Replies to post #54509 on Abet Chichi2 (Chichi2)

[DiscoverGold]

Clive Maund >>> Silver Market Update

* Sunday, October 7, 2012


A bloodbath is believed to be imminent in the silver market, now that its cheerleaders have herded their flocks into the corral, ready to be fleeced again.
In the last update posted early last week, we expressed the view that an intermediate top was forming in gold and silver, a view that is reinforced further by the inability of both metals to break higher later in the week, and the now towering Commercial short position in silver as revealed by the latest COTs.

On its 6-month chart we can see how silver has continued to track sideways beneath a resistance level approaching $35. It had a go at breaking out upside on Thursday when the dollar apparently broke down, but failed, and weakened again on Friday. If we look carefully at this chart we can see that, following failure of the steep uptrend that began in the middle of August, a potential Double Top is completing beneath this resistance that portends a drop, and we have already observed several bearish candlesticks with long upper shadows developing beneath the resistance, which is a big reason why we turned bearish. Failure of the support level shown, which is probably imminent, can be expected to lead to a brutal plunge.



Although it is clear that it might be at an intermediate peak, silver doesn’t actually look too bad on its 3-year chart – its moving averages are swinging into bullish alignment, and just going on this chart it looks like it might be consolidating before going on to take out the resistance and continue higher, so why are we so bearish on it near-term? The main reason is the massive, staggering short position built up by the Commercials that we will look at lower down the page, which is thought to relate to a possible surprise big rally by the dollar, the potential for which we examine in the parallel Gold Market update.



The silver COT chart was already showing extreme readings at the time of the last update, but last week Commercial short positions exploded to even higher levels. Their short positions are now way in excess of those they held before the onset of the severe downtrend of last Spring and also immediately before the vertical plunge of September last year. This massive towering Commercial short position portends an imminent plunge in the silver price.



Some of you may recall that it was consideration of such factors that led us to predict the savage plunge in silver just days ahead of time in September of last year, and we positioned ourselves to garner massive profits from this plunge while others were wiped out in a matter of days.



While, as ever, past performance is no guarantee of future performance, silver looks set up for a possibly brutal plunge soon. More sophisticated traders who examine the 6-month chart for silver presented here will clock the massively advantageous risk/reward ratio for silver shorts here, since any newly opened short position can be protected with a close overhead stop that strictly limits losses if silver breaks higher. To put it bluntly – if we are wrong in shorting silver here, we are out for a minor loss, if you are wrong here as a new long, you are going to have your head handed to you on a platter.

On the site we will be looking at ways to capitalize on the expected plunge before trading gets underway tomorrow.

http://www.clivemaund.com/article.php?art_id=67

George.

Click on "In reply to", for Authors past commentaries.

[DiscoverGold]

Clive Maund >>> Silver Market Update

* Sunday, October 28, 2012


The intermediate top in silver was called several weeks back in the last update. We had expected it to plunge, but instead into went into a more orderly steady decline, its measured rate of decline thus far being due to the fact that the dollar has not entered into a new uptrend – yet.

We can see how silver broke down from its uptrend, formed a Double Top beneath resistance, and then went into decline, in detail on its 6-month chart below. We shorted silver investments near to the top with a close overhead stop, a tactic which has worked out well, and the big question now is to determine whether the downtrend is set to continue, or maybe even accelerate, or whether this is just a correction that has about run its course so that a reversal to the upside is imminent, and the COTs, which we will look at lower down the page, have an important part to play in making these determinations.



Looking further at the 6-month chart we can see that the downtrend of the past few weeks has taken silver down through its rising 50-day moving average, to approach its 200-day moving average, which is also rising, and it is getting oversold at this point. While this won’t necessarily stop it dropping further, it is enough to put us off entering any new short positions here – so if you missed doing so at or near the top, you’d best forget it as it’s getting too risky. The fact that we now have a neat clearly defined downtrend puts existing shorts in a good position, as you can stay short for further downside, but take profits and stand aside if the price makes a clear breakout from this downtrend, which would be evidenced by a close 20 cents above the trendline boundary. Apart from some moving average support, the first serious support comes in at the level shown in the $28.30 - $29.10 zone, which is quite a long way down from where we are now, and if the downtrend isn’t broken that is where it is headed.

There is one scenario that we should be aware as it may produce a whipsaw. The dollar may back off from the resistance it is now at briefly, before turning higher again and breaking out as expected. This could result in a breakout by silver (and perhaps gold) from its downtrend that is a false move which is followed by a severe decline. We will deal with this on the fly on the site if it should occur.

What does the longer-term 3-year chart reveal of the larger picture for silver? It tells us that silver is essentially rangebound between the nearest major support and resistance zones shown with an overall neutral trend, and this being so it could quite easily drop back to the major support level in the $26.50 - $28.00 area, and should a deflationary shock hit, it could obviously crash this support and plunge as in 2008.



The COT charts assisted us greatly in determining that silver was set for a drop in the last update, when it was pointed out that the seldom wrong Commercials were heavily short. It is therefore logical to look for a significant reduction in Commercial short positions on the latest COT charts, if we are to see a breakout and significant recovery in the price of silver soon. The bad news for silver longs is that, as we can see on the latest silver COT chart shown below, there has been little reduction in the Commercials’ massive short positions. This implies that the downtrend is set to continue and possibly even accelerate, and this fits with the latest COTs for the dollar, which are strongly bullish and imply that the dollar is set to break out upside from its recent base pattern shortly, which will of course be bad news for both gold and silver.



http://www.clivemaund.com/article.php?art_id=67

George.

Click on "In reply to", for Authors past commentaries.