CCI continuest to plummet and as long as silver keeps moving down, so too will it. I do think however that some of the bigger commercials, particularly in the grain complex, are going to use the hedge fund selling to secure any long side coverage that they might need for their risk management programs.
Silver now looks like it is headed down to $35 at a minimum.
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