Sunday Evening 29 April 2012
Most everyone wants to know when silver, [and gold], will go to its "ultimate destiny," that being much higher prices. One thing we know for certain is that no one knows the future and how it will unfold. All
we can do, for our part, is to read the charts, past and developing, in order to determine possibilities that are based upon probabilities. Regular readers know we always start with higher time frames to put a
market into context. It must be stated at the outset that we do have a bullish bias, stemming from the unfettered creation of fiat that continues to debase all currencies. We have history on our side for that bias because there has NEVER been a fiat that has survived.
The question then is When, not IF. One has to keep in mind that the upcoming presidential election will not allow anything to stand in the way of the crumbling facade, once known as the USA, now the USSA,
taking a bit of license to more accurately describe what has become [NOT becoming] reality. Let us get to the charts and away from a fundamental bent that sounds more like an editorial.
By putting a market into a context, we can better decide HOW to trade, long or short, and WHEN to enter a position. The larger time frames accomplish that, but they are not used for timing the WHEN. Dealing with observable facts, we can see silver has been in a sideways trading range since 2011. We can also see that the lows of 2011 remained above the last swing high of 2008. This is known as bullish spacing and shows that buyers are willing to step in and support a market without waiting for a retest lower.
There has also been two attempts to drive the price of silver lower, after the strong rally to $50 in March, 2011. One, or a few Wall St entities have been naked short and doing everything possible to
stem the financial bleeding of their positions. The strength of the broader based gold market has kept silver prices from reaching lower levels, otherwise, these Wall St entities would have pushed price much, much lower.
We can see the market has been trading sideways for the past seven months, and that failed probe lower could be very important as an anchor for an eventual rally higher. So far, price has stayed in
the lower half of the wide range down bar of September 2011. Typically, after such a wide range, price tends to trade within the confines of it.
Price has been unable to rally above half-way of the range, indicating weakness, and at the same time, price has not been lower in the past seven months. The question is, where are the bears? They may|
still show up, for anything can happen, but the "read" of the chart has positive undertones.
We break it down further on a weekly chart that shows more detail. There are two observable facts worth noting. The net downside progress from the December 2011 low, relative to the September low,
has disappeared, especially when compared to the downside progress made May 2011 low to the same September low. This tells us that sellers are not making any progress for all their effort. It amplifies
the question asked above, where are the sellers who are supposed to be in charge?
The second observable fact is found further along the right hand side of the protracted trading range. The nine week rally up was followed by a labored reaction lower that has not retraced as much as what
was previously gained. This, too, has bullish implications. That is also bolstered by a higher low formed last week. We should qualify that as a potential higher swing low because it still needs confirmation.
We will add a third observation, and that is how the probe lower in December 2011 went nowhere. No stops of consequence were under that price level, and when price was at that low, it did not attract
new selling. This is an important piece of information.
This analysis should be familiar to those who saw the gold commentary, [See Gold - Buy Relative Strength, click on http://bit.ly/I6zaLb]. We chose to buy gold over silver because the gold chart showed greater relative strength for many of the reasons put forth in this analysis. Because silver has been more prone to manipulation and easier to attack/raid, for a futures position, gold was the better choice.
The difference between the rally and subsequent reaction is more clearly defined. It is worth watching the Wednesday low as a potential turning point. Lead month May shows less volume because trading
is moving into the July contract. In fact, we will add the July contract to make another point, in the form of a caveat.
Interpreting volume is an art, and it is not always easy. The red volume bar correlates to the low, last Wednesday. Volume increased and the close was mid-range the bar, indicating sellers were present at
the low. It is the next two volumes that can be of concern. Volume increased even more, but note how the ranges were smaller. and the highest volume occurred on Friday, the last bar. Of concern is the lack
of upward progress from Thursday's close. For all that effort, buyers could not get price to extend higher.
Some of this may be roll-over related, and the closes were at the highs of each day's range, so we know that buyers were in control. Subsequent market activity will answer the question, but it is worth noting as a caveat.
There are no recommendations for silver futures, here. We opted for gold, as mentioned. However, we strongly urge everyone to buy physical silver [and gold] in whatever quantity you can afford, and to do it consistently. Also, hold everything personally, not in paper form and not in a bank. Let MFGlobal be the answer as to why. The United States went bankrupt in 1933, and Socialist FDR shut down the
banking system so the Federal Reserve could take over, headed by foreign holders. All gold was called in by Executive Order. You should know that Executive Orders only apply to federal officers, and not the
public at large. However, the corporate federal government will never make that distinction known and let people assume what they will.
It would not surprise us to see another similar attempt, at some point. A word to the wise.