Si

Trading Silver

Resistance

25-26

21-22

19.33 - 19.60

17.88 - 18.33

 17.50 - 17.68

Support

15.50 - 16.40

14.40-14.60

13.06 - 13.38

11.60 - 12.00

Technical analysis Silver Precious Metals Market Trading

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Technical Analysis Silver /Precious Metals Market Update and Daily Report

Silver Long term Trend    = Bullish  Major resistance at the 19 and 21 dollar area - Support at the 11.60 - 13.60 area.

Silver Medium Term Trend  = Neutral --- . Support 14.40 -15.50   -  Resistance 18.50 - 19.00

Silver Short term Trend  =   Bullish at 17.30  3/9/10 ---- - 17.55-17.68.  Bearish on a move below 16.80

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The opinion expressed in these reports are the conclusions of the author. The information provided was researched carefully, but we cannot guarantee its total accuracy. The report is published for general information and does not address or have purpose or regard to advise specific investments to anyone in the general public. Rather it provides an individual’s perspective of such markets. Its content does not recommend any specific investment advice to anyone nor should there be any inferred.  

Silver Tuesday March 10th 1:15 PM EST USA TIME

In last nights update we took a short term bearish posture at the tip of the lower channel line at 17.23.  We gave support for Tuesday at 1680-1700 (recall how often we use 1689 too in past reports).  The low was 1687 and then out of nowhere the metals reversed RIGHT ON SUPPORT --- both gold and silver.  Lets go right to the chart.

We can see how the upper channel line has contained the silver bounce for the third time in a week.  This line has been on the chart since mid February and is now showing its importance.  I've also added a red channel that gives silver some credibility and potential to MOVE ABOVE the aqua downtrend line.  The subsequent 60 cent drop after touching the upper line twice over the past 48 hours gave validity of our bearish outlook in yesterdays report.  But with the reversal we saw right at our support point and subsequent rally back to the upper aqua channel line.  Even today's reversal hit the LINE EXACTLY, so we know its a valid price point.  The dilemma tonight is that if silver remains in its red channel not only is price going to bust through the aqua line resistance, is would be pointing to the 1780-1790 price zone.  The problem here is that it takes out the 17.68 area I've been targeting and allows price to reach nearly 18 dollars and still be in the confines of an uptrend channel.  TO add to the difficulty a drop to the 16.40 area would still keep silver in this red uptrend channel. 

Lets take a look at the daily chart of SLV (Silver ETF) below.  We can see the straight up move in silver last week.  Since then, we can see that price is trying to turn down.  But today's subsequent reversal higher at the minor support area of 16.89 gave silver new life in the short term.   I can make a case for a return to the channel line at 16.40 and the moving averages but a case can be made for a test of the upper orange downtrend line just as well.  This choppy topping pattern is also a major pattern turn off that resembles a broadening top (a bearish pattern).  The RED line on top of the blue is also suggestive that the trend hasn't FULLY confirmed the turn either.  So there is a lot of conflicting ways of looking at the short term outlook.    

What next ?

Today's subsequent blast off from 16.92 and back to the top of the downtrend channel is certainly a bullish factor but my own opinion --- I feel it is risky.  The pattern off the low today was powerful and sets up now for a potential break above the channel and a move towards the 18 area in Silver.  That cannot be denied.  The question is whether it should be followed.  From a short term perspective and trading is one thing.............but I continue to hold just core positions and a few specs as far as stock goes. 

ANY BREAK OF TODAY'S LOW would cause me to be short term bear ----- but for now,  odds favor higher if we bust above the aqua channel and hold there. 

SUPPORT IS THE 16.80-17.00 AREA.  RESISTANCE IS 17.55-17.68.  a BREAK OF THE AQUA CHANNEL LINE SHOULD LEAD TO A TEST OF 17.75-18.00.

INTRADAY SUPPORT IS 17.10-17.24 and minor support at 17.30.

Bottom line:  The pattern is a bullish one off the low today.  Odds favor a test of 17.50 ---17.68 and a move above the aqua channel line puts the bulls in charge on the very short term.   Watch the Aqua channel line --- as a move above it must sustain.....so it might be tricky.  

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Silver Monthly Update -  March 2010

It has often been said that silver is not for the faint of heart and the monthly chart of silver below shows that to be a fact.  It is hard to believe that it can be so volatile and even harder to believe it is not in some way manipulated.   In the middle of February the silver price broke thru the 16 dollar area and dropped below 15 to bottom near 14.70.  This drop caused a break of a main price channel line that had been intact since 2008 and was an area that I had highlighted as Silver's most important price area.  The actual report was 15-16 dollars as the most important price zone but regardless of that I viewed the break of the channel by such an amount as a done deal.  The chart below shows the break.  The horizontal line break certainly seemed to be a valid break of the uptrend especially since it happened in conjunction with a break of the uptrend channel.  But it was not to be.  Since that break silver has come roaring back and has actually rallied all the way back to the 17.50 area.  So I decided to take a longer term look at the price charts to ascertain what the expectations are for silver's direction. 

The chart below is a 17 year chart of silver.  It becomes obvious that this metals price chart suggests that trading silver is not for the faint or heart.   Indeed a rally from 5 to 21 dollars over the course of 4 years made silver the king of price appreciation going into 2008.  But a subsequent pullback to 8.50 in late 2008 left silver with a 70% DECLINE.  In retrospect that low was equal to the 1998 and 2004 price highs and was a major turning price point.  A look at the long term chart indeed shows that the 15-16 dollar area is another major price point.  We can see how the low that transpired in February on the long term chart was a retest of the 2006-2007 price highs.  The long term chart also reveals that when ever price trades in the 15-16 dollar area, it is usually a very quick move inside this price zone that has demonstrated many reversals such as the one we just saw in February. The question now of course is what does it mean for the future price of silver? 

After looking at this long term chart, it is evident that trading silver requires a tremendous amount of timing and the volatility of the price pattern is suggestive that a long term approach of silver accumulation is the prudent way to play this market.  Next to silver, trading gold almost seems child's play.  So it is questionable whether silver should be even traded.  Not that this is a new revelation either.  The BUY ZONE button on the website has long term silver price accumulation targets for those wishing to accumulate with average down price targets. 

When we factor in that 4 or 5 banks were recently short almost 1/2 years worth of silver production, we can see the impetus for a driving down of the price by the shorts in the market.  And indeed, it would not surprise me one bit if they were behind the effort.  There was a somewhat significant drop in the amount of short positions that were eliminated.  The subsequent rally since that low has once again begun to increase the number of shorts positions.  There has been numerous allegations of such manipulation in this market and as Martin Armstrong pointed out in his most recent missive, silver is a much smaller market than gold and is easier to manipulate.  Interestingly there is a meeting coming up on the 25th of March where I have read that this is to be brought up again to the CFTC.  

When I look at the price pattern on the long term, it is even difficult to construct a decent channel.  It's one of the ugliest bull market charts I've seen.

One of the most amazing things about silver is that every fundamental study I've seen says we are going to run out of silver in the not too distant future as demand is outstripping supply.  The difficulty of course is that I first read this in 1983 when silver was 8 dollars and I have read it ever since.  It's not that I doubt it either.  It's the disconnect between the fundamentals and the price pattern on the chart.  The only explanation I have is what I stated earlier, that silver is a manipulated market. 

From a long term perspective, the top of the webpage has listed BULLISH from the very first day. The long term trend as choppy as it is -- is in an uptrend.  Famed silver follower Ted Butler has provided intriguing commentary where if delivery demand for all the open long positions were enacted, you wouldn't be able to provide delivery and would send silver to the 30 dollar area in a hurry.  I've noticed recently that some places want 22 dollars for a "REAL" silver one ounce coin.  Certainly a 5 dollar premium is something that goes a long way in confirming shortage.  Perhaps the most amazing thing was the invention of the gold and silver ETF's.  While they have provided a great vehicle for investors to participate in the market, it is probably the biggest reason why silver is not already 30 dollars and gold 1500 for the simple reason is that it's "paper" silver and in a crisis one must ask him/her self whether it would even keep up with the real price.  When a loss of confidence is overlaid with a currency and debt crisis, would anybody really be interested in the SLV ETF anymore.  There have been more and more articles on the crisis that is going on at the New York COMEX in where they are barely meeting delivery notices as the futures contracts expire.  The fact that the chart looks the way it does during this rally we've seen seems counter to all the fundamental aspects.  When rendering a long term outlook silver certainly remains bullish. 

From a medium term perspective the silver chart shows the following:

First there certainly was a channel break. One of the things that does happen with channel breaks is that every now and then there is a return move to the channel line and often even a slight penetration back into the channel.  To make this analysis most difficult is the fact that this has occurred on this break.  Amazingly the fast blue moving average is sitting right there at the lower channel line right along with price.  This has been my hesitation to proclaim that the medium term trend has re-established itself to the upside. 

Second is the fact that the drop came right at the seasonal weakest point of the year.  One that usually lasts into March.

Third is the pattern from October thru February.  That pattern is usually a TOPPING pattern. (Choppy and over lapping).

Fourth was the Williams %R indicator at the bottom of the chart.  Here too we got a "signal" for silver that a potential low was being formed but the MACD indicator was still in a full fledged down trend.  The other hesitation was the fact that the "false" signal in June 2008 from Williams %R came at a time when the fast blue moving average was down sloping in its trend.........just like today's.  Instead of producing a low, the crash of 2008 began in earnest just a few weeks later.   That was another time where MACD was still in full retreat.  And it was at a time of the debt crisis of the US financial institutions and in today's time, it's countries that are beginning to default..  (If you haven't ready Martin Armstrong's new missive - behind the curtain II - Google it. A strong case for a set-up is made). 

What next ?

If we start off with the fact that the only guarantee's in life are death and taxes, we can surmise that the rest of it is risk management.  It is extremely difficult to have a medium term trend bullish when price is lower than 2 years ago at the March timeframe.  The spring lows of 2008 and 2009 did not arrive until the first week of April.  This all begs the question as to whether the medium trend is indeed bullish ?  Neutral, yes,  but is it really bullish again? 

Bottom line:  In the previous updates, I've been using a close above 17.68 as a bullish indication.  This would put silver back in the channel with room to spare.  Of course it would not provide any guarantees that the low is in.  But it would tilt the odds in the favor of higher prices. 

As fundamentals have their timing limitations -- charts also have their limitations.  They can guide, instruct, suggest, and show the course most favored.  Odds are odds and they can only provide advantage.  There are times when measuring RISK is not clear cut.  One can be clouded by the crowd.  There are times when its just not worth the risk and even if PRICE CONTINUES TO RISE for a while, it does not eliminate the risk.  It can be argued (and I wouldn't disagree) that the RISK IS NOT BEING LONG SILVER.  In the world that we have arrived at.........the information age....that there is so much information it clouds the analysis.  Thus a technical approach while providing guidance is not the holy grail either.  The difficulty lies in our perception and our perspective. 

Silver Seasonal chart

This chart contains only the last 15 years of silver.  On average we are about to enter a choppy period.  The good news is there is usually a spring rally.  If we look at silver chart, it rallies the first part of March and then another pullback occurs, only to be followed by a rally into April and then very choppy.  This are the waters we are faced with until the fall rally arrives again this coming year.  Thus the odds of a rally to new highs this time of the year, while not out of the question (especially in this mess) are usually reserved for the latter part of the year.  When we look at this set of data can we say that the medium term favors a bullish scenario ? 

Today's silver chart

Now that we are back to the 60 minute chart, lets have a look:

Price reached the maximum upper channel line as you can see the tip of the fat aqua line right here in the corner.  From there silver may have peaked on this bounce from February.  Its still a bit early but the seeds are there.  Support lies at the 16.80 to 17.00 area for Wednesday and then the 16.10 - 16.33 area where the green moving average resides.

What next ?

It looks like a pullback is in play and it could lead to mid month.  Resistance on Wednesday will be the 17.40-17.68 area. 

Bottom line:  odds favor a pullback from here.  Any close above 17.68 will change the outlook to higher.

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Silver Monday Mar 8th 12:58 am EST USA TIME

 We are working on a more extensive report in silver.  The crash through the bottom of the channel on the chart below from the key 16 dollar area and subsequent re-entry back into the channel is beginning to look more and more like a professional flush out.  My belief is that it was an attempt by the 4 banks who are short an enormous amount of silver to cause liquidation of long positions.  In this manner they did manage to cover a portion of their short positions.  The problem for them is that demand came right back up and has put silver in a position to return to a bullish posture. 

In this business, (like McHugh said this weekend) there are no guarantees, only risk management.  The question comes down to NOW WHAT for SILVER ?

Tomorrow we will look at the long term charts of silver.  For Monday, as much as I DON'T LIKE THE PATTERN LOOK since the bottom a sustained move above the upper channel line leaves short term silver bulls in the driver seats.  Here too we need to watch for a fake out.  The fact that silver trades where it did on 2006 makes it difficult for me to say that the medium term is bullish. Let's see what happens on Monday at the 17.50 -- UPPER CHANNEL AREA.  That will give me one more day to look at the longer term perspective.   Support is the 15.89 - 16.00 area ---- and the 16.10-16.40 is key support.   I remain patient.  The fact that silver is above its 50 and 200 day would tend to favor the bullish side but who knows what the banks have in store for silver this week.   It's a tuff call right here.  Watch the top trend line below.  IF silver can get above and sustain it will be game on again.

Silver Friday Mar 5th 12:01 AM EST USA TIME

There is no change to the forecast.  Silver double topped on Thursday and pulled back to our old friend 17.10, which we neglected to mention on last nights update.  Minor support is 16.89-17.10.  Watch that area on Friday.   The key is watching what silver does at this upper downtrend line.  Allow for penetration up to 17.80.  The moving averages have silver in and uptrend, but the pattern looks sloppy.  Still, if silver exceeds 17.80, it could accelerate.  For now, we can see that it is bouncing on that upper area.  Additional support is the yellow and green moving averages if 16.80 is taken out.  Resistance is the 17.45-17.80 area. 

Bottom line:  Key area for Silver.  Keep an eye on it as it might provide clues as to what gold will do.  Odds favor range bound going into the unemployment report on Friday. 

The short term trend is up --- but we're at a key resistance area where a pullback could develop.  Barring that pullback, the short term trend remains up.  THE MEDIUM TERM TREND remains neutral. 

Silver Thursday Mar 4th 1:15 AM EST USA TIME

In our last update the odds favored the bulls and the rally indeed continued.  We favored price heading towards the 17.60-17.80 area.  Thus far silver got as high as 17.40 as price is reached the upper downtrend line.  We can see that silver has been climbing ever since the break to 14.60 in February.  While silver could still hit the upper levels I mentioned earlier, if the scenario plays out like it usually does, a pullback into Friday morning could develop for the unemployment report.   Support is the 16.40 - 16.60 area and the 16.89 area.  Resistance lies at the 17.60-17.80 area.

