Tapping the brakes on the silver rally, the CME sent a letter to its clearing member firms and others Tuesday raising the amount of margin needed to trade silver futures contracts.

The change will go into effect after the close of business Wednesday, November 10th, 2010.

The reason cited for the increase was a "…normal review of market volatility to ensure adequate collateral coverage…"

Michael Shore, a spokesman for the CME, said the exchange evaluates margins from time to time and they often change-nothing unusual.

David Fuller's view Margin increases are a normal procedure when rallies become frenzied. Traders do not like it because it can trigger a convulsive reaction such as we saw today.

What are the consequences for markets?

The dramatic reactions seen by runaway silver (weekly & daily) and palladium (weekly & daily) today, following upside acceleration, suggest that we have seen peaks of at least near-term significance. It could also mark the beginning of medium-term mean reversions towards the rising 200-day moving averages.

However this decade-long advance is really about gold (weekly & daily), for which silver and palladium, and sometimes platinum (weekly & daily), are high-beta proxies. Therefore it is very unlikely that today's action will have more than a short to medium-term affect on the secular uptrends which reflect the remonetisation of gold in the eyes of investors, as Fullermoney has been saying for nearly a decade.

Traders are likely to be wary for a while, in case the CME raises margin rates for other commodities.