Hi-Ho Silver! Why Is a Short ETF Stealing the Spotlight?
Forget silver’s price—trading frenzy in a short ETF is raising eyebrows. Could this be a warning sign for the market?
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Let’s talk about silver. Not because it made a new high. Nor has the Daily Sentiment Index (DSI) gotten back to that extreme level of 89 from three weeks ago (it is now 82), but rather because there is an ETF to be short silver that traded just shy of 230 million shares on Tuesday.
Let’s put that in perspective. If we ex out the penny stocks, then NVIDIA (NVDA) was the most active stock traded on the two main exchanges Tuesday (NYSE and Nasdaq), and it traded 175 million shares. So, this ETF to be short silver traded more than NVDA.
If we want to use those penny stocks—remember when they were dominating the volume on the Nasdaq back in September by trading billions of shares each day?—then the top most active stock traded 380 million shares, and the second-most active penny stock traded 221 million shares, less than this short silver ETF.
I have said before I won’t be able to pick the exact top in silver, but I know when things have gotten out of control. And I know when the short silver ETF is trading more than the most active stock and is second only to a penny stock, it is worth paying attention. It is getting out of control.
Anecdotally, I posted this chart on social media today, and folks came out of the woodwork to explain why it is actually bullish that we’re seeing this sort of volume in a short ETF. The most plausible explanation is that it’s a ‘cheap’ way to hedge their long silver positions. They may be correct, but the same way I knew all that speculation in the penny stocks back in September and October was too much of a good thing, I know this is as well. I would say if this short ETF does a reverse split, run for the hills because that is often the kiss of death.
Away from that, none of the ratios we discussed on Monday have changed, and the VIX was barely red on Tuesday. I would also note that it’s still the case that when NVDA doesn’t rally, it leaves room for everything else to rally and vice versa.
But have you noticed that the same way the Mag 7 has been separating their moves from each other (for months now), the members of the semiconductor complex are also diverging from each other. Folks are no longer going for the perceived safety of NVDA and are branching out to stocks like—gasp!!—Texas Instruments and Qualcomm!
I still think the VIX says we are due a bout of volatility.