What next ?

As mentioned above I'm looking for a pullback into Friday am.  This doesn't mean that silver can't move higher as the trend remains bullish.  THE KEY however is whether silver is going to be able to break above the upper channel line. 

Bottom line:  The trend remains up,  but a pullback is due to begin and the upside should be limited until the Friday report.  Only a close below 15.89 would end the uptrend.  From a short term perspective, as long as we hold the 16.40-16.60 area, the uptrend should continue. 

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Silver Wednesday Mar 3rd 1:15 AM EST USA TIME

The Tuesday update had the odds favoring the bulls and resistance was listed at  16.75-17.10.  The exact high came in at 17.10 and price is poised to challenge the 17.60 -17.80 area next.  The daily chart shows the clean break back into the channel and silver has re-entered the momentum channel.  It's an ugly overlapping pattern since the lows of 2008, and the latest channel flush out in February shows how tough silver can be at times.  As long as silver remains above the channel, the trend is up. 

What next ?  Odds favor higher but a pullback from the 17.10 area in silver to the 16.50 - 16.75 area could be first.  Resistance is 17.10-17.50 and support is the 15.99-16.40 area as well as the above stated zone. 

Barring pullbacks, the trend is up.  A pullback into Friday morning could be developing.  Only a close below the lower channel lines would alter the bullish case. 

ODDS FAVOR THE BULLS.

Silver Tuesday Mar 2nd 12:02 AM EST USA TIME

Yesterdays update suggested resistance at 16.60 - 16.75 and the high of the day came in at 16.72.  From a support standpoint our old resistance of 16.10-16.40 became short term support and the low was at 16.42.  The question remains as to whether we saw some type of early winter low when we hit below 15 a few weeks ago.  It seems an early date for a low and a meaningful bottom for the year.

As for the chart below we are now using April gold instead of February.  On the chart below,  we can see the test of 16.75 that occurred and the subsequent pullback.  I still think the pattern looks questionable as to how long it can sustain price in an uptrend.  But, a move above the highs of Monday should lead to tests of the 17.60 area.

Resistance is 16.75 to 17.10 and support is the 16.16-16.30 intraday and 15.90-16.20 should it be required.

What next ?  If silver can over come the 16.80 area,  higher price should ensue.  

Bottom line:

The odds seem to favor the bulls to a higher price on Tuesday but the 16.75-16.83 should prove significant as to the actual turn point.  Support is 15.89-16.10.

Odds are still with silver to push higher,  BUT IT MUST GET above 16.75-17.10.  That's the area to watch on Tuesday.

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Silver Monday MAR 1st,  12:01 AM EST USA TIME

The mid month pullback in silver was short and shallow.  Silver declined from the 22nd of Feb for about 5 days and then reversed its trend back to short term up on Thursday and Friday.  The rally off the lows however has been strong and silver finally LED the way Friday. As noted on our daily email update this is usually a short term bullish development.   We can see on the 10 minute chart that Silver is virtually unchanged from February 22nd.  More important is the challenge of the highs here that is taking place.  To allow for overthrow, moves above 16.68 - 16.75 would suggest a test of the 17.10 - 17.50 area for the coming week.  So this weeks first KEY area is right here as we enter Monday.  So far the rally is intact, and we do have a double bottom at 15.60 from last week.   If your long the market from the lows that have been established at 14.40 area,  we see this 15.60 area as key and swing trader STOPS could be raised now from 14.40 to 15.40.  Any move below that area would suggest lower prices.   However, this should only be a concern if silver turns down from here (16.60-16.75). 

Let's take a look at the daily chart.

 Most important is the fact that silver coming into this week is above the CHANNEL LINE.   THIS IS THE AREA TO WATCH .....the 16.00 area.  AS LONG AS SILVER IS ABOVE 16.10-16.40,  the potential for silver to rally this week to 16.75-17.10 and even higher cannot be dismissed.  A failure here and subsequent close below 15.40 would portend lower prices.  For now let us stay focused on the current action (battle) at this key area.  While price is above the channel line at the moment, we can see that the moving averages lie directly above from where price is.   Regardless, if silver can hold this channel line upper level resistance testing would be next on the agenda.   The bottom line on the daily chart that silver's re-entry into the channel is an important development. MOST important is what it does this week.  Let's scroll down and look at the weekly chart.

'On the weekly chart below we can see the important oversold condition that existed at the lows and that the Williams oscillator has come out of a deeply oversold condition for only the third time since the 2008 lows.  The moving averages also show some important points.  NOTICE HOW THE spot low at 14.68 touched the LONG TERM GREEN SLOW and a significant bounce is under way.  Last weeks bar action on this chart shows  a bullish hammer as the lat bar on the chart.  On the other hand we really need to get back above the blue moving average.   The red and green moving averages are key to the downside as they have provided guidance  throughout the bull run from the lows in November 2008.  We also see the key medium term red average and how price supported this line at the lows of the last two weeks.  

What next ?

This week favors a range from 15.89 to the 17.19 area where the blue moving average resides.  The 50 and 200 day moving averages in silver are also located in this price range.  The 200 day average at the 16.12 area might be decent support.  We would view INITIAL SUPPORT THIS WEEK TO BE THE 15.89 - 16.12 area in silver followed by 15.50.

Cycles suggest strength at the beginning of the week more so than at the end. 

Bottom line:  Above 16.40 is bullish and below 15.40-15.50 bearish.  As long as we are above 15.89-16.00, the odds FAVOR the bulls this week.  SHOULD silver drop back out of the channel, it would revert to the bear side favored.  Swing traders who bought at the lows might want to consider moving stops up to the 15.40 area. 

There are indications on the chart that a potential low has developed, but we must remained on alert as the seasonal tendencies usually stretch out into the spring.  Lets see what develops this week and how the expected range of 15.89 and 17.19 play out.  ON MONDAY --  16.60-16.75 should be the key resistance area and 16.10 should be initial support.

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Silver Thursday Feb 25 9:00 PM EST USA TIME

Coming into Thursday, both sides of the equation were still open, but we have been favoring the downside. We got our mid month peak and silver returned below the 16.00 AREA.  I mentioned however that it would take a break of 15.50 to set the downtrend in motion.

SILVER has been on the ropes all week going back and forth at the key 16.00 area.

 All markets were down hard in the morning in the USA from oil, grains, metals and stocks.  By 11am EST STD USA time the metals we're dislodging themselves from other entities and staged a total comeback.

In an incredible display today silver dropped all the way to the 15.60 area but was able to reverse its trend back up in the face of a 150 point USA stock market drop.   

 Lets take a look at the chart and put it in context.

The hourly chart shows the vicious battle at the most important price of silver...the $16.00 area.  There is a triple convergence of short term channels, moving averages and price .........AT EXACTLY the 16 dollar area.  (I'm using the Silver ETF tonight and it usually trades about 25 cents lower than spot silver.)  Today's action shows a drop from a short term channel (Red fat lines) but a late day rally back to the trend line convergence at 16 dollars.

What next ?

The pattern from the low can be construed as BULLISH.  While in the larger context of the chart it can be categorized as a bounce from an oversold condition the message in the short term is the same.........the potential to rally further has NOT been eliminated from the mix.  In order to do so silver MUST FAIL HERE AT THESE LINES OF CONVERGENCE. If it can overcome, the potential to rally back up to the upper orange channel line at 18.25 will become a viable scenario.  On the flip side, a failure and penetration of the February lows would suggests the 13.25 area for silver as a potential. So its a very important point where the next trend should launch from.

We can see in context of the drop from December, that the bounce (or new rally) is still a long way from where silver was trading just a few short months ago. So while price has covered a good distance it's not as big when viewed on the chart. Tonight we stand at the same place the 16 dollar area.  Rather than flip flop I'm bullish, I'm bearish, I'm bullish.... we will wait for resistance to be taken out.  The fact that silver was able to break a full $1.40 away from the main support area of 16.00 and come bouncing back means we can expect anything from silver.  The FACT THAT 3-4 banks hold the majority of the silver shorts might have something to do with such unusual behavior.  They are in trouble and MUST cover shorts.  By breaking the market it allowed them to remove some of those positions.  But the problem is there are just too many buyers at this moment...or so it seems.

The bears it would seem have their chance to put away silver but they weren't able to do it again.  Buyers keep showing up. 

The odds keep tilting from bullish to bearish and back again.  By using the price range and the trend lines our stance has not changed once yet.  It has remained in bearish mode.  Now there is usually only so much time that will transpire and so many tests of resistance that silver or any commodity for that matter will take before it gives way to higher price.  It doesn't matter what WE THINK.........price is reality.  If silvers should turn here and close above 16.40-16.55, we have to honor the short term trend reverting back to bullish.  Key support is the 15.50 area. 

And now we are moving into Turnaround Friday, where the metals have always made a comeback. Resistance is now the 16.40 - 16.75 area.  Moving above the 16.40-16.55 in silver will reverse the short term trend back to a bullish mode. 

Bottom line

It comes down to what silver is going to do at this key area.  Seasonal favor lower to month end.........but for all practical purposes............there are only 3 days left in February.  March is not usually good month for the metals, but certainly a beginning of month rally could still transpire regardless of how the month ends.

For Friday.............it can go either way ---- if we break above the convergence of channel lines, the odds will favor higher.  If silver fails to so do...........then the potential to come back down would be in play. 

Silver Tuesday Feb 23 9:00 PM EST USA TIME

Once again silver avoided a close above 16.40 leaving the short and medium term is bearish mode.  Let's go right to it tonight. 

Last night we discussed decision time for silver and so far it has responded with a down tick.  A zoom in shows the downtrend aqua channel that has now arrived at the key 16 dollar area.  We can see that the February plunge was a break of this channel and the bounce back in price is trying to re-enter the channel.  Notice how low price has been trying to re-enter this key area.  Of similar importance look at all the price spike's down into this current price zone of 15.68-15.88. 

Pattern-  The pattern remains choppy and overlapping.  This usually favors the MAIN trend remains down.

Resistance - The downtrend line at 16.10 is the most important price area in all of silver.  Its where the bear and bull tectonic plate resides.  16.10-16.40 is the area the bulls must overcome.  Additional resistance is the Feb high at the 16.75 area and the green and red moving averages at 16.92 - 17.17.  SILVER MUST GET ABOVE THE LOWER AQUA channel line or face a price retreat.

Support -  We're at it short term.  There is not much to hang a hat on under 15.50 until the lows of February.  Thus support lies at 15.50-15.80.  Any break of that area increases the odds to the downside going into month end.

Cycles - The potential for a mid month peak has grown significantly.  We can see that price is trying to hold the fast yellow and tiny purple short term moving averages.  So far -- the mid month top is still in play as the Monday morning pop at the 16.50 area was the only hour silver spent above 16.40. 

Lets look at the daily chart below:

Price is trying to stay in the channel. Today's drop takes it back out.  From a daily perspective the next major support area is the low of February near 14.50 and then the 12.50-13.25 area......and that's a long way from here.  As we've seen with silver, there is nothing to say that it cannot hold here and STORM right back up either. 

Since the break of February 3rd, the short medium term trends have been in bearish mode.  The rally up to 16.40 came very close of neutralizing the short term trend.  From a medium term perspective, the trend has recently come out of bullish mode on that same date.  As you've probably read in other periodicals --- opinions vary......and in some cases often change as to the current direction.  Those who believe that the system we live in is about to collapse have their view on the long trend and I am no position to argue it.  There are storm clouds brewing -- to that there is no doubt.   

When price arrives at such a point it is not uncommon for a price battle and a back and forth to transpire.  The current price pattern on a daily basis must return into the channel with conviction in order to re-establish trend.

What next ?

The weight of the evidence favors the downside as long as silver doesn't close above 16.40-16.50.  Even then, it is not a magical number that guarantees the resumption of the bull market.  A far look to the left shows that silver is trading unchanged since March 2008, almost 24 months ago.  So it is only right that the MEDIUM TERM trend be considered bullish.  ONLY the long term trend right now is bullish.  Both the SHORT AND MEDIUM TERM TREND is bearish below this key AREA in silver. 

For Wednesday, silver will be fighting for it's short term life again. Getting above 16.10 and the channel is paramount to the short term trend.  Getting above 16.40-16.50 would at least neutralize the short term bear. 

In summary -- it is not as important tomorrow what silver does as to how important it is to realize that silver continues to lag in a big way on the medium and to some extent, the long term. 

For Wednesday, the 15.50-15.80 seems to be important support to hold on the daily charts.  Resistance is 16.10-16.40. 

Bottom line:  Barring bounces the trends are still pointing lower.  Odds favor sideways to lower into month end when cycles are taken into consideration. It is never easy to read that the US MINT is out of silver coins again and price is at a 2 year unchanged price.  IT BEGS the question.............  IS SILVER REALLY TOTALLY MANIPULATED to the extent it seems. 

WITH currency crisis, debt crisis and PEAK EVERYTHING ........... it is uncomfortable and difficult to have a bearish rating. But it is an unbiased rating as PRICE is the only consideration.  Should silver close above 16.40-16.50 it will be time to re-evaluate the short term trend. 

Watch 16.10 ---- and the channel line.

================

Silver Monday Feb 22 9:30 PM EST USA TIME

Silver avoided closing above 16.41-16.50 on Monday.  The high on spot was 16.55 and the low 16.10.  For the majority of the day we traded in our resistance range from last night 16.10-16.40.  Silver continues to leave either side open.

The daily chart shows that Silver is poised right on the 16.00 resistance line.  We can see the break that happened at 16 that carried all the way down to 14.50ish area.  But silver reversed and has re-entered the area above 16.00.  We're in a battle with the bulls and the bears.  Cycles point down but technical conditions seem bullish.  As always we will go with price as the most important.  Should silver close above 16.40 the next resistance will be the 17.10-17.50 area.

What next ?

Looks like decision time is upon silver........if 16.55 is exceeded look for 17.10-17.50.  As long as silver keeps closing below 16.40-16.50.

Bottom line:  can go either way.  We need to wait to see which way it goes.

=============

Silver Sunday Feb 21 8:00 PM EST USA TIME

There can be no denying that silver has made a comeback that that thus far did not have the technical odds in favor of such.  Silver has returned to a key resistance of 16.40 closing just 11 cents below it on Friday but touching that area intraday on Friday.  The comeback in the metals twice from key sell offs last week was an impressive display. 

For this weekend edition lets look at the weekly chart.

