JULY 26 2007 2:00PM - Okay, that was ugly! My speculative hopes remain alive by barely a thread as we have now retraced 50% of this summer rally over the course of 3 days. Unfortunately, the lack of conviction in breaking to new highs in silver, gold and PM stocks has now created powerful overhead resistance and a pattern of lower lows and lower highs. For example, take a look at this chart of September COMEX silver:
I don't even need to draw in the obvious top channel line marking the lower highs since February of this year. And if this isn't discouraging enough, the lows of today pretty much need to hold or we could be in for a rough time in the days ahead. On the other hand, there should be good support here, so there is a good chance silver will resume its rally. Basically what I'm saying is that a few cents in either direction is likely to lead to a lot more.
It would certainly be helpful if the fundamental indicators provided a clear picture, but that is still not the case. Lease rates remain tepid, COMEX warehouse activity (on which I will comment more in the next few days) is not particularly encouraging and ETF demand remains modest. Open interest and commitments of traders on the COMEX are not saying much either. And the dollar, of course, may not be ready yet to head much lower. Finally, the basis still appears to favor gold, which is usually the case during PM weakness. Bottom line, this remains a technically driven market and every good opportunity for improvement in the fundamentals continues to be wasted.
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