SILVER

March silver looks to have started the new trading week respecting last week's pattern of lower highs and lower lows. While silver and other physical commodities could have been lifted this morning by favorable currency market action and spotty gains in international equity markets overnight, the silver trade has instead started off on a back foot. In retrospect, the bull camp in silver has to be disappointed in last week's slide in prices, especially in the face of very favorable US data last week and with looming Euro zone supply ahead this week, there appears to be a feeling of vulnerability in many physical commodity prices to start the new trading week. Comex Silver Stocks were 122.303 million ounces up 1,177,175 ounces. Comex Silver Stocks are actually at the highest levels since 04/01/2009. Stocks have increased 16 of the last 20 days. Comex Silver stocks are at their highest levels in the past 10. The Commitments of Traders Futures and Options report as of January 3rd for Silver showed Non-Commercial traders were net long 13,561 contracts, an increase of 2,533 contracts. The Commercial traders were net short 20,523 contracts, an increase of 1,986 contracts. The Non-reportable traders were net long 6,962 contracts, a decrease of 546 contracts. Non-Commercial and Non-reportable combined traders held a net long position of 20,523 contracts. This represents an increase of 1,987 contracts in the net long position held by these traders. The path of least resistance is pointing down to start the new week. Initial downside targeting is seen at $28.05 but the market doesn't look to be facing an aggressive washout in prices. If the markets couldn't return to a full risk-on vibe last week, in the wake of very good US numbers, we suspect that many traders will come away from this week's Euro zone supply flows with fresh concerns of more global headwinds ahead and that will probably result in some of the lowest price action in March silver since December 30th. In order to turn the tide away from the bear track in March silver, probably requires a rise back above $29.11.