this is from ted butler's latest essay. he thinks the current liquidation cycle may be the last one. i hope he's right, and i wish i could share his optimism, but if he's depending on the chairman of the cftc to stand up to jp morgan chase and hsbc, i think he's going to be disappointed.

History has shown that whenever previous liquidation cycles have exhausted themselves, low-risk entry points have been presented. These sell offs caused the low risk buy points. The coming end to this current liquidation should prove no different. But what will determine whether it is the last one is the behavior of the big shorts on the eventual rally that follows.

The evidence of a silver manipulation grows stronger by the day. Awareness of the silver (and gold) manipulation has never been more widespread. This is unprecedented. We have never had a situation where hundreds of citizens have petitioned the regulators to end a manipulation. If allegations of a silver manipulation are on the mark, as I believe, surely such public petitioning will hasten its end.

When manipulations end, there is a sudden and violent price movement in the opposite direction from which prices were manipulated. Almost all previous manipulations have been to the long side, where prices were artificially elevated. When those manipulations were terminated, prices then collapsed. The silver manipulation is to the downside, and when it is terminated, the price will soar. If the silver manipulators are as smart and powerful as I have suggested, after they buy back as many short contracts as possible on a sell-off, they will likely step aside from selling new contracts short. If anyone can see the silver manipulation, it is the perpetrators. At some point, they will look to protect themselves when they see no hope in continuing. That will mean no new shorting.

Certainly, the data flow from the CFTC is showing an alarming trend towards super-concentration on the short side in silver (and gold). It’s really getting obvious. For almost a year, the four big commercial shorts have held more than 100% of all commercial net short positions. Recently, the 4 big shorts have held 70% and more of all the true net positions of all traders, commercial, non-commercial and non-reporting combined (when all spreads are removed). Such extremes can not continue, and they certainly can’t intensify. This suggests we have hit the limit in concentration levels.

We also have some interesting dynamics evolving at the CFTC, the chief regulator of silver and gold futures trading. In a few months, we will hit the one-year mark in their current silver investigation. This is the third silver investigation since 2004. Never has the CFTC investigated a commodity so frequently. Never has it investigated any commodity for allegations of manipulation based upon public petitions. The CFTC has often been accused of being an industry lap dog, more interested in cozy industry relations (and post-regulatory employment opportunities), than the public welfare and rule of law. There may be signs of change.

The new chairman of the CFTC, Gary Gensler, has more practical market experience than any previous chairman or commissioner. In every speech or in his congressional testimony he has spoken against fraud, abuse and manipulation. He has endorsed the need for legitimate speculative position limits. These are the specific issues in silver. He has yet to publicly acknowledge that banks speculate when they pretend to be hedging and that they need to be limited, both on the long and short side. Certainly he must have made that acknowledgement privately.

In addition, the new general counsel of the CFTC was a principal architect of the recently released Senate report on excessive manipulation in wheat. He surely sees the connection to silver and has discussed this with the chairman. Both of them know they have a limited time to act on the silver manipulation in order to not be blamed for it. Otherwise, they will inherit the responsibility for it. If the CFTC does decide to enforce existing law and move to end the illegal control by the big shorts, COT analysis becomes moot. You want to hold as much silver as possible before that happens.

As this article was about to be published, a new statement was issued by Chairman Gensler concerning new CFTC initiatives on speculative position limits and changes in the COT reporting. These are issues that go to the heart of the silver manipulation. My sense is that this statement is very important and will directly impact silver. I will be writing about this in the near future. Click Here

http://news.silverseek.com/TedButler/1246988868.php