We've been targeting the 16.10-16.40 area and as you can see the 200 day average is just below 16 dollars.   We can see the June high and the Oct/Nov lows at the 16.00 area also.  There is certainly a lot of technical evidence on the chart that favors the rally to continue.  RSI, MACK, and William's are all flashing buy signals.  While we always look at price as the key determining factor, technical conditions can be a good coincidental indication and helpful confirmation.  When we look at Williams it is only the 3rd buy signal in three years and only the second where Williams, MACD, and RSI EACH turn together. 

Resistance is the 16.60 to 16.75 area now and the 17.00 - 17.35 area for the coming week.  Making the analysis difficult is that cycles call for a high here and a pullback into the March timeframe.  This at a time when silver's price is right at a key resistance area opens the potential that we are at the highs and are about turn down.  On the other side of the spectrum was the ability of the precious metals to come back from repeated pressure last week.

Technically the price action last week and the position of the technical indicators have to favor the bullish side short term if we close above 16.40-16.50.  The worry would be a bull trap where prices rise for another day or so just enough to generate buy signals and then we get a pullback.  The overlapping price structure also leaves me cautious.

Support is now the 15.10-15.58 area.  As long as price is above that area the short term remains in an uptrend bounce.

Bottom line for Monday

The technical action is bullish short term on the indicators, but I want to see price action on Monday close above 16.40-16.50. 

=============

Silver Thursday Feb 18 8:20 AM EST USA TIME

There is no change to the update.  The trends remain bearish.  Silver again tested key resistance at 16.10-16.40 coming in at 16.26 today.  THE AQUA downtrend line and the 16.00 area are in a battle confirming the significance of this area.  Silver has 4 SPIKES lower that all got reversed higher during this rally.  Now it's at the key area.  Can silver overcome and move higher --- or does it now break down towards 13.60 ? 

KEY SUPPORT is just below the three spikes near 15.10 and the Feb 5th low.  Above that ---as long as silver remains above the moving average (yellow) (allow 10-15 cents penetration) there will still be a chance of recovery. Watch the 15.38-15.64 area as initial support.  Watch what it does at or near the yellow moving average price.  A break much below that would put up the red flags.  

Bottom line:  Trend remains bearish until we take out 16.40 area. Above the yellow moving average and silver is still alive,  below it becomes dicey. A good sized move could be in store for silver.

================

Silver Thursday Feb 18 8:20 AM EST USA TIME

There is no change to the silver status.  The Short and medium term remain bearish until we can move above 16.40.  The sell off from Wednesday occurred at our resistance of 16.10 to 16.40 as the peak was 16.32.  From there the market has sold off to the 15.80 area.  Support lies at 15.10-15.58. 

Bottom line: Until silver can move above 16.40 -- odds favor lower.   Resistance on Thursday is 16.10-16.40.

==============

Silver Wednesday Feb 17th 2010 1:00 AM EST USA TIME

Our bottom line from the last update:

BOTTOM LINE:

"Watch the Blue trend line --- the GAP and the GANN 3X1.  PRICE is building into a WEDGE above with the RED GANN line the uptrend and the BLUE trend line the RESISTANCE.  A move above the 4X1 GANN suggests the GAP gets filled and a rally to the 3X1 towards 16.40 would be next.  Notice how we are staying at the line now for the last 4 hours. The longer there the better the chance of moving higher.  I will be surprised if we don't fill the gap. A pullback to the fast yellow is possible but I think the odds favor a move to fill the gap or half of it."

Because I had a major hard drive failure I can't reproduce the chart but since 16.40 was mentioned we know the vicinity. Silver rallied 63 cents today and reached the 16.24 area. Let's go right to the chart.

I've drawn the MAJOR horizontal line at 16.09 on silver and as you can see Silver is attempting to climb back above this area.  We can see that tiny blue and purple moving average is back above fast yellow and after three MAJOR REVERSALS at the 15.00-15.20 area late last week, silver exploded back up today reaching the SLOW RED short term moving average. 

There was some back pedaling going on over this last weekend at different websites and this is the reason I always say what really matters is what price does after a channel penetration.  And sometimes the flush outs are huge.  In silver a few weeks back I mentioned that I had liquidated positions at the 16.30 area expected a potential break.  The drop was all the way to the 14.60 area before it stopped and was WELL below the channel.  Coming into tonight, silver is knocking on the door and has re-entered the 16.00 area channel as is only about 20 cents from my exit.  Now I have to figure out if I re-enter or not....and that's never easy.  There will be times when channels will be penetrated and price will drop.....as it the case of silver it was almost two dollars.  But price reversed and has come back. It is just something we have to live with in trading.  It's not going to play out each and every time.  A lot of times, yes, but not all.  But the most important point is NOT WAITING until silver is under 15 to go short or liquidating and then not having a stop loss in the expectation that all will play out.  Quite frankly the silver chart still looked bearish coming into today.  The key now for SILVER and for gold to some extent is does the rally have room for higher prices?

On the daily chart silver has reached a key area as it attempts to re-enter the channel line.  The gap has been filled on this chart and now the question is does silver re-enter.  While it is very possible we've seen a major low I am not ready to join that camp yet. the 16.10-16.40 is a key spot but also is the 17.10-17.50 area.  After a five dollar drop silver has all the right to bounce back up.  Here is its most important test though.  If silver can push thru 16.50, the short term trend will revert back to bullish.  One look at the chart shows that this is a VERY hard pattern to make money in.  IN fact the only way has been to either BUY or SELL the 16 dollar area.

What next ?

Its up to silver here.  There's a short term top due and price is right at the channel.  The key to whether silver rallies to the end of the month or goes lower is probably going to be decided at 16.  Odds favor some consolidation slightly above or below the 16 area on Wednesday.   Support 15.40-15.80 and Resistance at 16.20-16.40.

Bottom line: Until silver can climb back into the channel --- the TREND is not up.  So its certainly a key area.

Silver Friday Feb 12 2010 12:01 AM EST USA TIME

Our daily update in gold favored the upside but in Silver the pattern (as it has been for quite a while) is just not as bullish looking.  We did discuss that silver would Testing the key resistance areas.  We gave 15.65-15.89 as the area to watch for the test.  The high today was 15.74 pretty much in the middle of the range.  Silver is testing the 15.65 area in the far east session as we are right at one of our first key resistance areas, the BLUE downtrend line.

We can see the big gap down on the 5th of Feb where price opened just before it and collapsed into last weeks low. Coming into this week we were looking for a bounce to this area and today we reached it and are now testing that area.  Price has moved above 3 of our 5 averages but the drop in silver lately was so severe that even after a one plus dollar rally off of the low, we still remain quite a way from the green and red averages.  So far the rally is actually overlapping and almost sideways which is usually not a bullish condition.  We can see that the lower 3X1 Gann line has provided exact support thus far.  Coming into this morning things still looked pretty weak until the announcement came that Greece would be bailed out and commodities took off on the news.  It seems counter that the metals plunge every time that someone yells default.  But we can look at it this way. If a default is allowed it signals to the markets that the Governments will allow a credit contraction and that is bearish for everything except CASH MONEY.  Every time they signal a bailout they are indicating the printing press will keep running and therefore the metals respond correctly.

What next ?

Were it not for the gap that is on the chart I would be in favor of Silver turning down from here.  Gaps are made to be filled.  The one's that remain open are usually very bearish.  Look at the upper left top of the chart. An unfilled gap is there tight at our BLUE dotted line.  Look at the sell off.  Now look at the rest of the chart gaps.  All of them were filled.  In other words price came back and traded at the gap area a few days or week after in a technical term called "filling the gap."  The most recent was the gap of Jan 28 and it was filled a few trading days later. So the potential for price to "fill the gap" is one that the odds do favor.  The only exception is if price breaks down hard from there. 

Sometimes the gap is only "half" filled and price turns down.  When we factor in the downtrend line, the Gann 4X1 line shows the 15.89 to 16.00 area as resistance on Friday.  If Silver were to get a "normal" bounce back up then we should expect a rally to the 17 to 17.30 area.  Even though that seems far away we again remind you of how steep the drop was. 

Support for Friday is the 3X1Gann line and the two dips we saw this week at the 14.96-15.22 area.  Additional is the 15.32 to 15.50 area. 

Resistance is the 15.89 to 16.02 area followed by the 16.40 - 16.60 zone.  Was it just a squeeze today or is the bounce to continue.  When we look at price retracement and time factors odds favor a rally to continue.  The ONLY way we peak here is if there is one more leg to the downside before completion of this wave down.  There isn't much help with the cycles either as they could produce a high or a low at months end.  With that said the odds favor an end of month low. MANY ANALYSTS are looking for that too.  The fact that the cycles allow for a Feb end of month high cannot be discounted. 

BOTTOM LINE:

Watch the Blue trend line --- the GAP and the GANN 3X1.  PRICE is building into a WEDGE above with the RED GANN line the uptrend and the BLUE trend line the RESISTANCE.  A move above the 4X1 GANN suggests the GAP gets filled and a rally to the 3X1 towards 16.40 would be next. 

Notice how we are staying at the line now for the last 4 hours. The longer there the better the chance of moving higher.

I will be surprised if we don't fill the gap. A pullback to the fast yellow is possible but I think the odds favor a move to fill the gap or half of it.  IF PRICE turns down from there and closes below the BLUE TREND LINE it would send a strong signal that the SHORT TERM TREND could turn lower into next week.   Tomorrow could indeed be tricky and the variables are many. 

THE ODDS REALLY ARE NEUTRAL.  Silver has come to a  halt --- look at it sitting on the top of the line.  It either breaks down here or it fills the gap.........or BOTH.  We just have to watch.  Anything else would be a guess,  not an odd.  So lets see if silver holds its muster.

=======================================

Silver February 11 2010 12:05 PM EST USA TIME

There is noting new to report today in Silver.  Price did break down right to our support area at 15.10 and like Gold had a nice bounce back.  Thursday will be testing the key resistance areas we outlined below.  Support and resistance remains the same. 

Bottom line:  LOOK for SILVER TO TEST the key resistance areas on Thursday.  A move above and silver could pursue the 16 dollar area.  Remain cautious as seasonal weakness time frames like this MUST be kept in perspective.  Let's see if Gold and Silver both can overcome the areas mentioned.

Watch the 15.65 to 15.89 area.....where the first key resistance test is. On the downside 14.88 - 15.10 is first level support 

=========================

Silver February 9 2010 10 PM EST USA TIME

While at lot is said about the removal of the gold standard it's easy to forget how long ago silver was removed from coinage.  To give you an idea, it was 46 years ago today that the baby boom generation sat in front of their television sets and became of age as the Beatles performed on the Ed Sullivan show for the very first time performing 4 songs that would go on to change the world as we know it today.  Indeed just as JFK had pronounced that the torch had been passed to a new generation in his inaugural speech and just 11 weeks from his assassination the Beatles marked the point where the "young generation" became in vogue.  Up until then it was middle aged actors and performers who ruled the airwaves.  It was really never the same after that night.  The lowest amount of crime ever reported for a one hour period was that specific hour where the fabs made their appearance.  From that night forward the "old" was out and the "new" was in.  Meanwhile in the background it was during that year that SILVER dimes and quarter had their final pressings with Silver.  By 1965 the first modern monetary debasement of USA coins had their beginnings.  It came at a time of the USA's last war (Vietnam) and the signing of the largest welfare programs (especially housing - HUD) were signed into law as well. 

When we flash 46 years forward to now.............not much has changed.  The United States is in the largest monetary debasement program and housing welfare programs since then.  We  upped the ante and have two wars instead of one and the Beatles.............well as hard as it is to believe they were re-introduced in Virtual state with the creation of the video game "rock band" series and for a brief few weeks (due to the release) a few of their albums made it to the top of the charts.  Indeed if we are at the same time in monetary history then the odds favor the coming of a massive wave of inflation.

-------------------------

The bounce in silver forecasted on Monday continues.  Lets take a look at the chart. 

Because of the huge declines, all moving averages remain in a downtrend.  We can see that price on Monday hugged the tiny blue average all day and on Tuesday price advanced above Tiny Purple.

The key is going to be the blue horizontal line, fast yellow moving average and the black downtrend line from a short term perspective.  On Wednesday we'll be watching these areas and keeping an eye whether tiny blue can move above tiny purple and fast yellow.  This is usually the place that short term trend changes take hold or fail.  Notice the action on Feb 2nd.  Here we can see that tiny blue moved above fast yellow, but tiny purple did not quite make it.  The subsequent sell-off speaks for itself. 

The question on everyone's mind of course is what type of bottom was made last Friday (just two trading days ago.)  Is it just a bounce bottom or is there more to come.  Probably the most difficult analysis now is whether silver peaks this week and begins another month end pullback like we've seen over and over again during this bull market.

SUPPORT is the 14.95 - 15.15 area.  If this is the bottom a pullback there would provide opportunity for a potential trade with a stop below last Friday's action.  Additional support might be at 15.30 where tiny blue and purple moving averages will meet during the Wednesday session.  

RESISTANCE is the 15.70 to 15.85 area where the blue horizontal line ad fast Yellow moving average meet.  More importantly the black downtrend line at the 16.00 area is a MARKET known downtrend line and we would suspect that if price moves and supports above fast yellow,  then the market will take silver ABOVE that downtrend line just enough to clean out any short positions from that area.  Thus 16.18 - 16.40 zone is also a key spot where this bounce could run into trouble.  From a cycle standpoint we have just about arrived at the one month anniversary of the Silver's high at the 18.83 area on the 11th although there was a subsequent double top at the same price on the 18th which proved to be the kiss of death in this sell-off.  Therefore we are nearing the timeframe for a mid month peak. The damage done to the longer term charts and the breach of key channels is what keeps us suspect.  To add to the difficulty of course was the KEY reversal day we saw last week at the height of the Greek debt crisis.  Today's media spin was to announce that the EU would remedy the situation and this gave the markets a key reason to react to the upside.  To be clear, the new DEBT situation is at its beginning and is NO WAY about to be remedied.  The growing list of sovereign bankruptcy is growing in numbers and fast.  The situation prompted a secret meeting over the weekend by bankers. I'm sure it wasn't to just watch the super bowl.

 Lets look at the longer term action to get a bead of the action.  Scroll down.

As we can see by the DAILY chart of Silver, the potential that a FLUSH OUT LOW has occurred is a distinct possibility.  Look at the FRIDAY bar low and that long tail and reversal day that occurred.  We can see that this low occurred right in the price vicinity of the mid month August high and we've drawn a horizontal line to mark that area.  To think that Silver touched prices as low as mid 2008 certainly goes down as quite the flush out.  The velocity of the downtrend since mid January is certainly a bearish factor that has left price way below our moving averages.  And as you can see the moving averages have CROSSED and this technical action has added to the bearish case. 

