Gold & Silver: The Path To Concentration of Funds

The probability of higher-order trend acceleration increases once the upper channel resistance has been breached. Money has been supporting the breakout by repositioning from short to long as previous resistance is tested as support. This suggests that "Three Taps and Out" should be resolved and confirmed by June 2011.

Gold London P.M Fixed And Gold Diffusion Index (DI)


By way of comparison, silver's trend accelerated substantially with the breach of its 2003 upper channel. This acceleration (breakout) is marked by the green circle below.

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


While the headline analysis and Street chatter the new flavor of the day - fear, they always miss the quiet movement of money. Money continues to reposition against the grain of consensus. That is, money is moving from short to long. The devastating decline yet to be recorded in the COT data should extend the formation of the bullish setups already underway.

Strong hands continue to aggressively cover their shorts.

Silver London P.M Fixed and the Commercial Traders COT Futures and Options ZScore Weighted Average of Long & Short As A % of Open Interest


Money flows are beginning to show concentration. It's not statistically extreme, but it's close. Concentration of funds by 'strong hands' will provide the fuel for the next advance.

Silver London P.M Fixed and the Commercial Traders COT Futures and Options ZScore Weighted Average of Net Long As A % of Open Interest


Example of Flavor of the Day Headline
Headline: Talking Numbers: Silver Loses It's Luster

It's been a volatile week for commodities and Russ Koesterich, BlackRock iShares Group says silver may still be overvalued despite its steep decline.

Source: custom.yahoo.com