Morning Silver Update

Silver spiked past $32 overnight on rumors of the Chinese slashing their reserve ratio.
$32 continues to hold key resistance for silver- it needs to hold $32 through at least 2 consecutive closes before we have any real chance at breaking out and running towards $35.  Until then, silver remains range bound in the $28.50- $32.50 zone. 

Silver's technicals are slowly improving, the MACD is starting to turn up, and open interest (while decreasing again yesterday), has increased about 5% since bottoming almost exactly at 100,000.  Again, silver's COT report is the most bullish we have seen since the panic lows of 2008 near $8.  This does not mean that short term silver could not move lower, but it does mean that the bullion banks have massively reduced their short positions, added new longs, and are preparing for the next leg up in silver while the speculators (nearly always wrong) start to add short positions.
The commodity market, and oil in particular, is trading as if QE3 has suddenly been priced in for next week. Crude actually went into backwardation yesterday- signifying either major inflationary expectations among traders (imminent QE3) or else a sudden fear of holding US dollars.  With all of the FedSpeak issued last week, it appears to us that QE3 expectations are the cause.
Obviously, should QE3 be announced by The Fed next week, the corrections in gold and silver will come to a sudden end, and all of the expectations of The Morgue driving silver back to $20 to get out of their shorts may be pre-empted by The Bernank.   We'll find out next week.