If you ever wondered what a financial instrument in backwardation looked like, take a look:

[1] http://www.cmegroup.com/trading/metals/precious/silver_quotes_settlements_futures.html

Make sure the trade date is Friday, Feb 18. Silver is perfectly lined up from current month out to the future, with declining prices! It’s a mind warp to see that, for those that deal regularly with futures trading.

Does this mean anything? Yes, but what effect it will have on price movement is questionable. In fact, after a quiet day on Monday (a US holiday), we might get a pounding as JP Morgan and friends desperately beat down the price before options expiration on Wed. Futures expiration is Monday 2/28.

On the other hand, they had every chance to do that on Friday and instead the action looked like a short squeeze, while silver went into perfect backwardation. Quite a weird situation. Who knows, the price could go even more vertical from here if there are too many contracts to be delivered a week from Monday. Ed Steer has noted that the open interest in March contracts has remained very high, which is very strange because normally there would be active rolling into the next contract by now.

For some sense of people having fun while the rest of the world ignores silver, check out this brief article and the user comments below it:

[2] http://www.zerohedge.com/article/silver-escape-velocity-another-ecb-intervention-desperately-needed

The comment I like best is so accomplished, from a literary and awareness perspective, that I will reproduce it here. Credit goes to “by almost_have_a_name.”

”

We were somewhere around Bankersville near the end of the dollar when the effects of QE3 began to take hold. I remember saying something like “I feel a little long on dollars; maybe you should invest…”

And suddenly there was a terrible roar all around us and the sky was full of what looked like huge Banksters, all swooping and screeching and diving around the car, which was going about a hundred miles an hour, strait to the end of the dollar.

And a voice was screaming: “Holy Jesus! Who are these goddamn bastards?”

Then it was quiet again. My financial advisor had taken his shirt off and was pouring SLV on his chest, to facilitate the QE process.

“What the hell are you yelling about?” he muttered, staring up at the pyramid with his eyes closed and covered with wraparound FRB blinders. “Never mind,” I said. “It’s your turn to invest.”

I hit the brakes and aimed my 401k toward the shoulder of the highway.

No point mentioning those Banksters, I thought. The poor bastard will see them soon enough.

“Banksters!” he said. “If you think we’re in trouble now, wait till you see what’s happening at the POMO.” He took off his FRB blinders and I could see he’d been crying.

“I just went upstairs to see this man Diamond,” he said. “I told him we knew what he was up to. He says he’s a respectable banker, but when I mentioned Max Keiser – well, that did it; he freaked. I could see it in his eyes. He knows we’re onto him.”

“Does he understand we know Tyler?” I said. “No. But I told him every time he pushes silver down, were going to buy the shit out of that goddamned dip. That scared the piss out of him.”

“Good,” I said. “But what about our room? And the golf shoes? We’re right in the middle of a fucking QE zoo! And somebody’s printing zeros for these goddamn things!

It won’t be long before they tear us to shreds. Jesus, look at the floor! Have you ever seen so much blood? How many 401k’s have they killed already?”

I pointed across the room to a group that seemed to be staring at us. “Holy shit, look at that bunch over there! They’ve spotted us!”

“That’s the Zero Hedge registration table,” he said. “That’s where you have to sign in for your id. Shit, let’s get it over with. You handle that, and I’ll wait on the porch. It was raining when the door finally opened.”

”

This guy or gal has a little bit of Faulkner going on, wouldn’t you say?

In other news, check out the silver lease rates. They stepped up on Jan 19 and are heading higher now:

[3] http://www.kitcosilver.com/charts/silverleaserate.html

All of this points to a shortage of physical silver.

Finally, here is a great and also literary piece on silver available for delivery at the COMEX. Note the chart. While it looks like silver supplies are dwindling rapidly, the author speculates that is probably because the sellers can limit the amount of silver to deliver. Nevertheless, it is interesting to see what is going on with the physical supply.

[4] http://jessescrossroadscafe.blogspot.com/2011/02/registered-silver-ounces-available-for.html

Be careful next week.