The TEST if you will for silver is the area I've highlighted at the 15.60 -16.40 area.  This is where he down trend line and the LOWER UPTREND line meet.  In fact today's rally in silver shows that silver is knocking on the door of that uptrend line that has been broken.  This is certainly a dynamic area as the past has shown.  In September when price first launched higher Silver had a gap in price right about where price is tonight.  You can see the gap as it is just above the dotted blue trend line in early September.  So this is really a KEY AREA FOR THE MEDIUM TERM trend.  A MOVE back into this CHANNEL WOULD PUT SILVER BACK IN ITS UP TRENDING status.  Any move above the 16.40 area would take a lot of pressure off of silver.  THE OTHER AREA we've mentioned is the horizontal red line at the 17 dollar area.  This line is what stopped the last rally cold in its tracks and was an area that faked me out on February 3rd due to my expectation of a beginning of the month rally.  The failure of that line however had us revert back to a bearish posture when we breached 16.40 and 15.90 on our way back down and prompted my report on silver's most important price last week. (click on Medium term Button to review). 

What Next ?

Odds favor that silver should encounter resistance near this area 15.55-15.89 and or the 16.10 - 16.40 area.

Silver dropped almost 5 dollars per ounce since December and 4 dollars in the last month. 

Unless this is an all out crash we would think that silver has completed a major pullback.  

The action that transpires at this key area that silver is at will help answer the question of its medium term trend. 

Watch the action closely at this key area.

BOTTOM LINE:

Odds favor that silver should encounter resistance at this area in the 15.60-15.89 area.  Should silver take this area out the 16.10-16.40 area would be the next key resistance.  ODDS favor one of these two areas will provide the highs for this week and potentially this bounce.  The expectation that silver at least consolidates at a key channel area is high.  However we must keep the action that occurred in September (big gap up in price) in mind as this is a dynamic price area.  That is why the potential to move to 16.10-16.40 is another option.

The forces of expected hyper-inflation on the long term and the potential for sovereign debt defaults in the shorter term has produced a wild ride in silver. 

FUNDAMENTALLY --- Steven Leeb pointed out in a recent interview that the industrial uses and precious metal quality of silver has usage OUTSTRIPPING supply by a wide margin.   So while this debt and economic contraction has put a lot of pressure on silver its longer term outlook still remains sound.  

A potential price peak here at mid week resistance and a pullback to the tiny moving averages and support is the odds favorite for Wednesday.  Should silver support at the tiny averages in the 15.20 - 15.35 area, it would keep the bounce alive and allow for silver to push back towards the challenge at the blue uptrend line.  A break of the averages will have silver pursuing the 14.90 - 15.10 area.  This price area is short term decision time for silver.

================================

Silver February 8 2010 2 AM EST USA TIME

Since the silver medium term update on Wednesday evening Silver plunged from 16.30 to as low as the 14.70 area before a bounce occurred late Friday to lift silver back above 15.  The rally left silver with a reversal day bar on the daily chart but there is no doubt to the technical damage that has been bought on to silver.  In fact COPPER and SILVER prices have plunged as the economic recovery is coming more and more into question.  While there is potential for a silver bounce, the daily chart below shows this area is a minor support area at best.  Friday's price stopped at the same area as the mid AUGUST highs. It's hard to believe but Silver is trading at the same area as last August.  Another interesting aspect of the chart is how close the current sell off in price began at just about the same area as the crash of 2008 and how price is in a freefall of the same manner. 

The fact that we did rally late Friday does open the potential for a bounce back up the trend lines where the breakdown occurred last week.  While it is not impossible for silver to bottom here as it is a wild swinger, the breakdown does look technically damaging to say the least.  Both the short and medium term are now bearish and the potential for silver to move towards the 13 dollar area cannot be dismissed. 

Bullish perspective ?

The reversal day on Friday with massive volume as well as the oversold condition of silver does allow for a bounce.  Cycles could also lend a hand in this area.  BUT UNLESS silver makes a beeline back above the trend lines above price, the odds favor that silver could indeed move lower here. Minor Support is 14.60 to 14.88 area and the end of August lows at the 13.50-13.60 area.  As long as price is below the 16.30 area, the medium term trend in silver is down.

I find it interesting that hearings are coming up on position limits in the metals.  The fact that the 4 banks account for the majority of the shorts leads me to suspect how coincidental this drop is.  Ted Butler reported that the short covering that has occurred is equivalent to 100 million ounces of silver......a substantial drop.

The bullish potential lies in the fact that there is NEWS THAT THE EUROPEANS WILL SUPPORT a GREEK bailout and that might lead to a short term PUSH.

WILD CARD ???   The IRANIAN HOSTAGE CRISIS IS NEARING it's anniversary on the 11th and there is a lot of talk the Iranian leader "marking" that anniversary.  With the USA having sold 6 billion dollars of weapons to Taiwan recently and the Chinese fuming over the issue......might they be pushing some Iranian buttons behind the scenes?  We should know soon. 

What next ?

The chart below gives a look at the potential support area in Silver and should this area hold, silver could move back up to test the upper 15 to low 16 dollar area.  A bounce attempt is underway in Monday's trading.  Resistance will be the 15.75 - 16.30 area.  We believe Monday is also a watch day in silver. 

Bottom line:  While a bounce can develop from here, the trend remains down in silver. 

=============

Silver February 4 2010 11:20 PM EST USA TIME

In all market sell offs there is what is known as a point of recognition where there is something wrong.  As it gets closer to D-Day (down day) there are more and more participants who transition from a comfortable position to one of selling.  The culmination is when news that hits the airwaves is considered "bad" news.  That's when everyone is in the theater with every seat taken watching "Avatar" with their 3-D glasses on and someone yells the word...."FIRE."  Some are close to the exits but others are in the lavatory. Pandemonium breaks out and the rush is on to get out. There are always a few who happened to be at the concession stand who make it out unscathed.  There are few who for one reason or another decided to either not pay the ticket price or for one reason or another did not attend.  Finally there are a few who just before the "fire" call was made that thought they could smell smoke and decided to exit the theater. 

The market can be that way. There are some who get up at five am and get all their news while there are others who don't get to the news until they get home after "a hard days night" (for you Beatles fans).  The former sells on the open and the latter sells on the open.........of the next morning.

While there can be tragedy once in a while, there are many times that someone yelled "fire" but were either mistaken or they were looking for a better seat.  The point of the last sentence is that sometimes one exits the market only to find he was the last one out the exit door but most stayed in the theater and kept watching the film.  Come to find out, the "fire" word was part of the Audio clip in the movie. 

Whether or not today was a low or not there were a lot of people exiting the theater.

Let's look at where silver ended:  We can see the 16 dollar line that was discussed in last nights Essay that email readers where sent as soon as it was completed.  If you haven't read the article (click on the Medium term button and read)

What next?

The metals markets were delivered a blow today and as we can see by the chart below the main 2009 silver channel was pierced on the downside.  I have always said it doesn't matter as much whether a channel is penetrated as much as what price does after it has been penetrated.  If it comes back and holds and re-enters the channel it becomes a major flush out low and price begins another up leg.  On the other hand, if it's a genuine break, price usually finds its way to the next key support areas.

Support on a medium term basis is the 12.90 - 13.50 area followed by 11.50 - 11.70 area.

Resistance is the 15.80 - 16.00 area where the lower blue line and the tiny blue average is.  This if followed by the 16.30 to 16.50 area and the KEY RED horizontal line at 16.80 - 17.00 area and then the red and green moving averages at 17.50.

What next ?

Tomorrow could be a rally back up towards first resistance but it could also be a continuation of the down trend if silver is indeed in a mini crash scenario.  It's not one that can be called with any accuracy.  We know which way the trend is and we have to see if we get follow through. 

Bottom line:  As long as silver is below the blue channel line on the chart below, price will be under pressure.  Let's see what silver does.  On the upside, silver needs to get back above the 16 dollar area to remove the downside pressure.  On the downside we've listed the potential support areas above. Let's see if silver can regain it's footing tomorrow or if it has more room on the downside.

============================

Silver February 4 2010 ----  2 AM  EST USA TIME 

Notice how silver rallied a full dollar almost and reversed back down.  The MOVING AVERAGES are all bunching up just like they did at the top of this chart.  There might be a few fake breaks from these averages, but when it does move the next leg should begin.   Cycles favor the upside, but PRICE RULES.   We have to respect it.

The potential for silver to DROP was fully laid out in our MEDIUM TERM BUTTON TODAY.  Please read it if you have not.

What Next ?

Recall we said that the KEY would be to GET ABOVE THE RED HORIZONTAL LINE ?  Look where silver peaked (see chart below).  RIGHT THERE.  Now it has turned back down pretty strong and there is danger that we are heading lower towards the bottom blue channel line again.   That blue line is pointing to the 15.70 area and is dropping each day.  What I don't like is how STEEP THE DOWNTREND HAS BEEN and the long term report we finished (Medium term button) is warning of potential weakness. 

Traders who took positions this week (like myself) should TIGHTEN THEIR STOPS NOW while its STILL a breakeven trade.............or risk the potential to move lower.  For me,  I would rather stand aside and wait until there is less risk. For you, it might be different.  There were a lot of profits made since September and while we could indeed rally into next week, I tend to err on the side of protection.  Thus, for my own account I have gone back to a flat position at the 16.30 area and wait for a better opportunity.  One can almost make a case for SHORTING SILVER, never mind going long it.  This chart does not look BULLISH ONE BIT.  That FAILURE AT THE RED HORIZONTAL LINE (chart below) and severe drop back down so fast is not usually a harbinger of strength.  At this time of the year when seasonal weakness can appear, I choose to err on the conservative side. 

Support is now the 15.50 - 15.75 area and minor support at last weeks lows.  Resistance is the HORIZONTAL RED LINE at the 16.80 area as well as the 17.50 area where the moving averages are.  Price remains below all key averages.

BOTTOM LINE:  Silver is NO LONGER MEDIUM TERM BULLISH below the 16.40-16.50 area and could turn OUTRIGHT BEARISH if we get another LEG DOWN.  The short term trend has the same category.

SILVER MUST MOVE ABOVE THE RED HORIZONTAL LINE AND CLOSE ABOVE that area to restore any type of uptrend.  

===============

Silver February 3 2010 2 AM EST USA TIME

We were looking for a consolidation day on Tuesday and as you can see by the chart that is exactly what we got.  We gave resistance at 16.66 and 16.85 - 17.90.   The high was 16.78.  Tuesday's mention of how important the RED horizontal line was is also evident as silver has spent almost 36 hours consolidating just below it.  This line is where THE MEDIUM TERM PIVOT IS so its a key area.   The good news is that the FAST yellow moving average might be providing support.  Tiny Blue is above Tiny Purple and IS CLOSE to exceeded fast yellow.  Thus far these are all bullish developments.  Now we want to see silver push above Red horizontal next.  Resistance is the 17.10 area and the red and green moving averages at 17.50 - 17.75.  SUPPORT is the 16.30-16.60 area.

What next ?

The pattern thus far looks bullish and we think that once we exceed the Red line a push to either 17.10-17.30 or more likely the red and green moving averages would be the next target.

Bottom line:  Barring a pullback to support........the short term trend is bullish and odds favor higher.

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Silver February 2 2010 1 AM EST USA TIME

In over the last few days we introduced the BUY ZONE button as a new feature and listed silver as our first chart in that category.  We suggested that the 16 dollar area was a buy zone that should be considered for either a small position in long term accumulation or for a short term trade.  Because price was below all the moving averages the short term trend came into the week still in bearish mode but today's rally has neutralized the downtrend and has opened up the potential for a rally towards the 17 dollar area.

On the 60 minute chart of March Silver we can see where the black arrow shows how silver just touched the lower blue downtrend line and after a pullback that failed to make a new low on Friday silver catapulted higher once price exceeded the tiny blue moving average and has now rallied the green moving average.  You can see how price has been trying to move above it over the last 6 hours as it has become the first resistance in this rally. 

What next ? 

We want to see the tiny blue moving average move above tiny pink and we'd want to see any pullback in silver hold the 16.20-16.37 area.  This would give us a mini reverse head and shoulder and would increase the odds that silver also is going to rally towards mid-month.  IMPORTANT to the upside would be for silver to move above the RED horizontal line that's just above the green moving average at the 16.80ish area and move towards the yellow, red and blue averages.

MAJOR support is the lower blue downtrend line in the 15.70 - 15.80 area followed by initial support at the 16.20-16.37 area.   Resistance is this green moving average here at the 16.66 area,  the red line connecting the lows of Dec 23rd at the 16.85 -16.90 area and 17.25 - 17.71 where the yellow, red and blue moving average are.

In summary --- we got our beginning of month start to a rally but it is just the first day. Lets see what the pattern looks like on Tuesday and we'll watch for pullbacks to hold support.

BOTTOM LINE:  The downtrend was neutralized on Monday.  Should the green moving average provide resistance we'd look for silver to consolidate on Tuesday and test the 16.35 area where tiny blue and pink moving averages reside. 

LETS ALSO keep in mind that the downtrend was pretty severe over the past 12 days.  The potential that this is only a bounce cannot be dismissed just yet.  We're going to need to see some more action.  THE MEDIUM TERM TREND has been bruised and as we can see by this chart.........THE OVERALL MEDIUM TERM TREND NEEDS TO GET BACK ABOVE THAT RED LINE TO HALT A DOWN TRENDING pattern that is developing in SILVER.  AS LONG AS SILVER IS BELOW the 16.85-17.25 the pattern must be categorized as sideways to lower.  Therefore it's important for silver to get back above the lows from February.   Odds favor a consolidation day for Tuesday.

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Silver February 1 2010 2:00 AM EST USA TIME

There is no change from Friday.  Silver is at a KEY medium term price point.  The daily chart shows how silver is hanging right on the blue downtrend line ready to make its mind up whether it breaks down from here or supports either here or just below near the 15.50 area.  The drop in silver has been hard and a breakdown from here can't be ruled out.  We have a cycle low due this week and a bounce should be in order.  However there is nothing to say silver can't break lower first and bounce from a lower level.  A break below the these channel lines could turn the medium term bearish.  Keep you eyes on the two blue lines,  the one where price is on and the other just below.

Should we support and bounce, the first resistance area would be the 16.70-17.10 area followed by 17.50.

We will elaborate more on Silver on Monday night. 

Bottom line:  KEY AREA here.............lets see what silver does and which way it decides to go.  Until we see any strength and barring bounces, the short term remains bearish.  Silver has ALREADY SPENT THREE trade days bouncing off of the downtrend line and must begin to move up today or it will break to the next support area.

