It’s been a rollercoaster ride for silver investors the past two weeks, with excitement about $100/oz silver after Reddit set their eyes on the trade quickly dissipating. In fact, despite the Wall Street Bets crowd taking aim at the silver market, it was down for the week, closing well off of its highs. The good news is that while we saw significant chatter about the metal online, we haven’t seen this translate into exuberance yet, with sentiment readings still suggesting further upside for the metal over the medium-term (2-4 months). Therefore, while last week’s lethargic close was disappointing, I remain bullish on the metal over the medium-term and long-term.
(Source: Author’s Chart, CFTC Data)
If we take a look at small speculator positioning (blue bars) vs. the silver price above, we can see that long positioning remains near elevated levels at nearly 55,000~ contracts, but we are still outside of the danger zone above 65,000 contracts where we often see medium-term tops.
The fact that we had near-unprecedented chatter about the metal last week but did not see a stampede for exposure on this indicator is a positive sign because too much long exposure for this indicator often warns that the rally is on borrowed time. Based on a reading of just below 55,000~ contracts last week, this indicator remains neutral, suggesting that further upside and new highs above $31.00/oz are possible for the metal in the next couple of months.
(Source: Daily Sentiment Index Data, Author’s Chart)
If we look at another measure of sentiment, we can see that optimism has indeed returned, with long-term bullish sentiment up from 35% to 70% in just over a month. This sharp increase in bullish sentiment is because we’ve seen multiple readings above 90% bulls over the past two months for silver, which means that 9 out of 10 investors are bullish.