Using SLV as the proxy for the price of silver, on Friday, March 27th, 2009, for the first time since August 25th, 2008, the 50 day moving average of SLV crossed above the 200 day MA, a formation known by technical analysts as the “golden cross”. SLV closed that day at $13.15.

Since then the spread between the 50 day MA and the 200 day MA has widened every day, a bullish sign.

Anyone who follows the silver market knows that the fundamentals of silver are incredibly strong, long term. Since most silver is mined as a byproduct of base metal mining, and base metal prices are currently depressed by the global recession, inventories of base metals are high, and silver supply is shrinking. Many less profitable mines are closing down. Silver recently went into backwardation, which could indicate delivery problems are imminent in the physical silver market.

The US government currently holds no silver bullion at all, down from five billion ounces immediately after WWII. Above ground silver supplies are currently estimated to be one billion ounces, compared to five billion ounces of gold. This includes silver in tableware, jewelry, and other sources that will never be available on the open market.

There was a suspicious trading pattern on SPY at the close, which looked liked a form of manipulation called “Painting the Tape”. My definition of this is “last minute buying or selling to manipulate the closing price of an exchange traded equity.” In a previous article I explained why a manipulator would benefit from manipulating the closing price.

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What does the future hold? Tell me what the market is going to do tomorrow. I get a lot of questions like that, and if I really knew, I would be sitting in a five star resort right now with my laptop computer and a few close friends, not worrying as much about what the future held. I am no expert in technical analysis, or fundamental analysis, but here is my opinion, for what it’s worth:

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It has been nearly a week since the FOMC announced they would buy US treasury long bonds in the open market on Wednesday March 18th, a stunning development that some had predicted, and many others predicted would never happen.

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Last Wednesday afternoon, after the FOMC announcement, the price of gold (in dollars) went up. On Thursday gold ETF GLD (GLD) closed at its highest level since February 25^th. But what actually happened? The FOMC announced that it would begin buying U.S. treasuries on the open market, this at the same time that U.S. treasury auctions are tripling and quadrupling their bond sales in order to pay for the massive increase in the U.S. budget deficit.

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On Wednesday, Ben (the helicopter) Bernanke, current chief of the Federal Reserve (which is about as federal as Federal Express, and has no reserves), announced that the Fed would start buying US treasury bonds on the open market.

Also, that they would be buying mortgages and mortgage backed securities for a total of $1.25 trillion over the next six months.