I have to tell you, the last couple of months have really taken its toll on the "manipulator-in-chief." It has not been easy to orchestrate a 19% decline in silver from its high in December of last year (for which we provided advance warning on Seeking Alpha within cents of the top), as well as to convince Big Ben to turn to the dark-side and become Darth Bernanke. All of this effort has been really "taxing" on this former tax and M&A attorney, turned evil-metals-manipulator.
Can you even imagine the amount of coordination it takes to "manipulate" the price of an asset down 19%? I will tell you that, although it was not easy, it was quite profitable to this "manipulator-in-chief" and the bankster cartel, who follow my analysis and commands issued from a bunker in Maryland. But, hopefully, now that Darth Bernanke has turned to the dark-side, it should make my job a lot easier.
So, let's move on to our "fundamental" perspective of the market sentiment and we will start with the anecdotal market sentiment. First, on Friday afternoon on CNBC, it seems that all the analysts felt that silver has much lower to go. Second, it seems that the COT report from last week noted that both the large and small speculative traders have added to their short positions, while the commercial traders have not only reduced their short positions, but have even added to their long positions. This all points to the "herd" being very bearish on the metals, while the banksters have obeyed my commands.
Furthermore, on Seeking Alpha, I am beginning to see more articles that are either looking for lower levels in the metals, or are suggesting "patience" to metals investors. Normally, I would say this anecdotal perspective from a financial website would not be indicative of significant bearish sentiment, but when we weigh that with the fact that almost all metals' authors on Seeking Alpha are generally very bullish, it does provide evidence that there are serious cracks in the armor being seen.
And, I am sure I will arouse the ire of my fellow contributors here on Seeking Alpha when I view them as contrarian indicators. But, let me explain why. What is amazing to me, in perusing the many articles on the metals on Seeking Alpha, is that, after the metals drop, some present a new fundamental reason as to why the metals have dropped, and, I have to say that some are quite creative. And, the rest are simply outright perplexed, so they reiterate the mantra "fundamentals are bullish, so buy the dip." But, have you heard a fundamental perspective of why the metals will drop before the metals dropped anytime over the last year?
Unfortunately, none of them have been able to tell you the next directional move for the metals, other than the "default" position that they are "eventually" going up. So, most have remained bullish through this decline. But, as they begin to question their bullishness, or move into a bearish stance, that would be a strong indication for me that we are nearing a bottom. Over the last several weeks, we have begun to see them questioning themselves.
In a related matter, for the last year or two since we hit the top in the metals, almost all the metals analysts were screaming from the mountain tops that "the dollar is crashing due to inflation, and the Fed is giving us QE ad-infinitum, so get ready for the parabolic rally." While I do not disagree with them regarding a potential parabolic rally setting up, I completely disagree with them as to what is going to cause that rally.
In fact, over the last year, I watched each and every rally quite intently for the "break-out" signal, but each and every time, it has led me to short the market at its top with the expectation of another decline, as the market was never able to give us the break out signal that I wrote about for each rally attempt. But, almost all analysts remained staunchly bullish at each and every top. This is why knowing what will cause that parabolic rally is so important, as it will prevent you from being caught in further false break outs.
So, for the last few months in which silver has lost 19% of its value, we have seen the dollar both rise and decline, and we have been "graced" with QE3 and QE-Infinity. But, no one has honestly questioned the fact that the metals have not rallied as expected due to these positive "fundamentals" reasons, while I have seen many, many articles saying that the rally is imminent due to the fundamentals supposedly still being bullish. But, astoundingly, silver still lost 19% in the face of strong fundamentals, like large money-pumping action by the Fed, but many are seemingly ignoring this huge fact. Is anyone noticing the elephant in the room? Are the fundamentals not working?
But, if the fundamentals are not working to prognosticate the direction of the metals all the time (and saying that they will "eventually be right" is not an intellectually honest answer), can we really believe that they are driving the market any of the time? And, if the metals happen to rally while nothing has changed in the fundamentally bullish perspective, are we going to wake up one day, and say "look, the metals are FINALLY following fundamentals?" Seriously, how much do we really want to fool ourselves? Aren't we simply looking at a clock at 7AM and saying, "look, the clock has the right time," when, in fact, the clock has been broken and stuck on 7AM for years?
Ultimately, I have continually attempted to open your mind to the fact that maybe it is not the "fundamentals" that dictate the direction of the market. When Ben Franklin said "Geese are but Geese tho' we may think 'em Swans; and Truth will be Truth tho' it sometimes prove mortifying and distasteful," it is instructive to us to open our minds to other possibilities if something just does not look right, no matter how ingrained our prior perspective. So even if it is "mortifying or distasteful" to metals fundamentalists to view their perspective as possibly not being as useful as they had thought, "truth will be truth."
In fact, while most analysts have been scratching their heads, we have been pretty good about tracking the metals movements without paying attention to any of these exogenous factors. Simply put, all the exogenous market factors are noise, and have not helped anyone identify the direction in which the metals are going. Rather, they have actually misdirected most. And we have ignored all of this "noise" and have done quite well in tracking almost all the movements in the metals.
So, the reason that I view other analysts as contrarian indicators is because they have all followed the herds' "reasons" as to what is going to move the metals, and, as usual, the herd is almost always wrong when it comes to a turning point. They are always too bullish at tops, and too bearish at bottoms. For this reason, I will continue to peruse the articles on Seeking Alpha, as well as other financial publications, for the general sentiment regarding the metals and view it as a contrarian indicator.
As for the current perspective on the market, well, since December, I have been looking for a "decline to at least the 28.67 level, with potential extensions to the 27.98 and 26.87 regions." I have been noting or referencing these specific levels for over 3 months. And, this past week, silver dropped right to the top of our long-time target blue-box on the charts I have provided here, hit the 27.94 level (4 cents from the Fibonacci target extension I provided over 3 months ago), after which, we saw a strong rebound.
In fact, on Thursday afternoon, hours before we hit that 27.94 reactionary bottom, I noted in my Trading Room that I was cashing in my short term SLV puts at the close on Thursday, and I sent out a Wave Alert to all my subscribers on ElliottWaveTrader.net that were shoring silver with me (for a short term trade) since the last top, and said:
I want to warn those that are attempting to short silver here, as we approach the target zone, the possibility exists that once we hit it we can see a VERY strong reversal . . . remember, there is VERY bearish sentiment on the metals, and the next low will likely provide us with a positive divergence on the daily chart. The top of that target zone is just under 28, so please be cautious with your shorts. This is now becoming a dangerous game to short silver.
So, with this strong reversal in silver on Friday, the question everyone is asking themselves is if the bottom is now in. Well, we have now hit my long term target zone for our next buying opportunity in the metals, and the market reacted strongly. But, this alone is only an initial indication of a bottom in place, and we have more to see to determine if it is a meaningful bottom.
First, silver must continue to the upside early next week on strong buying volume. Second, based upon Elliott Wave analysis, we must see a 5 wave impulsive structure to provide us further evidence that a long term bottom is in place. Third, we must move through the initial resistance region between 29.26-29.97, as any move up that weakens into that region can provide another local top for silver, which can turn it down back to the lower Fibonacci extensions at 26.87. In truth, this may be my preferred perspective at this time, so I will be watching very carefully how we move into that region, and may trigger into a short-term short trade with a 26.87 target. But, this will be a game-time decision based upon how the market looks as we move into that region.
But, assuming silver can move through that region with an appropriate Elliott Wave structure, which is supported by the internal Fibonacci structure and technicals, then the next major hurdle will be the 30.90 level. Assuming we can move through that level appropriately, then the final test will be within the 34-35 region. The reason that region is so important is that this is where we can see a relatively significant top for silver to complete an intermediate triangle, which can still turn silver down into the low 20 region.
So, we still have a lot of work to do to determine if we are ready to sail to new highs in the silver market. But, we should have signals well before we see the 34/35 region to know if we will be slicing through there like a hot knife through butter, on our way to new all times highs, or if we will be turning and dropping down as low as the lower 20 region.
Disclosure: I am long SLV.
Additional disclosure: I may initiate a short position with SLV puts in the near term