The 300 Club

http://www.gotgoldreport.com/2011/09/stunning-plunge-in-comex-commercial-silver-net-short-positions.html

Not since November of 2008, during the heat of the 2008 Panic, has there been a smaller commercial net short position for silver futures. We can say that as of Tuesday, the largest, best funded and presumably the best informed commercial traders of silver futures had taken the price downdraft opportunity to very strongly reduce their short bets for the second most popular precious metal.

http://edegrootinsights.blogspot.com/2011/09/silver-setup-classic-rope-dope.html

Silver Setup Classic 'Rope a Dope'

Muhammad Ali was the master of misdirection. He was so good at it the phrase “rope a dope” reflected his ability to lure his opponents into believing an illusion that setup their demise. Ali often feigned exhaustion on the ropes in order to exhaust his opponents against the counter attack in later rounds. Many a fighter, notably George Foreman in the Rumble in the Jungle, succumbed to this famous tactic.

If I didn't know any better, I would say Ali orchestrates paper market operations in the futures and options market behind the curtain. One can almost taste the "rope a dope" in silver (as well as gold other dead safe haven plays).

How? Those that lack a nature feel of the markets can use mathematics to reveal it. Silver recorded a DI reading of 94 as of 09/27/11. This is the second highest since the inception of the bull market in 2003. The highest DI reading was recorded in October 14th 2008 at 97. This reading preceded the $9.05 capitulation lows by two weeks.

Silver London P.M Fixed and the Silver Diffusion Index (DI)


The massive sell off in 2011 was a classic example of “rope a dope” executed on retail money. As of 9/20 nonreportable partication (WA) was 79%. This is fairly bullish. A week later, this participation, fell to the maximum low of 0%. In other words, retail money has been completely removed (wiped out) from the paper battlefield despite suggestion that control of the trend had been lost. This red spot shadow below illustrates the extent of the carnage.

Silver London P.M Fixed and the Commercial (C) & Nonreportables (NR) Traders COT Futures and Options Stochastic Weighted Average of Net Long As A % of Open Interest


Now, the panic sellers are screaming "the bull is dead" from the sidelines. Unfortunately, Ali's "rope a dope" tactic works both ways. A DI reading of 94 foreshadows a 2008 style turn that will come to be viewed as shocking as it is unexpected.