HOUSTON – The Commodity Futures Trading Commission (CFTC)released data for the disaggregated commitments of traders (DCOT) and Legacy “COT” reports for the week ending July 18, 2014. Our recap of the net positioning for large reporting futures traders is below, compared to the prior week’s data.

Source: CFTC for COT data, Cash Market for gold and silver prices. The positioning and price data is as of the close of trade in New York on Tuesday, July 15, 2014.

Table below.

In the DCOT table above a net short position shows as a negative figure in red. A net long position shows in black. In the Change column, a negative number indicates either an increase to an existing net short position or a reduction of a net long position. A black figure in the Change column indicates an increase to an existing long position or a reduction of an existing net short position. The way to think of it is that black figures in the Change column are traders getting “longer” and red figures are traders getting less long or shorter.

All of the trader’s positions are calculated net of spreading contracts as of the Tuesday disaggregated COT report.

We also focus on the Legacy COT positioning of traders deemed “Commercial” by the CFTC, which includes Producers, Merchants, Processors and Users, plus Swap Dealers in a single category. The Legacy COT report preceded the Disaggregated COT report and we have tracked and charted it for many years, focusing on the movement and positioning of commercial traders – The “Big Hedgers.”

The action in gold and silver in this COT week for reference.

Update 1: Adds one graph for silver futures with brief commentary.

Well, the most shocking graph to us this week has to be the NET positioning of Managed Money in silver futures. Recall that the big sell-down this week began on Monday July 14, and continued into Tuesday, well ahead of the normal COT cutoff for data. Silver bled a net 35 cents or 1.7% Tues/Tues (from $21.02 to $20.67). The sell raid that began in the wee hours of Monday bottomed about where the COT data cutoff was on Tuesday (hourly graph above shows the action).

Now hear this! As silver was knocked on its back feet for a relatively small 1.7%, we are surprised to find that the Managed Money traders were actually net buyers as of Tuesday, adding 1,992 contracts to their already high net long positioning, to show a net 45,943 contracts net long silver futures.

Here’s the Managed Money net position graph for reference:

Source: CFTC for COT data, Cash Market for silver, GGR.

This week’s Managed Money net long position (45,943 contracts) is the highest for The Funds since October 5, 2010 (47,823 then with $22.83 silver). Silver, which was breaking out then in a power move higher and on a romp, would cross $30 by December, two months later, for the first time in 31 years.

So, if Managed Money traders were not bailing on silver… and looking at the table above showing the net action of the other participants, including the Producer/Merchants and Swap Dealers (the commercial traders), neither of which has a large enough change to account for the selling action … then where did the high sell volume come from? (See the 30-minute tick chart appended at the very end of this message for reference.)

Update 2: Adds new graphs for COMEX silver (SI) with additional commentary on volume and trade action.

Now, we realize that silver did not even turn in a Fibonacci 38.2% retrace of the June 3 to July 11 move from $18.61 to $21.63. Gold did put in a 50% retrace of the move from $1240 to $1346 over the same period.

Silver, daily

Isn’t outperformance by silver considered very bullish by itself?

“Heck! Less than a 38.2% retrace is a TELL, isn’t it?”

The 30-Minute tick chart gives an idea of the sell volume below. To give a sense of how much horsepower was being thrust at the COMEX market, 30,000 contracts for SI silver futures (the largest 30-minute spike in volume showing on Tuesday - apparently an attempt to annihilate those long silver) ... is equivalent to 150 million ounces, or about $3.1 billion USD.

When silver is being sold by someone at $104.5 million dollars per minute for thirty minutes, and it fetches up at known upper support (the bottom of the green box, actually slightly above it), not even making it to a 38.2% retrace, it's time to raise an eyebrow isn't it?

Our view on silver, for what it's worth, has not changed based on these data. Silver traded this week as strong as an acre of wild garlic.

"Short silver at one's peril."