The Phaserl


Has The Worm Turned? – Ted Butler

by Theodore Butler, Silver Seek:

A timely question from a long-time subscriber resulted in crystalizing an idea that was on the distant periphery of my conscious thought. The great thing about the idea is that it fully incorporates all the data points up until now as I have been presenting them. But please be forewarned, even though all the important factual dots seem to be connected, the premise must still be considered speculative at this point. On the other hand, should the premise prove to be accurate, it could amount to no less than the game-changer in silver (and gold).

Alejandro’s question concerned whether the managed money technical funds who refused to add to short positions in silver back in the fall had to have cooperated in some way in reaching that decision. You’ll remember that for the first time in years, the technical funds didn’t add to COMEX silver short positions as they always had on similar previous price declines. I opined at the time that some type of cooperation was likely, seeing how the managed money technical funds were a subset of the investment industry that involved hundreds of billions of dollars of investor assets under management and there existed well-known industry trade associations in which mutual concerns were addressed.

Alex asked his question in such a way that it dawned on me that the funds must have cooperated in some way. Cooperation was not just likely, it was required in order to explain the technical funds’ sudden change in behavior. That’s when the lightbulb went off in my head – the failure to go short silver a few months ago could only have come from collective deliberation and cooperation on the part of a number of managed money technical funds. Let me add some background and then dissect the simple observation that some managed money traders collectively agreed to forgo shorting silver a few months ago (a decision that seems wise in hindsight).

For background purposes, let me first acknowledge that I have been steadfast from the beginning (more than 30 years ago) in my conviction that the silver manipulation that I uncovered back then and have continued to write about to this day, was the result of market actions taken by large trading entities on the COMEX, as opposed to some government-sponsored plan to suppress the price of silver or gold. To be sure, I can’t prove that governments aren’t involved in some way, such as the CFTC being prodded to investigate silver and then looking the other way when the evidence was clear; but I never believed that the government orchestrated the manipulation from the get go. The good news (to me) is that today’s theme is consistent with the silver manipulation being (mostly) a non-government run operation.

The silver manipulation has been run by large banks (with JPMorgan being the biggest bank crook since 2008) versus the managed money technical funds; with the banks running the scam and the technical funds as the victims and essential enablers. The best example that comes to mind is the decades’ old series of supposed basketball “games” between the Harlem Globetrotters and the Washington Generals. Just like the Generals served as fodder to showcase the talents of the Globetrotters, the technical funds have been little more, up until this point, than the enablers to the COMEX bank crooks.

The lynchpin to the ongoing silver scam was the near slave-like adherence of the technical funds to mechanical price signals. These funds always bought as prices were rising and sold (and sold short) when prices were falling, with particular emphasis on moving average penetrations. So mechanical and rigid were the managed money technical funds to price change that it was relatively easy to predict how they would behave in any price change environment. This can be seen in the widespread and growing attention to developments in COT reports. The technical funds’ behavior was such that on numerous past occasions I referred to them as “braindead” – not necessarily that they were stupid, just incredibly mechanical and disciplined beyond reason in their trading methodology.

However, neither did I view the technical funds as particularly bright on a collective basis, since they were invariably the patsies and victims of the banks’ ability to rig prices on the COMEX. That is, up until recently. The collective decision not to add aggressively to COMEX silver short positions may have signaled that the worm may have finally turned. If so, then the game itself will have changed.

Since there had to be active collaboration and agreement among some managed money traders not to sell short aggressively in COMEX silver futures this last go-around (there was one such trader which did short), there had to be a valid reason behind the collective decision. The inescapable and only valid reason had to be avoiding a trap in which new shorts in silver at that time would only lead to losses when prices turned higher (which occurred).

This leads to another question – could the managed money traders which did collectively decide not to short silver in a price hole do so without realizing the broader circumstances, namely, that they’ve been played like a cheap fiddle for decades by the banks? My answer is that they couldn’t see one without the other.

Along these same lines, it’s hard to overlook the circumstances of the past year as not contributing to the possible epiphany in thinking by the managed money traders. As I have recounted on a running basis, last year’s rally in gold and silver was largely driven by managed money buying and in which these traders flipped from a historically record large short position near the start of 2016, to a record long position by mid-summer in both COMEX gold and silver.

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