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Silver January 29 2010 1:30 AM EST USA TIME

Silver's reversal from Tuesday was wiped out as the severe market drop in most commodities continues. The odds favored a reversal day was at hand and it had to be played for the fact that we are at a MEDIUM TURN POINT in price.  However I want to discuss tonight the longer term aspects of Silver and investing.  I discussed that I would be buying a little silver.  What I try to do is buy near the bottom of my price channels and sell near the top of them.  That is what works for me.  I discussed that I would buy what I could comfortably sleep with and that my holdings on silver were very light.  I advocated that if you were already holding you SHOULD NOT BUY.  Since there are three timeframes of investing -- short, medium, and long term, one should always ask the question "which timeframe am I buying for."

If the buy was a short term play, then the execution should have been exited this morning at 16.29 as that is where I mentioned that if price broke that area the ODDS that a reversal day did not play out and the short term trend would revert back to Bearish.  The risk was 30 cents.  It was not successful.  There are times when turning points will work and times when they will not.  When they work, one tries and let the profit run for as long as possible. when they are not a FAST EXIT is the best Strategy.  But medium term areas need to be played as they don't come often during the year.

When we exited Gold in December at 1188 and the short term trend went bearish, I reluctantly sold a good portion of my holdings because it was at a medium term AREA at the upper end of the price channel, and fortunately, it was the peak and the move was right.  It was a tough thing to do.

Now if your buying for the medium term and you have a very low position to begin with and you are buying just a little, then you should feel good about your position tonight knowing if it continues to drop you will add some more at the appropriate time.  You just bought silver three dollars lower than what is was less than two months ago.  BUT THAT IS IF ALL THE ABOVE CONDITIONS WERE MET.  if you bought a position with the remainder of your money and your fully loaded in the metals................. I would say be careful. 

Since these timeframes and longer term investing are so important I have taken the time to make a change to the website and I've created a separate page for medium term and long term buys.  You will see that there is a new button tonight called BUY ZONE.  It will be specifically for those who are looking to establish positions in Silver and Gold who are not looking for a quick short term trade.  Click on the button and give it a visit.  Inputs are welcome.  It basically shows the medium and long term places where buy zones are on the chart.

My purchase of a LITTLE silver today was because we are at a key support area in silver on the chart below.  The 16 dollar area in the SILVER ETF is a place where a potential low could take place.  NOTICE 2008 how price sliced thru that area and proceeded to fall all the way to the 8.50 area.  Since that was only 14 months ago we could say that if Silver were to drop to the 12.00 area, that it would be at its AVERAGE price for the past 4 years.  IN AUGUST OF LAST YEAR SILVER (just 6 months ago) TRADED AT THE 12.66 AREA !!!!!  If we were to make a six month low in silver,  price would return to UNDER 13 dollars. What I'm getting at is a pullback to that area could develop very easily.  Now I know that everyone is super bullish on Silver, but if you think silver can't pullback to a six month support area, I think your betting against the odds.  MARKETS DO IT ALL THE TIME.  What if this year is another CONSOLIDATION YEAR AND A DEBT CRISIS RESURFACES again as in 2008 ?  That would mean that Silver could return to UNDER 10 dollars.  Now I know that sounds ridiculous.............just as ridiculous as it sounded in July of 2008, just 18 months ago.  I'm discussing possibilities here and not absolutes.

There is no guarantee that silver is going to go back down, nor is there any guarantee that silver is going to $100 dollars.  Its all a matter of how things play out.  Silver was $50 dollars an ounce 30 years ago this month.  What do you think those people were thinking then ?  100-200 dollar silver ----is what they were thinking.  And you know what ?  THE ISSUES WERE THE SAME THEN as they are now.  CURRENCY CRISIS.  What did the Government do then ?  THEY CHANGED THE RULES AND ONLY ALLOWED SELLING ON THE EXCHANGES.  That's right.  NO MORE BUYING.  The market of course collapsed and silver traded to 6 dollars in 18 short months.  The day of the announcement saw silver drop 15 dollars per ounce if I recollect.  The point I'm trying to make is not that the government is going to shut down the markets this year or change the rules but rather to show you how the possibilities of what can happen are many.  No one thinks the top is in when it is.........and no one thinks the bottom is in when it is........except for those who keep proclaiming it at each and every turn until it finally happens.  If you were buying silver and loading up on it when it went below 10 in 2008 congratulations as your a true investor.

For me I believe that the metals are in a long term bull market, and with all bull markets, there will be bumps along the way. Check out the BUY ZONE button.

Here's why I bought a LITTLE bit of silver.  I am starting to accumulate again.

Notice where we are on the chart below.  It is at a key area, the bottom of the channel line from 2008.  There are three white Oval areas on the chart.  THOSE ARE THE LONG TERM PLACES TO BUY SILVER IF YOUR IN ACCUMULATION.  The blue Gann lines are the medium term places where the price of silver might bottom.   On the new button called Buy Zone, I have provided a simple accumulation plan for those of you who might not have an accumulation plan for the medium and long term.  So whether your buying for the first time or looking to add a little bit, the chart below shows the KEY price areas.  CHECK OUT THE BUY ZONE BUTTON.  It's a first pass at it, and its open to change and I welcome your comments. 

If you bought silver at this price, the choice is to determine the dollar RISK you want to take.  Then SET A STOP and get out if your wrong.  If you bought too much............sell some.  If you bought just a little bit, and you hardly had any, and your accumulating for the long term your next buy is the 12 dollar area.  At that point your average price will be 14 dollars per ounce.  IF A MAJOR CREDIT CONTRACTION takes place and SILVER drops to 8 dollars,  buy for the THIRD TIME.  The buy zone BUTTON lays out a simple plan that will give you a $10.94 cent average price should the markets have a big correction into the summer.

Now lets scroll down and update Friday's action.

What Next ?

The trend is bearish on the short term and the Medium Term is Neutral.  The potential for Silver to have an extended sell off into next week is certainly viable.  Because of the potential for a large DROP I've done extensive research tonight in Silver.

 IF WE BREAK 16.00-16.10 SUPPORT IS NOW THE 15.40 - 15.89 Initially followed by 14.70 - 15.30;

RESISTANCE IS 16.60-17.10

The chart below shows the following:  First RSI is near a position where prices usually find a bottom (see arrows on upper end of chart)  Second, The black dots is the 30 day cycle.  The red DOTS above price is when the 30 day cycle inverted and actually sold off instead of rally. The all happened when price made a high instead of a low at that time frame (an Inversion).  Third, Williams %R is at the oversold level for only the fourth time in 14 months.  Fourth, Silver has a medium term moving average (red line) at the 15.30 area.

If RSI bottoms, and price hits the red moving average and Williams % R comes out of oversold condition --- all at the same time that the 30 day cycle comes into play early next week, a potential bottom could form near there.

For now......... we wait until the all clear.  Price and time are in the zone for a bottom.  It could be as early as tomorrow as Friday's have been turnaround days in the past four months when we were in a BULL market.  Should silver not reverse tomorrow it would add more bearishness and the short term low potential will have to be looked for next week. 

The potential for a severe drop is POSSIBLE and continues to have merit as the VELOCITY OF THE MOVE continues to be strong. 

Bottom line:   ODDS favor lower but we are watching for a short term low and a potential bounce into February.  When we get a sign of a bottom, we'll address it.  THE 16 DOLLAR AREA HERE IS A POTENTIAL SUPPORT AREA THAT has held since the OCTOBER AREA.  A BREAK down from there would suggest 15.38 as next support. 

SILVER WILL TRY AND HOLD 15.89 to 16.05 tomorrow --- lets see what happens.

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Silver January 28 2010 1:00 AM EST USA TIME

The short term trend bearish from 17.50 went neutral at 16.60 today mostly due to the reversal day we had on Tuesday.  It goes right back to BEARISH if we break below 16.30.  See gold for SPECIFICS on outlook. 

support is 16.30-16.40 and 15.50 to 16.00.  Resistance is 16.75 - 17.10  and 17.51.

We are at a key area.......and must hold here or silver will see the 15.50-16.00 area NEXT.

A key CYCLE LOW IS DUE IN THE METALS.........when it shows up....odds will favor higher.  The double bottom still has a potential of moving higher from here........and odds favor a bounce if we can hold the low of Tuesday.

BOTTOM LINE:  The reversal day on Tuesday did not get wiped out yet...............BUT ANY CUT BELOW THE 16.30 area will ELIMINATE THE REVERSAL DAY and the short term trend go right back to BEARISH. 

price pattern is suggested of a BOTTOMING ATTEMPT as the ODDS favored --- due to the double bottom.  If it is breached we'll look for one more swing down in the short term.  Lets see if it can hold.

NOTE -- see the seasonal chart in the gold update. You'll see that a seasonal peak in the metals is in the timeframe that it usually begins.  More on this over the weekend.

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Silver January 26 2010 8:00 PM EST USA TIME

A dramatic flush out occurred in Silver today.  We broke thru the 16.75 area finally and a lot of long positions probably got stopped out --- and just as it looked like silver was going to go to MEDIUM TERM NEUTRAL -- price reversed during the day and closed above 16.75.  It seems that a major reversal might be at hand and the correction that silver has been going thru for most of the fall might very well have ended today.  At the very least a short term bottom and the potential of a Medium Term bottom as well.  Right now, this is pure conjecture and speculation on my part and more pricing will have to be observed if this is going to play out.  So, for now let's discuss what we do know.

What we do have is a reversal day today.  The ability of silver to reverse a 60 cent drop is no easy feat and requires a lot of STRONG hands to reverse the tides.  While there are no guarantees in markets, the LOW in silver and a turnaround just might be at hand, at least for the short term....and possibly the MEDIUM TERM as well.  This is the first solid evidence we see of an IMPORTANT BOTTOM.  We are arriving at the end of the month, a place where silver and gold have bottomed just about every month of this bull market.  We were over a $1.25 away from the major moving averages at today's lows, which is very oversold.  While silver may not rally in the next 24-48 hours, and may pullback from here and consolidate, odds are favoring that a short term and possibly a WINTER RALLY is about to develop.  Again, we want to take it slowly, and let price confirm this situation.  But it might just be time or close to it to accumulate some positions. 

We want to watch and see what silver does,  and be prepared to act. 

 The fact that we cracked a MEDIUM TERM PRICE ZONE and a subsequent reverse rally here means one of two things.  First that this is just a vicious reaction from that price zone and the area will be broken again after a brief rally .............or that the very STRONG hands that control this market put an end to the correction today.

The chart below of 60 min

March silver shows the arrow at the bottom of the chart piercing thru key support and then reversing to close back above that area.  Based on this price action, the BEARISH position from 17.50 on the short term trend will revert to neutral in the 16.60-16.75 area.

There are however....some unresolved issues (scroll down)

What next ?

One of the things I'm trying to figure out is this --  Did gold already bottom a few days ago and silver today or does gold have one more dip into the Fed Meeting and then it bottoms ???  What we have now is a gold bottom at the 1082 area (not a new low from December) last Friday and now Silver making a new low today (below December price) while GOLD'S low was 6 dollars above Friday's print low price.  However, a key double bottom did occur in gold at the 1085 area this morning about an hour apart.  Was THIS A DIVERGENCE SIGNALING AN END OF MONTH BOTTOM FOR THE METALS ???   IT is serious consideration tonight.

Support is the 16.60-16.75 area followed by today's 16.34 low.  Monthly support is the 15.50 -16.00 area.

Resistance is the 17.10-17.30 area followed by the 17.60-18.33 area.

Lets look at one more chart:

This is just a zoom out one more level of the 60 min chart. Notice the red arrow pointing to a blue down trend line.  The perfect scenario would have been for silver to touch this area and then reverse. 

Here's yet another clue.....look at that spike today at the bottom.  Look at the other spikes on this chart.  All of them PRODUCED at least a temporary low.  Others saw significant moves to the upside.

Cycles and Time

Options expiration is now out of the way and is officially over for another month.  The boyz were able to knock the metals down and many options were rendered worthless today.  Yes folks, that's how it works. No wonder there are so many end of month lows.  The system of things as far as I have researched it is in one word........FIXED. You want two words? Ok......its corrupt also.  I'll say no more, do your own due diligence.  The stuff I read today about how things really work in the USA, is not only astonishing, it left me pretty mad.  The report came from a pretty credible source, an insider if you will.   

The Fed meeting ends tomorrow..........and they will leave interest rates alone and the markets should be free for a while to move again.

One thing is for certain ----  if the open interest in the metals did not drop during this sell off.........  then the banks who are fronting the shorts are going to have more INCREASED PRESSURE.  Unless they can stop the ONSLAUGHT of buying they are going to be in trouble and maybe pretty soon.  But we are getting ahead of ourselves.

The chances for a short term bottom have INCREASED significantly and the odds are shifting that a key monthly low might be in place or is very near.  Silver STOCKS are off 20 to 35% and might pose a good buying opportunity.

When we look at the cycles and turning points for the year there are a number of possibilities for the coming few months.  RECALL that we've discussed that the best time to buy gold stocks is NOT THE WINTER TIME.  But that is the odds..........not the absolutes.  Gold and silver usually don't top until Feb/March.  The fact that they did in December opens up a host of potentials.  Let's discuss them briefly.

1  The metals rally one more leg up into Feb/March and then a spring correction takes hold. 

2)  The metals stay in a trading range this winter until the spring where another leg up develops.

3)  The metals rally into February but fail in mid month and produce a March low at or near the 200 day average in gold.

It's not going to be an easy road to navigate but as each clue unfolds we try and follow it to the best of our ability.  For now..........be on the WATCH FOR A POTENTIAL LOW and RALLY ATTEMPT GOING INTO FEBRUARY. 

I will be accumulating some silver positions .........starting tomorrow in bits and pieces.  I will buy a small amount tomorrow............especially if we get down to the 16.50-16.75 area.  I will only buy enough so if silver were to drop again to the 15.50 - 16.00 area I will be able to sleep fine.............and will consider adding more at that area.  I'm going into silver because I was holding a very small position.  If I already had a large position,  I would not be adding. 

Odds favor a short term low could be or is about to be made and a reaction rally attempt could get underway.  Look for pullbacks to 16.50-16.75 and potentially a little more consolidation to digest the big move from Tuesday.

A move below today's low would invalidate the above scenario and would suggest that the low is NOT YET IN.  One day DOES not confirm a trend.  Lets see if silver pulls back into the fed meeting.  I think that consolidation is probably the best fit for Wednesday action.  I'm READY to start buying.........just dipping in.....a first bite if you will.....and add if we get more confirmation.

Although this is NOT THE USUAL TIME OR THE BEST TIME HISTORICALLY TO BUY METALS.........today was compelling for a short term play that could extend higher. 

