Trying to Spot the Trend in Silver

| About: iShares Silver (SLV)

As we've seen here at SeekingAlpha, InformedTrades, and other trader communities elsewhere on the web, silver has been the talk of the town of late. Below is a daily chart of SLV; note the volume spike as we broke below $35, which reminds me of the volume spike when the decline started as price approached $50. As we've seen some reversal candlesticks and price appreciation since then, have we found a floor?

Click to enlarge

(Click chart to expand)

Well, personally, I'm not convinced; I'm sticking to my trading plan, which means I'll need to see a period of rangebound movement before I can get back into active silver trading. But I did want to share some comments from other market pundits on the web that I thought were worth noting:

Martin Armstrong, perhaps my all-time favorite market commentator, had this to say:

The primary support to what lies is at $23.50-$26.50 range. This is the critical area for long-term support and a MONTHLY closing BELOW this range would signal that we have a serious near-term cahnge in trend. On the yearly level, the main support lies at $28. This will be the critical area to watch for year-end. A closing BELOW this level will signal a decline into 2012.

You can read Armstrong's whole recent comment on silver here (pdf).

A more bullish perspective can be found via James Dines, who commented in a recent interview with King World News that he was accumulating physical silver; that the gamblers had been squeezed out in this parabolic run up. I recommend that interview not only for Dines' take on silver, but also for his take on crowd psychology and his view that gamblers, who often rush into parabolic markets, have a secret desire to lose.

For those with a multi-year outlook who are capable and willing to tolerate wild fluctuations, I do still favor accumulating physical silver, believe it will go over $100/oz, and that the gold/silver ratio will continue to decline. Eric Sprott's commentary from March 2011 (pdf) on silver is one of my favorite pieces that summarizes the great opportunity that silver offers.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.