Silver: Expected Rally Not Yet Convincing

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Includes: SLV
by: Avi Gilburt

I would like to begin by letting all of you know that I have not been writing of late primarily due to vacation time I have been taking this summer with my children, and have more time planned in the near term. This is the first opportunity I have had to take vacation time since we first found out about my wife's illness over 3 years ago, which sadly wound up taking her from us. So, I do appreciate all the posts and emails I received requesting my analysis and checking up on me.

Also, as I have said, I will probably be lightening my writing load on Seeking Alpha, and writing less frequently. But, for those of you that have been requesting our accurate silver and gold analysis, it is provided throughout the day on elliottwavetrader.net.

So, now, Bernanke has "clarified" his position to the markets, and many now believe silver is going to rally. To me, this is pure insanity. The definition of insanity is doing the same thing over and over, while expecting a different result. Have people not learned yet that anything Ben does is not going to cause silver to rally? Yet, people still post articles and opinions that Bernanke's reiteration this past week is going to cause silver to rally!? I think these people really need to wake up to reality and look at what has happened in the market for the last year or so, rather than post opinions that are not burdened by the facts.

And, again, others post their opinions based upon what other countries will or will not do. Has this had any correlative affect upon the metals for the last year? I think not.

Again, people still need to wake up to the fact that none of these "reasons" will move silver, no matter how much they want it to move. Until sentiment is ripe for a strong move, such a move will not begin not matter what "story" they want to point towards.

When I last wrote in mid-June, silver had just experienced a seemingly strong rally to the 22.50 region. However, I warned all readers not to be fooled by this rally. As long as the market maintained below the 23.05 region, I was expecting a decline which should have seen a 19 handle, which would be followed by a snap back rally.

In fact, silver provided us with the expected drop, however, with an even deeper extension, which took it down to the low 18 region. But, we then experienced the expected snap back rally. However, this rally has been quite weak, thus far. In fact, it is making me believe that the rally may set up yet another decline, which will likely provide us with a 17 handle in the silver futures. So, unless silver is able to move through the 21.35 level with strong buying volume, I am going to expect to see the 17 handle, before a longer lasting bottom will be in place.

Ultimately, I am still going to expect to see the 23-25 region in the silver futures before I am able to make a determination as to whether a solid bottom is in place for the metal. So, even if we do see that further decline to the 17 region, that should be the final decline which sets up the rally towards the 23 region, which could extend as high as the 27 region.

In conclusion, based upon the action I am seeing in the market, it does not seem that sentiment in the metals has yet bottomed, unless it proves to me otherwise with a strong break out over 21.35 in the silver futures. Over 21.35, and I will be looking for at least the 23 region before I re-assess the action I see in the market.

Disclosure: I am long SLV. 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.

Additional disclosure: I am long SLV LEAPS, and will likely hedge when silver reaches the cited targets, or breaks support.