The potential exists that the rally could fizzle out.  The strategy obviously will be TO RAISE THE STOP once a bounce gets going so that if I am wrong I can exit without MORTAL wounds and hopefully break even at worse.

There are many who are looking for 14 dollar silver and some lower.  That still might be the case.  Lets keep in perspective that this is just ONE DAY OF DATA we looked at today.  All medium term trends start with a short term trend.  That is how I'm approaching it.........and will proceed cautiously.

SHOULD WE NOW BREAK and CLOSE BELOW TODAY'S LOWS ---- THEN WE CAN ENTERTAIN the forecasts of 14-15 dollar silver and the MEDIUM TERM correction would extend into next week with probably the same velocity we saw over the past two weeks. 

THIS TURNING POINT HERE COULD PROVIDE A GOOD MOVE EITHER WAY -----  if we move below today's low, we'll entertain the downside into next week.  Otherwise we'll stay with the ODDS PREFERRED an end of month low near this area.

BOTTOM LINE:

Let's see what Wednesday brings and let's get prepared for a short term rally to try and develop as month end is upon us.  Should we close below 16.34, then it will mean that the silver drop has further to go on the downside and will extend into next week.

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Silver January 25 2010 5:00 PM EST USA TIME

The silver market continues to lag gold.  There is no other way to look at it.  We can see that the 17 dollar area has been traded since the August time period.  However, it refuses to buckle down.  The chart is in a position of congestion and topping formation.  Yet the 16.00 - 16.75 area continues to provide support as it has since September.  The technical indicators are mixed, but then again, remember we are looking at weekly and not daily indicators.  RSI at the top is nearing the lows of 2009 near the 40 area.  It has bounced off of the 50 area twice and it is signaling a key area that does have the potential to break down from.  Williams %R is approaching its oversold area but would require a touch at or under the 80 area and then a move back thru it.  MACD is also flashing danger signals as its trend seems to be down.

With that said, as you can see on the charts, each MOVE down has been reversed since the September timeframe.  To say the least, it has not been the traders friend in any way.  And the moves have been dramatic on both sides.  One of the factors we conclude is that Silver is a byproduct of mining in the base metals.  Zinc is an excellent example.  With the rally in these metals there is a distinct possibility that there has been some selling from these companies.  The other area is the SHORTS that are already in the market.  There is no doubt that them must be wounded and bloodied.  The sell off's we have seen in this market keep getting turned around and the COT short positions have not had a dramatic liquidation.....and that keeps the pressure on the shorts.  Ted Butler has correctly concluded that if there ever was a demand for delivery of these contracts there would not be enough to go around to fill the orders at these price levels.  So while investors have the ability to buy ETF's like SLV,  the fact of the matter is unless the buy the physical silver to store these purchases, that these ETF's actually hurt price because the purchases are only paper.

On the bear side, we have lots of indications we can site for lower price above and beyond what we have already mentioned.  The fact that we are below our fast blue moving average for the third time in four weeks is warning that silver will not take much more of this action without some type of breakdown favored. 

The main areas of support is the 16.60-16.75 area and the 15.40-16.00 area.  Volume statistics on the ETF also is not favorable either.  So there is precedence to submit that a major peak with the potential of a breakdown in price cannot be discounted or ignored.  There are certainly many more bearish indications than bullish.  This latest drop last week added to that potential. 

In fact, we are very close to a MEDIUM TERM trend change from Bullish to Neutral/bearish.  Any move below 16.60 would remove silver from a medium term bullish mode as it would produce lows that we have not seen since October.  Some bears see silver returning to below 8 dollars.  While I'm not ready to go there,  our longer term moving average (green) is currently at the 14.30 area and the 2009 support area is the 11.66 - 12.40 area.

What next ?

The first arrow on the left in technical terms is called at exhaustion gap,  and the second one a breakaway gap.  Both are an indication that silver (from a technical standpoint) is has given some pretty powerful evidence of a top.  More important is how close silver is to breaking down from the December lows.  On November 30th (scroll down to view) we published a monthly chart of silver and postulated that a potential head and shoulder pattern was evident on the monthly chart.  We mentioned that if this was the case that the 19 dollar level on silver would be a major resistance area going forward.  The fact that we rallied back to 18.92 with an exhaustion gap, and then reversed back down on a breakaway gap leaves a lot of question to the MEDIUM TERM in silver as remaining bullish.  A break below the December lows and a penetration of 16.60 would flip this MEDIUM TERM indicator out of bullish mode and warn of a potential that silver has completed its winter rally and a sell off into the spring is a definite possibility.  When we look at the silver stocks, we can see that they have taken a good hit here also.   (scroll down)

Bottom line:  Barring bounces the trend remains down.  What silver does at this 16.60 -16.75 area is key. We must remember we have seen it hold at that area on a number of occasions.  A break there would suggest a move towards the 15.50-16.00 area.  Cyclically, the ideal short term low would be at the end of the month and then a rally toward MID February would develop.  On the medium term, as we saw in the weekly chart, if this is a top it is a complex one, and they are the hardest to discern.  For now, the weight of the evidence still suggests that rallies aside silver is in a short term downtrend and has the potential to neutralize its medium term trend from bullish to neutral and even slightly bearish.   As we stated in the weekly report of Gold a few weeks back (when silver was in the mid 18 area) that the precious metal stocks are at their best value usually during the summer time period, and at the upper end of their price value in the winter.  That continues to be a good call.  Lets see if silver can hold 16.60-16.75.

Silvercorp is an example of the hit that silver stocks have taken.  While this stock is still a triple from the lows of November 2008,  it also is about 50% lower than the peak of 2008.  Since it is also at one of the lows of 2007 (the five dollar area), it some respects we can say that this stock is fairly priced.  Perspective and timing is such an important factor, regardless of what they may tell you.

Silver January 25 2010 2:00 am EST USA TIME

Our last update gave the 16.60-17.10 area as support.  Friday's 16.84 low has so far held that key area.  A bounce for Monday towards the 17.10-17.34 area is underway.

We will update the silver portion more fully during the day tomorrow.

Bottom line: 

A bounce is underway, but the short term trend still remains down.  Support 16.60-16.75 on Monday.

Silver January 22 2010 3:00 AM EST USA TIME

There is not changes to our last update with the exception of support and resistance.

Support is the 16.60-17.10 area with 16.75 being the KEY price area.   Resistance is the 17.75-18.02 and 18.34-18.41.

There is a minor resistance at 17.55-17.60 worth mentioning also.

Bottom line: Barring a bounce..........the trend remains down.

Silver January 20 2010 1:20 PM EST USA TIME

Our last update in silver had this for a quote:

"Our best take at the moment would be to see price peak this week, then pullback into near month end and then a final rally in silver in February would unfold before a more significant rally takes place.  Since silver has repeatedly ran sideways to lower during the latter half of the months in this bull market, we think the most likely event would be a repeat of that performance.  Should silver move above 19.10-19.33 --- then we would expect a rally to the upper black channel in the 20 dollar area.  We STILL THINK there is one push up into that area.....we're just not sure if it's going to wait until February to launch. 

Lets see what price does when it reaches the 18.90-19.10 area.  That should be the main price area this week where silver will have to show what it's got."

During the peak this week,  silver got to 18.92 before turning down in a price collapse today, just barely reaching our key resistance target before the sell off took place.  We also quoted that should silver trade there and then reverse and trade back below 18.30 that the odds would significantly increase that the short term trend would turn down.  We also we're focused on the green moving average as a key area for Silver.  That CHOPPY pattern there and consistent testing of the line was a warning and so was our mid month scenario.  Last week, when we discussed the potential for that peak, we pointed out that this rally had the potential to rally towards the 21st or 22nd of the month.  Today's peak is the culmination of that rally.

the last update gave the 17.80 to 18.00 area as our short term support area.  THE EXACT LOW ON SILVER for the day was 17.80 on the NYFFE contract. As a testament to the moving averages we use, take a look a the green moving average.........and how price kept bouncing off of it during the move this week. The green moving average took 6 HITS and held since 1/12.  That was until today.  As we can see a price collapse gave way once the green moving average and our initial support of 18.41 got taken out.  Today was a breach of 4 moving averages in one day......rarely is that not a bearish omen.

What next ?

The short term trend goes bearish if we decline below the 17.50 area from a price perspective to confirm, but for all intents and purposes the trend has already turned.  A lot of damage has been done to the chart.  Resistance is now the 18.40-18.70 area and a rally back up to that area that fails will take the medium term out of bullish mode for the first time in a year.  More work needs to be done here but the odds have turned to a more bearish posture and the potential has increased that we may have seen the highs for a while in silver.  Odds have also tilted to lower prices into month end. 

Support is now at the 17.50 - 17.75 area followed by 16.60-17.10.

Bottom line:  Any bounces back to the 18.40-18.70 that has a choppy and overlapping pattern will be a MEDIUM TERM sell signal and warn of lower prices into the spring.  Barring a bounce..........we expect lower prices.

For those who are heavily long precious metal stocks who have not read the WEEKLY button on when the best time to hold precious metals and when to BE LIGHT in quantity should do so now.

OUR BEST TAKE AT THIS TIME ON THE SHORT TERM IS LOWER TO MONTH END.  

THE ODDS ARE INCREASING that the HIGHS for the next 2-5 months might be in place and we will address that this weekend.  The silver market bears smell blood and we urge extreme caution.

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Silver January 17 2010 7:00 PM EST USA TIME

Lets take a look at the weekly chart in silver. 

As we can see silver continues to trade upward within its channel and is at the upper end of its price range.  The moving averages are all in sync and the trend remains up.  Silver has doubled in the past 14 months ----but curiously it is at the same price as it was two years ago, with no net gain when measured over 24 months. 

We can see that RSI had an important test at the 50 level that held and has begun to uptrend again. 

Support------As much as we sound like a broken record, we remain bullish in the medium term as long as silver can hold the 15.50 area and bullish short term as long as we can hold the 16.75 to 17.10 area.  On a daily basis, as long as silver remains above the 17.80 to 18.00 area the trend up.   There is a minor support at the 18.30 area as well on silver for Monday.

Resistance ------ resistance for silver is the 19.00 - 19.33 area followed by the 20-21price zone. 

I've mentioned how I don't like the overlapping pattern that silver has but until it gives signs of giving way, we will stay with it.  There is no DOUBT that MACD at the bottom shows that silver has been loosing momentum.  The last few weeks have turned that time back to up and silver is at the important zero line.

This weeks cycles suggest that a potential short term top could transpire in the latter portion of the week.

What next ??    The long range bar off of the 16.75 area keeps us bullish.....albeit cautiously.

Lets see what Tuesday brings..........odds favor higher and as silver tries to once again reach the 18.90 - 19.00 area we discussed as resistance last week and where the blue channel line on the 60 minute chart resides. (scroll down to previous report to see the 60 min chart).  That area ...say 18.90 and above the 19 dollar area is probably a tuff nut to crack on Wednesday.........but if it does price could get a hefty rise toward the mid 19's in quick order. 

Should price rally there, and fail to overcome it and then turn back down below the 18.30 area, then the odds will significantly increase that another short term correction is under way.

Our best take at the moment would be to see price peak this week, then pullback into near month end and then a final rally in silver in February would unfold before a more significant rally takes place.  Since silver has repeatedly ran sideways to lower during the latter half of the months in this bull market, we think the most likely event would be a repeat of that performance.  Should silver move above 19.10-19.33 --- then we would expect a rally to the upper black channel in the 20 dollar area.  We STILL THINK there is one push up into that area.....we're just not sure if it's going to wait until February to launch. 

Lets see what price does when it reaches the 18.90-19.10 area.  That should be the main price area this week where silver will have to show what it's got.

==================

Silver January 15 2010 1:45 AM EST USA TIME

There is no change from last nights update.  Silver is still trying to enter the blue channel line has not.  On the downside, silver held the green moving average again.  (see report below).

Silver January 14 2010 2:00 AM EST USA TIME

Due to the long gold, tonight is short and sweet.  Silver may have completed the 72 hr pullback we were looking for and is ready to try another stab at the blue channel line...(which keeps getting higher and higher).   We can see the TRIPLE support the green moving average gave silver.  Support was called at 17.80 to 18.20 and the low was 18.22 right on the money.  Silver tonight is above all moving averages. 

What next ?

We cannot say for sure the pullback is complete......as this could be a last gasp back up.  However, we are not going to say the very short term is bearish.....in fact even though a cycle high is due........ we want to see a break of yesterdays action..................otherwise barring a pullback to support, odds favor a test of the blue channel line on Thursday.

Resistance is the blue channel line and the 18.80-19.00 ------  then 19.33-19.60.

Support is the 17.80-18.20 area.  There is initial support at the 18.41 as well.

BOTTOM LINE:  WE NEED TO RE-ENTER THE BLUE CHANNEL LINE to feel more comfortable....but barring pullbacks to support, the short term trend is still alive.

=====================================

Silver January 13 2010 2:00 AM EST USA TIME

The big question in yesterdays update was ........can silver hold the key BLUE CHANNEL LINE.  We gave our concern that price had risen too fast,  and gave support at 18.43 followed by the 18.20 area. As you can see, the latter support was elected.  Here's our quote about silver and the blue channel from yesterday.

 "WHAT OUR CONCERN IS TONIGHT............is that we've been thrown a fake out and the entry into this channel could be reversed.  ...............with a 48-72 hour pullback now in store for silver.  With a 2 dollar move in 10 days, the potential to pullback would seem high.  It just seems that silver has limited upside this week much beyond 19.   We've already reached our key resistance area for the week as well."

Here too we were looking for consolidation, but instead silver pulled back 30 cents.  We see that silver has maintained a lot more of its gain.........and in context, so far this is just a pullback to support on the Green moving average and a normal retracement.  We had been looking for a 48-72 hour pullback and we are nearing the 48 hour area.

The question tonight is the same as gold.............can silver hold here?  We think that the lows just above 18 from last week is sticking out like a sore thumb for the market to go clear the stops.  IF that was the case, then the potential for silver to move down to the 17.50 - 17.75 area is certainly a potential.........BUT ONLY IF WE BREAK BELOW the lows of Tuesday.  

What next ? 

We've already discussed the potential for a mid month peak and the pullback we forecasted yesterday is underway.  Whether it only last 2-3 days has yet to be seen. 

Resistance is the 18.44 - 18.51 area and the 18.70 area where the blue channel line is.  We think that is the maximum we'll see on Wednesday.  

Support is the 17.98 to 18.20 area initially and then the 17.50-17.75 area.  KEY WEEKLY SUPPORT REMAINS 16.75 as it has been for weeks.

