Usually, the "Greater Fool Theory" applies to fools chasing the momentum of a hot stock. They bid it up, hoping to unload it onto a "greater fool" at a higher price, sometime in the near future. This same process is currently playing out again though, in this case, the fools are short and the instrument is silver.
I cannot stress strongly enough the unprecedented quality of what we are seeing. Nearly two months ago, on February 5, the price of silver closed at $31.94. On that day, a Commitment of Traders survey was taken and it showed that the Large Speculator (managed money, hedge funds, HFTs) category was:
Long 42,449 contracts AND
Short 6,588 contracts.
This gave us an unusually high and bearish LSpec net long ratio of 6.44:1.
So here we are, seven weeks later, and a new CoT was released back on Friday. With price last Tuesday night at $28.68, the new Large Speculator breakdown was:
Long 37,548 contracts AND
Short 26,144 contracts.
Immediately, you should notice three things: