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Silver’s step sum is telling us that an epic battle between the bulls and the bears is currently taking place in the COMEX silver pits.  Look at the table in the chart below.  From August 27, there has been 32 trading days, with twenty down days and only twelve up, for a net of eight down days, but the silver bears have had little effect on the price of silver – this is huge!

Anything can happen, even seeing the price of silver collapse.  However, we should note that so far, after a titanic effort by the shorts for the past month and a half, they have failed to create a panic-price decline in the silver market, which I’m sure is their intention.

The step sum is only a single item A-D line, which in the chart above, is tracking the daily advances and declines of the price of silver.  In a step-sum box formation (in either a bull or bear box), market sentiment of the large-commercial traders in a market, the people who trade in volume, day after day, is out of step with the primary-price trend of the market.  In the chart above we see that the silver market’s step sum is clearly bearish in a bull market.

This can’t go on forever.  Without a doubt, the silver market’s net short side has yet to show a paper profit.  It’s important to realize that the shorts haven’t seen a real payday since late June of this year when silver bottomed around $26.5 an ounce.  With silver now going for over $33 an ounce, the shorts are currently carrying a large paper loss, unless they entered their positions when silver was just short of $35 an ounce.  This is not so for the silver longs, who so far have for the most part not closed out their positions for a profit yet.  The question is; why haven’t they?

I don’t know why, but I think it’s pretty clear that even after twenty down days in the last thirty two trading sessions, the longs are beginning to smell fear in their counterparties, and are willing to hold on to their contracts until they see silver somewhere well over $33 an ounce silver.  There is a good chance for this to happen.

Bill, you may just see your “commercial signal failure” in the coming days or weeks ahead.

FYI: here is gold’s step sum chart.  Not as exciting as silvers!

I believe we are really close to a significant event in the precious metals market.