BOTTOM LINE:  While the trend remains down over the next day or so,  we don't want to count silver out just yet.  Make no qualms ----  the metal could move lower from here on Wednesday.  We think silver will fight to hold the 18 - 18.20 area.......but a break of that area and we can't eliminate a move to the red, yellow and blue moving averages over the next few sessions.  Silver will try and mount a move towards 18.44..............as it tries to hold the decline from Tuesday.    Be cautious here...............it won't take much for silver to break the green moving average and Tuesday's low.   The pattern since the high is BEARISH LOOKING.........but let's at least see silver breaking the lows of late last week before totally condemning the short term.  A failure to hold the supports above and the mid 17's would be next.

Silver January 11 2010 9:30 PM EST USA TIME

Early last week we pointed out that Silver might be indicating that a good sized rally was developing due to the strength we were seeing in the pattern.  Over the past few sessions the blue uptrend line kept silver from re-entering three times but Monday proved to be too much and silver re-entered the blue uptrend line.      We can see the action from 1/6 thru 1/9 as silver was trying to re-enter the channel, and then the gap today.  Silver reached the 18.92 area (our resistance listed 18.90-19.20 as the next area last night) and from there, a correction back down into Monday's close was EXACTLY on the BLUE channel line.   Here too we have grown concerned about the price rise, but as long as we maintain inside the BLUE CHANNEL line the short term will be SUPER bullish.  The question is can it remain there ?

Support for Tuesday is the 18.43 - 18.50 area ( the blue line) followed by 18.20 (tiny pink MA) and then the 17.50 -17.92 area where the myriad of moving averages are converging. 

I must admit surprise to such a reaction rally and I continue to go back to the fact that the COT (SHORT POSITIONS) just did not go down during the sell off we saw in December.  In the very short term the market is overbought and a pullback is due to occur.  However, we can see the pullback last week was a very weak pullback, and as we look at the chart tonight, it is tough not to be bullish looking at this chart. 

If silver can hold this blue line channel the potential to move higher is certainly the odds favorite.  Over the past four months silver (like gold) has made most of its monthly gains in the first half of the month.  We are now approaching the mid month area, and we do think the better part of this rally has been seen.  However, until we move below blue channel like, we favor the upside.  WHAT OUR CONCERN IS TONIGHT............is that we've been thrown a fake out and the entry into this channel could be reversed. 

Tuesday looks to be an attempt to stay inside the blue trend line day.  We think that piercing below it is very possible, but we are just not sure at this point if we have a short term top.................with a 48-72 hour pullback now in store for silver.  With a 2 dollar move in 10 days, the potential to pullback would seem high.  It just seems that silver has limited upside this week much beyond 19.   We've already reached our key resistance area for the week as well.

BOTTOM LINE:   Odds favor a consolidation day on Tuesday.

================================

Silver January 10 2010 11:15 PM EST USA TIME

Lets look at a weekly silver chart for this weekend edition

Over the last month we have maintained a move below the 16.75 area in silver would give us a bearish signal.  The last 3 weeks as you can see by this weekly chart each had a test below 17,  but was not able to close below 16.75.  We also laid out the case over the past two weeks of the 30 day cycle low that silver and gold have been following. However, we did not expect silver to rally almost 9 percent last week when the week began.  As the week progressed we began to ask the question, IS SILVER now taking over the lead ?   By last weeks action it surely seems so.

Like gold the silver technical indicators have turned.  RSI AFTER HOLDING the 50 area for over three weeks has now turned up, and Williams %R exploded upward and MACD is close to turning up as well.  We can also see that our fast BLUE moving average has been exceeded and price remains in an uptrend.  

The one thing that we have not been a fan of is the overlapping quality of the rally.  But somehow silver keeps holding key areas.  We have been testing the 16-17 dollar area since September and therefore have been more hesitant with silver.   But last week was tough to argue with.

What next ?

Silver's next resistance is the 18.90 - 19.20 area followed by the 20-21 area.  In short we continue questioning our observation that silver all of a sudden seems to be leading.  This would play well with a winter rally and a final push up into mid winter before the spring correction takes hold.   A LONG RANGE week in price on the chart like last week goes a long way towards saying the bottom in in an NEW HIGHS ARE LIKELY IN SILVER.  Investor's are turning to the metal as there is something about buying 50 coins for 1000 dollars (silver ) vs. 1 coin for almost 1200 dollars (gold).  

RSI TURNED UP FROM 50

In the middle of the channel

Support is the 16 and 14 dollar area in the medium term chart.

Big move up in Williams.....

Has MACD turned ?

Bottom line

We don't like the price pattern on the weekly chart but until silver GIVES way,  we have to favor the trend and that remains up.

SILVER STOCKS HELD UP VERY WELL DURING THIS PULLBACK..........and are also suggestive of strength.

THERE IS A PULLBACK of a few days due this week for Silver.........but we think that's all it is .....a short pullback.

AS LONG AS SILVER REMAINS above 16.75,  the medium term trend remains up. 

We will go back to the daily chart on Monday evening.  The message from the weekly chart has us bullish and as mentioned above,  a bit concerned about the choppy pattern.  ANY NEW HIGH above 19.50 should lead to the 20-21 dollar area.

=======================================================

Silver January 7 2010 10:15 PM EST USA TIME

In last nights update we discussed the potential of the rally from the lows to be complete and odds favored a consolidation and choppy price action on Thursday giving a range of 17.80 to 18.30 and reiterated that  BLUE CHANNEL LINE WAS THE KEY RESISTANCE AREA.  Thursdays highs at 18.38 once again had price hitting the upper channel line..........but price once again was halted and a price retreat back to 18.10 resulted. 

What Next ??

This second upper channel failure after reaching our resistance area now brings forward the potential we discussed last night.............that a move lower into Mid month is fast becoming a possibility.  If this is the case, we would anticipate a low somewhere from the 15th thru the 19th based on a number of factors. 

Support is the 17.70-17.80 area (slow red moving average) with more important support where three moving averages are .........the 17.43  - 17.50 area.

Resistance is the 18.44-18.60 area.........i.e.---the highs of this week and THE BLUE CHANNEL LINE. 

BOTTOM LINE:  ODDS FAVOR A TEST OF SUPPORT listed above if we break below 17.98 for Friday.

SINCE ITS JOBS REPORT DAY........The potential for a big move cannot be discounted.  THE POTENTIAL for silver to peak and pullback for the next week or so is becoming much more likely.  We think price has come back to far too fast............odds favor pulling back to support on Friday.  SHOULD WE IGNITE AND GET A MOVE ABOVE THE BLUE CHANNEL LINE..............it could be game on for Silver.  At this time and chart juncture, while it can happen, its not the odds favorite.

We'll take a look at the MEDIUM TERM FOR SILVER ON THE WEEKEND REPORT.

========================

Silver January 6 2010 11:30 PM EST USA TIME

Silver marched right past the slow red moving average all the way up to the upper trend line in the COMEX session. Last nights final short term resistance was quoted at the 18.20 -18.30 area and the high came in today at the 18.25 area, right in the middle of the target. The odds favored pullback to 17.50 from the slow red moving average never materialized as the real news was second day straight up strength.  However, this is all playing along with the 30 day cycle low we posted at the end of December (I've added them again tonight).  Look back at the last 3 months all show the same thing.........a VICIOUS RALLY to begin the month, something we've been pointing out more so on the GOLD DAILY page in the past.  In any event the outlook for a bounce from the December lows did morph into a rally..............or it has PUSHED TO THE EXTREME END OF A BOUNCE BY TOUCHING THE LOWER BLUE CHANNEL TREND LINE.  Look at the last bounce on Dec 29th how that one failed right at that line.  Now the question begs, do we keep moving up here ?

The Far East open clocked all the stops pushing silver to the 18.35 - 18.44 area and into the upper channel line before pulling back very hard giving a potential session reversal bar.  THIS MOVE TO THE 18.30 area SATISFIES the BOUNCE TARGET I was looking for as a $1.50 cent move from the lows of last week leaves silver in a very overbought condition on the short term.  

ON THE MEDIUM TERM --- THE AVERAGE PRICE OF SILVER SINCE OCTOBER IS ONLY 18 DOLLARS SO WE ARE IN THE MIDDLE OF THE CURRENT RANGE and IT IS NOT OVERBOUGHT.  INVESTORS KEEP THIS IN MIND.  Only short term traders should be concerned with the overbought condition.  THE KEY 16.75 area HELD IN SILVER THREE TIMES LAST WEEK........and as was our mantra then.........ONLY A MOVE BELOW THAT AREA WOULD TURN THINGS BEARISH.

Now -- back to the short term :   All through this bull leg, and on the chart below, the SILVER rallies big from the cycle low (black oval) area and then goes into a consolidation for a few week.   (IN DECEMBER price collapsed after that rally).  MY POINT IS THIS..........the easy money for the week has been made for the week and since we've reached the same channel line that provided the last resistance with a rally equal in size as the last 3 cycle lows, the odds favor that silver is could go into a sideways/and choppy pattern into week's end in the 17.80 - 18.30 range.

Here's the issue tonight.  The market (at least how I see it) is time and price.  We were expecting a mid month high and a pullback.  BUT IN PRICE we've already reached the objective.  From that  PERSPECTIVE, the possibility to NOW TRADE sideways and choppy TO MID MONTH IN A PULLBACK IS ALSO WIDE OPEN AS A POSSIBILITY.

The market dynamics are increasing in many avenues.  Lets discuss the COT issue again.  Last week I reported that a $2.75 cent move down from the peak price DID NOTHING TO REDUCE THE OPEN INTEREST.  And that can only mean ONE THING..........and for the shorts it could be big trouble.

If open interest did not decline it can only mean that NEW BUYERS CAME INTO THE MARKET.  FOR EVERY SALE, the short positions in the market we're only able to reduce their position marginally.  Their position is so big that the percentage decline in their shorts was negligible.

ARE WE SEEING THE BEGINNING OF A SHORT SQUEEZE ????????????????  The big one?????????????

You see the action here could suggest that the shorts ran for cover at the same time FRESH NEW YEAR BUYING CAME IN and this is RUNNING THE PRICE UP.

Now...........before we get hog wild in silver dream land.........the odds do favor that silver should start correcting from here,  but do you know what?   IT HAD BETTER START DOING IT NOW..........right near this area or the price of silver could EXPLODE HIGHER.  If any readers are seasoned COT followers, please send me an e-mail at GOLDTRENDS@GMAIL.COM and let me know your thoughts.  (only followers please.......need to control the emails).

This needs to be watched. I wonder what Ted Butler's latest thoughts are on this situation.

What about THE JOB REPORT THAT IS ABOUT TO COME OUT FRIDAY ????   IS IT going to be a bust or are the BOYZ GOING TO STUFF SO MUCH BOLOGNA in it that the STOCK market takes off and heads for 1150 S&P or higher clearing out all the stops as the NEWS IS GREAT ???   Since new jobs is the biggest lagging indicator the odds would favor a bad number.  But who knows what to believe when the stats come out?  COULD IT BE POSSIBLE THAT IT WILL BE GANGBUSTERS..............and the DOW goes up 300 ???    If not,  the dow should shed 300 then because price has come to a COMPLETE GRINDING STANDSTILL WITH A VERY TIGHT RANGE.   SOMETHING IS ABOUT TO GIVE and it won't surprise me if its FRIDAY.  The metals DON'T HAVE A GOOD TRACK RECORD on JOB DAY............its like only 3 of the last 30 have been good for metals..........but of course two of them is in the last few months.  But it does add credibility to a pullback into weeks end.  Of course, a pullback that is shallow will just add more strength to the market.............so it doesn't mean we are definitely heading lower here or that a short term trader should bail either.

To further complicate matters is the fact that in the New Year fresh money is being deployed and the ones who were left off the gold and silver run of last year need to get some in the portfolio.  With Silver on sale from the December peak, the combination of new buyers, sellers from last months peak, short covering market players jumped in from the get on Monday...............and the rush into today triggered all the HEDGE FUNDS TO ENTER THE MARKET........and everyone wanted in THIS WEEK.

WHAT NEXT ?

THE POTENTIAL FOR A PEAK UNTIL MID-MONTH and sideways action would most likely occur here at this price zone.  IF it DOESN'T the potential to move right up towards 19 into next week is very possible.

SUPPORT IS the 17.50 - 17.80 area followed by 17.10-17.30.

RESISTANCE is the 18.33-18.49 area.  ABOVE THAT AREA........and a quick move to 19 would be next.

If the market follows the script,  a sideways/choppy to lower action should begin at this area.  ANYTHING ABOVE 18.50 will suggest 19 quickly.

BOTTOM LINE:  We are at a key resistance area.........and  a sideways/choppy action with a pullback here should develop for the remainder of the week.   While we we're looking for a mid month high,  the short term price objective has been met.  This leaves us neutral at this price area for Thursday.

As far as the trend... while it may begin to chop sideways here.....the short term trend is up and we are still looking for higher price into mid month.  Pullbacks to 17.30-17.80 for support on Thursday.

We will say what we've said for quite a while on silver.  As long as we remain above 16.75...the potential to keep the upside going remains. 

WHAT ABOUT TRADING ..........OR BUYING .............OR WHAT SHOULD I DO ?????

First off, I get a lot of emails,  should I buy now ?  What do you think? 

It comes down to what type of investor you are.  Short, medium or long term.  It is a question you should try and define on each and every purchase.  If your an investor, your not selling here.  Not until at least a KEY resistance area like 1070 is broken.  Even then, if your not a trader...............then you might be holding.  The next question is SHOULD YOU ADD?  That is easy to answer.  ARE YOU WILLING TO RUN A STOP BELOW 16.75 or 17.10???   IF not, then where ?   Define your risk.  HOW MUCH are you willing to lose???   Every trader thinks of how much HE/SHE can make.  No.  How much are you willing to lose on this trade?  Get that first..........then plan the entry and stop.

Lets say its $1250 dollars.   Then 1000 ounces of silver with a stop below 16.75 is your answer.  If its $12,500 then its 10,000 ounces.  Lets say your willing to risk $600 dollars on a trade, but you'd still like to have 1000 ounces.  Fine,  look to buy silver on a pullback to the 17.30 area where the moving averages are and put a buy there....then run your stop.   Otherwise, buy 500 ounces here, run your stop, and be happy with that.  Couldn't the stop be higher?  YES.  But the chance of being stopped out grows exponentially the closer you are to market price.  Certainly a stop below the moving averages at 17.10 could be a consideration....but the best stops are below key recent lows (or highs if your short).

If your risk is $500 dollars............buy 1000 ounces on a  pullback to 17.30------------   etc etc.

