Sunday pre-game, 10/30

"There's an old saying in Tennessee — I know it's in Texas, probably in Tennessee — that says, fool me once, shame on — shame on you. Fool me — you can't get fooled again." -George W. Bush

I want to start with silver. After the historical collapse last month, I commented that if nothing else, we were about to get some important information regarding how much manipulation and criminality there is in the silver market.

An asset that crashes 40% in just over two full trading days, hard on the heels of another 40% crash (that one in 5 trading days) -- with no bad news released concerning fundamentals specific to it-- is either a bubble that's in the process of popping, leaving lots of bag-holding fools in its wake, or else the work of a manipulator trying to create the perception of a bubble that is popping. (With high probability, anyway -- and in life we have to live by probabilities.) Thus, the month of November (and December) promise to be very informative. I'm eagerly anticipating the next silver sell-off following this small burst. Will the $33.9 line hold?

If it does, we could see $40 again real soon. And if we get to that point, a lot of silver investors won't get fooled again during the next sell-off; they will find their hands stronger, they will see the sneering army of silver naysayers as merely the unfortunate sufferers of system justification syndrome, so that silver should easily cross the $50 line in the sand in 2012.

I should add that even if the $34 level doesn't hold on the next sell-off, support at the $33 level would also bode very well (see the upper dotted red line)

And, on the chart with a more conservative trend channel, which has held quite well (especially on a closing basis), only a drop below $31.5 would be a cause for concern going forwards.
So in short, I expect at least a mild correction in silver this week to test these lower levels. I will be watching (somewhat idiosyncratically, I confess) the 10-yr-yield: $SILVER ratio, as I think a bounce off of the top purple line of the channel would mean a powerful rally is imminent.

What a difference a week makes on the monthly gold chart; it appears to have resumed its strong, stable ascent, making a 2008-like drop to its 2 or 3 year MA's significantly less likely.

The daily chart suggests strong resistance at Jim Sinclair's $1764 level. So I'm not expecting a great week in gold. Gold bulls should be very happy if recent gains can be consolidated without too much volatility. Only a close below $1690 (the finally-cleared 89-day MA, not shown) should cause concern. The 144-day MA (pink, below) is strong at $1625.

The weekly chart tells a great story. Not surprisingly, it also suggests strong resistance at $1764.

One chart that i rarely post, because frankly I don't understand it, is the $GOLD:$USD. chart. But, since I posted it back in the spring, the black trend line i drew has been critical support two times, signaling the end of the June correction, and (perhaps?) this present one. It looks to be breaking out right now.

Finally, to throw the pessimists a bone, I am posting the CCI chart. We have not cleared the critically important horizontal trend line yet, which means another cratering in commodity prices can occur (especially with the G20 and FOMC scheduled for this week). So be careful out there.

1 comment:

Louis Cypher said...

I miss George Bush II sometimes. It was little gems like that that made him worth listening to. This new guy not so much.
I'm not sure it matters any more what the physical market does anymore as it seems to have little or no influence on the price of Silver except to embolden or terrify the small time traders. So if people are looking to get out of physical Silver and dump their $40 and $50 holdings will it really matter? My guess is we are going to see a wedge forming again this week across the board until we have some rumors of a direction. With European banks insolvent and only insane schemes in offering it's going to be fun for the volatility traders.

Great charts as usual GM.