So, everyone is just scratching their heads and wondering for how long this blood bath in the metals can continue. My answer is simply that it will continue until the metals have completed their downside pattern, and sentiment has completely bottomed.
Now, I know that many of you have questions as to what I mean by the pattern showing us that sentiment has bottomed. Well, this is exactly why I use Elliott Wave analysis as my primary methodology.
As an Elliottician, I believe that markets are fractal in nature, or, patterned, if you will. In theory, Elliott Wave theory postulates that public sentiment and mass psychology move markets in 5 waves within a primary trend, and 3 waves in a counter-trend. Once a 5 wave move in public sentiment has completed, then it is time for the subconscious sentiment of the public to shift in the opposite direction, which is simply a natural cause of events in the human psyche, and not the operative effect from some form of "news."
I know many of you will simply view this as some sort of voodoo or hocus pocus, but those that have followed me for some time know that my method is simply not madness, as it has pinpointed most of the turns in the metals with fairly high accuracy (often within pennies). And, yes, I also know that it is counter-intuitive to everything you have ever learned or believed about markets. But, remember, everyone else thinks as you do about markets, but the metals have not done what everyone expected of them for the last two years.
In fact, just think back to when QE-Infinity was announced. Everyone not only thought, but was 1000% sure, that the metals were about to go parabolic. But, even before the Fed announced QE-Infinity, I made the bold call that, irrespective of what the Fed did, silver will turn back down from the $34.40 level in the futures contract. And, yes, this was based upon my analysis of market sentiment through patterns and Fibonacci mathematics.
Well, silver went to $34.49 (nine cents over my target), and then turned down and has not looked back since. In fact, it was right after that market call back in 2012, that I started warning all the Seeking Alpha readers that $22 was a strong possibility to be seen. And, while many of you scoffed at me and my analysis methodology, how many of you actually started to question what you think you knew about the metals as it has gone completely opposite the manner in which the majority of the market assumed.
So, I have made it my mission to enlighten the readership of Seeking Alpha as to other methodologies that have proven to be much more accurate than the most common of methodologies used in the metals markets, which have led investors astray for the last two years.
As for where silver is now headed, as long as we remain below the $23.05 resistance, I will be looking for a low with a $19/20 handle before we are able to see a rally back to the $25-27 region. However, I still believe that the rally to the $25-27 region will be sold one last time before a true low is seen in silver.
Additional disclosure: I currently have intermediate term puts.