Trying to Spot the Trend in Silver

| About: iShares Silver (SLV)
This article is now exclusive for PRO subscribers.

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 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.