Silver Gamma Squeeze

Please click here for a chart of silver futures (SI_F).

Note the following:

• The chart shows silver is experiencing incredible volatility. Take a close look at the scale on the right hand side.
• The chart shows silver started around $99 on Friday around 8am ET and peaked yesterday afternoon around $117.67.  The spectacular rise in silver was the result of the following:
  • There were many stops of short sellers between $100 and $105.  These stops were hunted and taken out.
  • After the stops were taken out, there was incessant, extremely aggressive option buying, mainly by the momo crowd.  As silver rose, market makers were forced to hedge themselves by buying various silver instruments.  This is a classic example of a gamma squeeze.
• The chart shows after peaking at $117.67, silver quickly fell to $101.75 as the gamma squeeze exhausted itself.
• As silver fell, short sellers pushed the pedal again.
• The chart shows short sellers are getting squeezed again.
• Momo gurus have been having heydays mongering all sorts of rumors about silver, banks, mines, and governments.  As usual, the momo crowd is easy prey to fake rumors –  The momo crowd is rushing to buy SPDR Gold Trust (NYSE:GLD), iShares Silver Trust (NYSE:SLV), VanEck Gold Miners ETF (NYSE:GDX), Newmont Corporation (NYSE:NEM), silver miner Hecla Mining Co (NYSE:HL), and Global X Silver Miners ETF (NYSE:SIL) like there is no tomorrow.  Smart money is not buying.
•  In our analysis, the vast majority of silver rumors are false, designed solely for the purpose of running up silver.  
• President Trump is threatening to increase tariffs on South Korea to 25% from 15% due to the South Korean legislature delaying the approval of the trade pact with the U.S.  Prudent investors should note investors rebuffed President Trump's threat and aggressively bought South Korean stocks, driving Korea's benchmark KOSPI to a new high.  Including today's gain of 2.7%, KOSPI is now up 21% in the month of January alone.  Driving the South Korean market is the extreme exuberance about the AI demand for semiconductor memory.   Two of the three big semiconductor memory makers are in South Korea.  Samsung Electronics Co Ltd (OTC:SSNLF) rose 4.9%, and SK Hynix (HXSCL) rose 8.7%.  In the U.S. in the early trade, stock of memory makers and storage devices such as Micron Technology Inc (NASDAQ:MU), SanDisk Corp (NASDAQ:SNDK), Seagate Technology Holdings PLC (NASDAQ:STX), and Western Digital Corp (NASDAQ:WDC) are seeing aggressive buying.  We previously wrote:

The rally will be tested when Western Digital (WDC) and Seagate Technology (STX) report earnings this week.

• On April 9, 2025 , we gave a signal to buy Ishares Msci South Korea ETF (NYSE:EWY) as one of the top countries to consider.  At the time of the signal, EWY was trading at $48.91.  EWY is trading at $121.05 as of this writing in the premarket.  This illustrates the importance of paying attention to markets outside of the U.S. 
• India and the European Union have signed a deal that they are calling the "mother of all deals."  The deal covers one quarter of the global economy and one third of global trade.  The deal is very important for India because President Trump has imposed 50% tariffs, some of the highest, on India for buying Russian oil.  India is set to become the fourth largest economy in the world this year.  In our analysis, prudent investors should note the following:
  • Even though the headlines of the deal are today, the deal was negotiated a while ago and is already discounted in the markets.
  • For the very long term,  India represents the best investment opportunity among major economies.  We have covered India (WisdomTree India Earnings Fund (NYSEARCA:EPI)) continuously for 19 years. 
• The drop in the Dow Jones Industrial Average this morning is due to only one stock, UnitedHealth Group Inc (NYSE:UNH).  In addition to earnings less than whisper numbers, UnitedHealth is being hurt by the proposal of only a 0.09% rate increase for Medicare Advantage plans.  This is President Trump’s attempt to rein in healthcare costs.  Health insurers such as Humana Inc (NYSE:HUM), CVS Health Corp (NYSE:CVS), and Elevance Health Inc (NYSE:ELV) are seeing significant selling.
• ADP data shows that the private sector added an average of 7,750 jobs per week over the four weeks ending January 3.

Magnificent Seven Money Flows

Most portfolios are now heavily concentrated in the Mag 7 stocks.  For this reason, it is important to pay attention to early money flows in the Mag 7 stocks on a daily basis. 

In the early trade, money flows are positive in Apple Inc (NASDAQ:AAPL), Amazon.com, Inc. (NASDAQ:AMZN), Alphabet Inc Class C (NASDAQ:GOOG), Meta Platforms Inc (NASDAQ:META), Microsoft Corp (NASDAQ:MSFT), NVIDIA Corp (NASDAQ:NVDA), and Tesla Inc (NASDAQ:TSLA).

In the early trade, money flows are positive in SPDR S&P 500 ETF Trust (NYSE:SPY) and Invesco QQQ Trust Series 1 (NASDAQ:QQQ).

Momo Crowd And Smart Money In Stocks

Investors can gain an edge by knowing money flows in SPY and QQQ.  Investors can get a bigger edge by knowing when smart money is buying stocks, gold, and oil.  The most popular ETF for gold is SPDR Gold Trust (GLD).  The most popular ETF for silver is iShares Silver Trust (SLV).  The most popular ETF for oil is United States Oil ETF (NYSE:USO).

Bitcoin

Bitcoin (CRYPTO: BTC) is seeing buying.

What To Do Now

Consider continuing to hold good, very long term, existing positions. Based on individual risk preference, consider a protection band consisting of cash or Treasury bills or short-term tactical trades as well as short to medium term hedges and short term hedges. This is a good way to protect yourself and participate in the upside at the same time.

You can determine your protection bands by adding cash to hedges.  The high band of the protection is appropriate for those who are older or conservative. The low band of the protection is appropriate for those who are younger or aggressive.  If you do not hedge, the total cash level should be more than stated above but significantly less than cash plus hedges.

A protection band of 0% would be very bullish and would indicate full investment with 0% in cash.  A protection band of 100% would be very bearish and would indicate a need for aggressive protection with cash and hedges or aggressive short selling.

It is worth reminding that you cannot take advantage of new upcoming opportunities if you are not holding enough cash.  When adjusting hedge levels, consider adjusting partial stop quantities for stock positions (non ETF); consider using wider stops on remaining quantities and also allowing more room for high beta stocks.  High beta stocks are the ones that move more than the market.

Traditional 60/40 Portfolio

Probability based risk reward adjusted for inflation does not favor long duration strategic bond allocation at this time.

Those who want to stick to traditional 60% allocation to stocks and 40% to bonds may consider focusing on only high quality bonds and bonds of five year duration or less.  Those willing to bring sophistication to their investing may consider using bond ETFs as tactical positions and not strategic positions at this time.

The Arora Report is known for its accurate calls. The Arora Report correctly called the big artificial intelligence rally before anyone else, the new bull market of 2023, the bear market of 2022, new stock market highs right after the virus low in 2020, the virus drop in 2020, the DJIA rally to 30,000 when it was trading at 16,000, the start of a mega bull market in 2009, and the financial crash of 2008. Please click here to sign up for a free forever Generate Wealth Newsletter.

Benzinga Disclaimer: This article is from an unpaid external contributor. It does not represent Benzinga’s reporting and has not been edited for content or accuracy.