As clearly shown in the chart below, the naked shorts have been notably attacking the silver shares since the silver breakout in September. From early December and onwards though, the selling has ramped up even further. The odds of this activity being a coincidence throughout the entire sector is as about likely as Geithner telling the truth.

Regards - VHF

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Silver in Breakout Mode but Silver Shares Lag

Jordan Roy-Byrne

February 18, 2011

Last we checked, Silver was trading at $32.53/oz. It is higher by more than 2% today after its breakout yesterday. All is good and merry right?

While Silver has surged in recent days and weeks, the silver stocks have lagged tremendously. In the chart below we show SLV and the SIL/SLV ratio. SIL is an ETF for large-cap silver shares. Note the strong relative performance of SIL (evidenced by the rising SIL/SLV ratio) in the months leading to the breakout in September. We see a different picture now. SIL is 10% off its December high while SLV is now 4% above its December high.

Whether it is Silver, Gold or another commodity, we like to see the shares perform well prior to and into a breakout. In this case, Silver is trading at a new high but the vast majority of the shares have not followed suit.