Silver: Near-Term Bullishness Possible, But Lower Levels Still Likely

Feb.10.13 | About: iShares Silver (SLV)

It seems as though many have misunderstood what I am attempting to convey in my articles. Many investors even seem to become insulted by my insinuations of seeing lower levels before a larger rally takes hold. Well, let me attempt to clear the air.

First, I want to reiterate my position that those who are seeking correlations by which to trade have been shown the folly of their perspective once again this past week. There are still many that cling to the USD/metals inverse correlation as their primary mantra for investment in the metals. Well, as we look to the relatively sizable DXY rally over the last week, we see that metals have simply been consolidating, and have not reacted.

Those that rely upon these correlations will now claim that it is some other currency to which the metals are now responding. Well, my question to you is how do you know to which one they will respond to at any time and to which ones they won't? To put it simply, are you just searching from currency to currency to see which one seemingly correlates to the metals on any given week, or are you really just fooling yourself regarding any real correlations? I think the answer is quite clear.

Second, for those that feel I am a "shill" for the banks who are short the silver market, I can assure you that this analyst is located in a "bunker" in Maryland, and has no connection to any large banks. But, as I have said before, maybe these banks are following my analysis, which then makes me the manipulator-in-chief?

Third, I have always provided very specific levels in my articles to watch for turns in the markets. I do this to allow investors on Seeking Alpha to understand my thought process regarding my immediate term directional biases, and also to provide clear levels at which you will objectively know my analysis is wrong. I have always believed that no analyst will always be right, and, in fact, most are wrong so often, that they will not even cite specific levels in their writings. But, I do provide very specific levels to watch, and much more often than not, the markets do turn at the levels I cite, oftentimes to the penny.

But, some have taken my citing specific and objective invalidation levels as an opportunity to point to how wrong I can be, even though my patterns have been invalidated less than 30% of the time, according to those who track my published market calls. But, in fact, I am simply providing investors with an objective perspective as to when to view my analysis as wrong, rather than allowing them to maintain a losing market position. Yes, believe it or not, once I put something in writing, I actually care enough about what investors may do with my analysis that I never want anyone to be hurt by my analysis. Therefore, I feel very strongly that you must know, in advance, when I am wrong and when to not rely upon the analysis I provide in a specific article.

In truth, you have to ask yourself how many analysts will provide you with such specific near-term levels in their articles on Seeking Alpha? Furthermore, how many analysts are comfortable enough or confident enough in their analysis to even provide you the objective perspective to know when they are wrong? And, lastly, how many analysts have a methodology that can provide you with invalidation and validation points that are often accurate to the penny? Personally, what I have mostly seen are fundamental analysts with a very broad directional bias holding silver through a 50% decline while "objectively" claiming that they are right to do so. Well, I can guarantee that you will never see that from me.

Lastly, please understand that my long term perspective is that I am looking for $60+ silver sometime over the next 12 months. But, that does not mean I am expecting the rally to begin immediately, as most are. Rather, I see the current pattern in the market as only corrective to the upside, which, to me, means we will likely see lower levels before this expected rally over $60 takes hold.

While I have given the silver market the benefit of the doubt many times over the last year to prove it has begun this final parabolic run, it has never provided confirmation in a move over the clear break out levels I have cited in my articles over the last year. So, while I continually look for evidence of this break out, silver has never been quite that compliant in providing us with evidence of this break out, and I still do not believe we have such evidence in hand. This has consistently led to the lower levels I have cited in my articles, despite the non-believing masses.

In the near term, silver may yet "break out" with a move over the 32.15 level in the futures, and move up as high as the 33.50-34.50 region. But such a "break out" off the last lows does not provide me with a clear pattern which supports the beginnings of the parabolic rally we are, and have been, expecting. Rather, such a rise would likely only be another bull-trap for silver investors, and I would advise caution on such a break out.

But I always remain vigilantly seeking the potential signs of the expected parabolic break out, and remain 75% invested with my long term capital in long positions (purchased between the 26-29 region, after last selling and shorting from the 37 region) in the silver market at this time, with 25% dry powder to deploy at potentially lower levels.

However, if silver does not exceed the 32.15 level in the futures, it can still begin a strong decline, which, if it breaks 30.50, will be targeting the mid 28 region at a minimum, as I have discussed in my prior articles. But, for now, I do not have a strong directional bias for the near term until the next cues are seen from the market.

I look forward to meeting many of you at the New York Traders Expo on Tues Feb 19, 2013 at 1:00-1:30 pm ET at the Marriott Marquis Hotel, where I will be speaking about Elliott Wave and Fibonacci Pinball. I will be meeting with attendee's right after the presentation in a Q&A gathering at the hotel.

Disclosure: I am long SLV. I also own intermediate term protective puts. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.