How about buying pullbacks????  Yes............buying a pullback here might be good.  Adding at KEY SUPPORT AREAS can be good also. It comes down to so many factors.............how much do you already have????   Should one be 100% LONG HERE?   I KNOW I'M NOT.  I'm not flat either. 

You see, the reason it is so difficult to tell an individual to buy here, sell here.............is that we ALL HAVE DIFFERENT HORIZONS and circumstances that must be considered.  The above is just about picking a stop and it took that long. 

The point tonight:  Know how much your willing to risk,  know where your stop is..............and divide that by the current price..............that tells you how many shares,  or ounces you buy.  

Always have an EXIT.........I'M WRONG price.  NEVER EVER EVER LET A SMALL LOSS TURN INTO A BIG ONE.  You can get away with a lot in markets..........BUT NOT BIG LOSSES.  They end the game for you. Step aside and wait for a better opportunity when a trade goes against you.............when the loss is manageable. 

You are not in control of PRICE.  THE MARKET IS.  HOWEVER  you are in control of RISK.  Know what your willing to risk.  Don't wait for a 10% move to enter a short term TRADE.  However, a medium term person would be different.  They could buy a bit here..........and if it pulls back, but a little more accumulating on dips, building a good position near support areas..............and CULLING some near the channel top trend lines.

=========================================================

Silver January 5 2010 5:30 PM EST USA TIME

Late last week when we discussed the current short term cycle turn, we stated that if silver is to rally it needs to begin trading above 17 and quick otherwise OUR key support at 16.75 wouldn't hold much longer.

In a few short days Silver has rebounded strongly to the (SLOW) Red moving average.  Look on the way up in November how the red moving average provided the lows on 11/12,  11/25 and on 12/7.   Now price has reached it from underneath...will it provide resistance ?  

In last nights update we were looking for price to continue higher into the 17.68 to 17.83 and the high price of the day was 17.88. Our projected support given was 17.43 and we came in at 17.51 as the low. Clearly silver has outperformed my expectations so far this week.  ALMOST TO MUCH.  Does that sound odd?  What I mean is that when a commodity uses up all its POWER in a fast amount of time...........i.e.;  a quick bounce, the odds INCREASE that it's just that..........a bounce.  However, for now we will give silver the benefit of the doubt.

Just as silver came down hard, this rally has come back swiftly.  The long horizontal area is the NEUTRAL OR EQUILIBRIUM spot for price.  You could say we are MID-WAY in the price pattern. Directly above is the final short term resistance (see black arrows) where we have the upper blue channel line at the 18.20-18.30 area and the tiny blue down trend line at the 17.95 area and where we are today......the 17.80 area of the (Slow) red moving average.  Should silver climb into this area the short term trend flips bullish. 

This is the area where a bounce failure, if it is to develop would most likely happen.  There is also a minor cycle peak potential that comes into play into weeks end that has us on the watch now.  I did not give it much thought as we've been looking for a mid month run.  The fact that price is up by one dollar since Thursday and is near key short term resistance now brings that potential into play.   So it will be key here to see what price does.  Can we revert to short term bullish ? Yes, we can.  However, we must be cautious of a fake out as well. 

Look at the tiny insert when price was at the 16.94 area.  Goldtrends published the 30 day cycle of lows that we've been seeing since this rally began in September.  Our weekend update on Sunday night pointed out the dotted circles ---------and revealed that the "FULL MOON" scenario of  "Werewolves in the Silver Pit" (lol) is a very important cycle to watch.  A $1 dollar rally since.

WHAT NEXT ?

This is a zoom in of the 60 minute chart below.  SUPPORT IS THE HIGHLIGHTED AREA NOW WHERE the moving AVERAGES have all bunched up to provide support in the 17.10-17.30.   Also, we have a downtrend line that is showing up now at the 17.50 area.  The question for Wednesday is do we pullback towards the moving averages or do we press forward to the upper resistance areas first ?   Regardless, first resistance is the 17.83 - 17.97 area on Wednesday.  Odds favor a pullback develops  (giving room for overshoot) at the 17.88 -18.06 area and moves back to either the 17.50 area or the moving averages over the next few sessions.

There is one FINAL NOTE TONIGHT................  SILVER ALWAYS LEADS THE LAST RALLY BEFORE A CORRECTION.............and the METALS have NOW ENTERED THE WINTER STAGE.......  WHERE MANY OF THE HIGH PRICES FOR THE YEAR IS MADE.  IS SILVER GIVING US THE CLUE THAT WE ARE IN THE WINTER RALLY AND THE CORRECTION IS OVER OR THAT JANUARY PRICE IS HEADING FOR THE HIGH LEVELS OF DECEMBER ??????

THIS IS SOMETHING WE NEED TO KEEP ON RADAR.............AND IT MIGHT BE PROVIDING A CLUE.  SILVER'S UNDERPERFORMANCE IN NOVEMBER WAS A BIG CLUE THAT HELPED GOLDTRENDS CALL FOR CORRECTION RIGHT AT THE PEAK.   IS SILVER NOW TELLING US ..........."ALL CLEAR.............WE ARE READY TO ROCK?"

We're not sure yet because we've only traded two days since the cycle low.  But its on my radar.

Bottom line:  WE HAVE A GOOD RALLY GOING.............if its just a bounce.........it should end in the next day or two and begin a PULLBACK into MID MONTH.  If this develops, we would view it as a BEARISH INDICATION initially.  What we want to see is a rally to mid month.  The next few sessions favor a pullback from a range of 17.88 - 18.10 back towards 17.50 and potentially the moving averages below. 

From a medium term perspective...............keep using the 16.60-16.75 area as key support.  AS long as we are above that area..........the potential for a rally back up is in play.  WATCH THIS KEY AREA WE ARE AT HERE........moves back in the blue channel and the short term will be bullish.

WE STILL FAVOR THE UPSIDE BOUNCE INTO MID-MONTH.........but admit that a pullback here to support first is also very viable as we're at or near key short term resistance. 

===============================

Silver January 4 2010  11 PM EST USA TIME

Last week our key SUPPORT area of 16.75 was tested three times with lows at 16.74 and 16.76 providing exact tests of that key area.  We're glad we stuck to our guns and did not go bearish beforehand as silver prices exploded once new economic data came out suggesting the economy was getting better on a global basis.  At one point silver was up 72 cents.  We had anticipated a bounce or rally back up towards mid month as we gave evidence that the last three KEY lows in silver were in 30 day increments and the potential for another low at this time was very favorable.  (see last nights silver chart showing the BLACK CIRCLES where the lows have formed since September.)  Those lows are FULL MOONS and as crazy as that might sound to some of you, the moon has interesting characteristics when it comes to the markets.  All commodities and stocks were in a full fledged rally today in the markets.  Make of it what you will.  I care not where an indicator comes from, but that the moon can cause highs and lows in tides on the ocean is a great example of the forces it puts upon the earth.  After all, a lunatic is one who is affected by the moon.  Werewolves in the Silver pits ?  

We gave resistance as the 17.43 initially as the first area of bounce, and while the comex close was right at the area,  the after hours market and the Tuesday open in the Far East blew right by that area and has returned to the a price where the last two short term peaks were, mainly the 17.68-17.83 area.   We suspect that silver prices will hit this area and potentially bounce off the red MOVING average. 

From a technical perspective ,look how bunched up the MOVING averages got (tiny blue, purple and the fat green, yellow, and blue moving average) all around the 17.10 - 17.30 area in silver right before the rally took off.  Not that it mattered on Monday...........news of economic strength put all base metals in rally mode, and silver was one if not the top gainer, but the point is when the moving averages get tight together, its usually indicative of a short term move. 

The short positions in silver (COT) have not dropped even though silver dropped $2.75 since the peak.....an incredible statistic suggesting the shorts are still in trouble in this market.

What next ?  

As long as we hold the 16.75 -17.10 area in silver we expect higher prices into mid month.  Pullbacks to the 17.10-17.30 area might be opportunity for short term traders.   AS FAR AS BULLISH,  prices need to climb back above the LOWER BLUE CHANNEL LINE ABOVE THE 18.20 area.  IF we can do that silver has the potential to rally into mid winter.  The only thing I did not like about the rally was that prices moved up so far so fast..........that it felt a little like a short cover rally.  The fact that everyone plowed on today suggests that the speculation is still heavy and a lot of folks had been waiting to jump on the bandwagon.

We need to keep in focus that while the short term is rallying in silver, we need to be cautious of the MEDIUM TERM, as there is still the potential that we have not completed that correction.  The good news however, is that we might have seen the low and that the next pullback could potentially hold at a higher level.  It's only one day into the bounce.........so we don't want to count all our eggs already. 

ONE DAY DOES NOT MAKE A TREND...........and this huge rally should consolidate within the red and blue moving averages on Tuesday..........but barring a pullback to the blue and green moving averages the short term odds have been tilted higher.  

Our best take is a rally to mid month is unfolding.  The next key turn dates are late this week and the 16th of the month for the short term.  Lets see how the next 24 hours play out.  Resistance is 17.68-17.83 for Tuesday and support is the 17.30-17.43 area initially.........with additional support at 17.10.

AS LONG AS WE ARE ABOVE 16.75 ----- the uptrend is still intact.

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Silver January 3 2010  8:30 pm EST USA TIME

Weekend edition

Last week Silver bounce off of what is the most important short term SUPPORT, the 16.75 area on three separate occasions.  The battle for control of the silver market short term is right in that area.   KEY SUPPORT IS THE DOWN TRENDING BLUE LINE drawn off the OCT 11th high and connected to the last tow lows.  That support is targeting the 16.50-16.55 area.  Another support is JUST BELOW the October and November lows.  Notice the red downtrend line drawn off the late November pullbacks and touching the 12/10 and 12/12 lows.  That support combined with the Oct / Nov lows suggest the 15.40-15.89 area as support should we break down from here. 

The moving averages all remain down but the fastest green and yellow have decreased in downside velocity. Until price turns up and makes moves above these averages, the downside potential remains.   

The silver market has been moving in impulses of 30 day lows since the rally began.  Here below you can see the last four timeframes as another is due here.  These signals are somewhat reliable sometimes coming right on time, other times off a few days.  Like all cycles, they do not always perform.  THEY WORK BEST in a sideways market....as you can see by the chart, that is what silver has been in for a few months really.  Based on this cycle, one thing we can be pretty certain of is this.............the NEXT TWO WEEK trend is about to get going.  Once in a while this cycle will do what is called a CYCLE INVERSION where the time period becomes a PEAK instead of a bottom.  We're watching this cycle carefully as the next two weeks is USUALLY upside oriented and would favor silver bouncing towards mid month.  In the event that silver decides to sell off into mid month, we would view it as a potential bottom and a new uptrend into mid winter would develop from there.  However, if silver follows its usual script,  a RALLY INTO MID MONTH is the usual cyclical pattern. 

Lets scroll down and see what the weekly chart shows..........

Weekly chart of Silver below:

The black uptrend line and the high at 21.44 is major resistance.

RSI nearing the 45 area...a place where last two lows registered.

Need to hold this price area or a move to the red (200 day) moving average next.

Williams % R shows not at bottom.

MACD rolling over adds to bearish case.

The weekly chart of silver from a technical perspective still is suggestive that the correction might not be complete from a medium term standpoint.  For the most part silver just bought time last week and still needs to make a short term decision.  The chart above is a LOG scale so I could show in percentage terms that silver has not had a big pullback in context as to where it has come from. 

One of the more interesting ways of looking at this is that the last 3 months in silver shows that each 3-4 week pullback has gotten a rally right back up.  Can we be in for more of the same in silver as has been the case since September ?   That is still a possibility even if we move back to the 16 dollar area.

I've been waiting to see a LARGE DROP IN THE COT SHORT DATA (longs and shorts on the COMEX) but to be honest it has not really shown up yet.  There are a few banks (probably shills for the government) who are DANGEROUSLY short this market.  It really questions the rules that the exchange commissions have set up. The fact that the open interest is not decreasing is setting up for a potential blow OUT of some kind.  I think if the market forces were left on their own it would be to the upside.  IF anyone EVER CALLS IN A big order OF SILVER AND WANTS DELIVERY, THE PRICE IS GOING TO BLOW SKY HIGH.  On the other side of the silver coin however is the fact that the short side of this market might be too well connected to not have a government intervention.  GATA released a document that Vietnam is suspending the trading of Gold.  The reason of course is the currency drop in the DONG (what a name for a currency) but that is not what the spin was.

But lets get back to the chart.  The pattern itself at the top of this chart is MORE OFTEN then not an ENDING pattern to a trend suggestive that a correction of medium term proportions to even lower levels of price could be the outcome.  With the last two weeks having almost identical price one would think that a move above or below this range by more than 10-20 cents could set the pace for the next few weeks.

Typically silver does not peak until mid winter unless the economy is in much more serious condition as is currently thought.

What next ?

We're going to go with the same strategy as last week and that is as long as we can hold the 16.60-16.75 area, the potential to try and rally from there still cannot be eliminated from the mix.   We believe the odds are favoring that silver might trade in another tight knit range this coming week in the 16.75 - 17.43 area. Clearly a break of support listed above would suggest a move down to under 16.   

Resistance is 17.10 - 17.25   17.33-17.43 and 17.58 to 17.80.

Support is thin........16.60-16.75,  15.40-15.89 and 13.91.

In summary, the weekly chart and the congestive pattern doesn't eliminate a bounce here even into mid month.  The potential to trade back to the 18.00 level and higher is still a potential.  However, the potential for a failure on the upside is certainly an outcome that need be watched. 

ONE THING FOR SURE..........WE HAVE BEEN HANGING AROUND THIS AREA TOO LONG ALREADY.........and silver won't take much more of this trading just below 17 without a breakdown to the next support area.

BOTTOM LINE:  ANY move that violates the 16.75 area will give impetus to the downside to at least the red or blue downtrend lines on the 60 min chart.  FIRST things first, we need to get back above 17.10-17.33 ish.   A FAILURE TO MOVE UP HERE will also be a warning that the metals are not yet down with the downside.

We are entering week 5 of a potential 6 week pullback.  We think then NEXT BOUNCE or rally attempt begins either this week or the week of the 16th.  Those are my two targets.  From there, we suspect that the winter leg of the metals rally will take hold. 

The concern is the look of the weekly chart and HOW CLOSE SILVER is from its lows.  Any positions taken here should have a tight stop.  The issue is that while we could be bouncing here, we are concerned that the medium term still has correction capabilities.  

A break of last weeks lows (only 20 cents from here) would suggest another leg down.  SUPPORT HERE and a move towards 17.33 would be underway. 

Odds favor silver bouncing on Monday in a attempt to turn the short term up.

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