Sunday, February 7, 2010

Silver’s Most Important Price Point

All,

Pay real Attention:

The Silver chart is warning that a MAJOR PRICE TEST AREA is the 15-16 dollar area for silver. While there is rampant bullishness for the future, the chart is telling us to pay close attention to this area. Should history repeat itself, the chart shows that a break of this important area could lead to a test of the 11.50 – 12.50 area where the lower channel lines are. That is what price did the last time we broke this price area when money flow was dropping. On Friday Silver broke the $15 an ounce support and went down to 14.85 before closing over $15. In the case lower channel of 11.50 to 12.50 an ounce for silver is reached between now and summer, the miners would take real heavy price decline from Friday's close.

If the bull market is alive and well then Silver should hold the 15-16 dollar area and a new rally leg should develop. However the last 15 years have seasonally shown that the February time frame is a dangerous one for silver bulls.

Should a major credit crisis develop again like it did in 2008 I think silver could be very vulnerable over a 3-6 month period. Should we get a drop to the LOWER major channel lines it would be a great buy spot. Silver is not the only commodity that has been going down. Note the CRB commodities index.

In summary all commodity and stocks markets need to be watched carefully. The longer we get into this so called recovery the more the government numbers seemed cooked like Japan did in the 90’s. While the fundamentalists will eventually get their way in most areas, the timing element of silver and gold and any other instrument can swing wildly to the opposite side during times of panic.
If you get emotional & IMPATIENT, and ASSUME miners are cheap enough now and load up now for BUY and HOLD, and silver stays below $15 an ounce and goes to lower channel of 11.50/12.50 ( bottom), then your porfolio will take a heavy beating.
For the majority of the time, silver’s a great buy in the June/July timeframe and a good time to be light is the winter time. Read the Article:
http://news.silverseek.com/SilverSeek/1265238514.php

In conclusion, listen carefully to the LYRICS of this song, " Burning Bridges", especially when it comes to market. Friend is the one whom warns you about burning bridges regardless of whether you like to hear it or not.http://www.youtube.com/watch?v=AhKnEo9ZyEs

18 comments:

  1. Great post. Until proven otherwise the USD/SPX trends have to be respected as overriding, until proven otherwise. Going long of any position before a break and hold of at least SPX 1090 has to be considered a high risk countertrend trade. Play at your own risk and keep your finger on the trigger. - Analyze.

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  2. Analyze,

    The song tells the story especially when it comes to stock market, those who listen and those who do not:
    http://www.youtube.com/watch?v=AhKnEo9ZyEs

    palmer

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  3. Great song, I book marked it. - Analyze.

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  4. Your previous post "Tin Foil Saturday" may as well apply to this one too. Although you warn your readers of the perils of investing in silver, isn't it best to tell them to look elsewhere? Don't you get it? Gold, silver and commodities are going to get crushed in the coming deflationary environment.

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  5. readers of this blog have multiple links and commentary on the history of silver and gold in a truly deflationary environment. Answer..they do quite well. ONLY in a good stable growing economic long term backdrop do silver and gold go into hibernation..gl You obviously have zero expertise in the precious metals.

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  6. The market this year is another traders market. Money can be made long and short in the metals and miners. As well as other stocks but I find it is best to stick with a sector and learn to play it well.

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  7. Anon,

    There is a huge difference between saying, " do not buy and hold Gold and silver stocks NOW at this level" vs. play the gaps, trade, or even short it and WAIT and be careful for lower level channel which then becomes buy and hold for a while. It's not black and white as you see it. SSRI for an example dropped from 24 to 6 in 2008 from early september to late October and physical silver went down from 20 to 8.5, within two months. The overall market took a beating till March of 2009 BUT Gold, silver along with Gold & silver stocks bottomed in October of 08 and after that they went up while rest of the market was taking it up the rear end. The best time for gold and silver stocks to make huge gains is during DEFLATIONARY environment when Gold and silver bottom which is much faster than rest of the market AND they start going up along with Dollar. When precious metals bottom and de-couple from the dollar especially BOTH going up is when miners make huge runs up since the cost of production including oil is down due to oil being down and silver and gold go up( higher margins) which is exactly what happened between October of 08 thru March of 09. Go and look at what happened to gold and silver stocks after October/November of 08. The point of the article you just read is not that stay away from gold and silver during deflation, IT's BE CAREFUL NOW since the prices have not bottomed yet. If Gold gets to 960 and silver around 11.50/12.50 during deflation THEN it's an awsome time to buy and hold gold and silver stocks regardless of what happens to other commodities, dollar or rest of the market.

    palmer

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  8. Great silver post Kli! I'm adding to ZSL again. I'm in her pretty heavy. I pulled some profit Friday when silver jumped back up. I'm figure I'll add more ZSL in the morning...watchinf London over night...GL All! Oh, I've got the SLV puts July 12/11s...we'll see. TXBlondie...

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  9. When cost of transportation and production goes down for miners which is during DEFLATION and Gold and silver prices de-couple from the Dollar is when huge gains can be made from going long the best miners with huge reserves, BE PATIENT and let market do it's own thing.

    palmer

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  10. Gold and Silver have 3 demand components.

    1. Industrial
    2. Luxury
    3. Monetary

    Demand items 1 and 2 are and will continue to drop during the not so secret stagflation competitive devaluation and quantitative easing coming forth right now and the subsequent defaltionary collapse in 1-2 years. Whoopie, governments and central bankers are not stocking up to stockpile engagement rings, electronic conductors or gold leaf their capitals. It's for item 3, as electronic fiat becomes more and more suspect with each round of competitive devaluations and quantitative easing, not to mention subsequent sovereign and corporate defaults.

    It will get to point, A nation wants 100,000 metric tons of wheat or 1 million barrels of oil, it better be willing to deliver half the gold up front. We are basically 1 EMP or large class X solar flare from that scenario, the economic equivalent is either doubling/tripling the money supply globally overnight or dumping all sovereign debt for cash.

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  11. Off the futures, breakout tomorrow over 1064 implies 1084 target, which should be a rollover point if the current downtrend is to remain intact. Break below 1056 equals go short for a 1040 or lower target. - Analyze.

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  12. To be more conservative wait for a 1053 break for shorting since it was a sticking point Friday. - Analyze.

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  13. Agree analyze ......and watch volume... I think volume will have more significance this year especially with the miners...to confirm. Light volume will be a concern near term.

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  14. You could get burned shorting PMs if Israel hits Iran. It looks like the time is drawing near.

    http://www.debka.com/article/8580/

    -C

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  15. Analyze, thats a good guide for playing this area. Both scenarios are what I am watching for and yes volume will be the key to identify which way it turns.

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  16. More on Gold & silver stocks performance during inflation & deflation:
    http://seekingalpha.com/article/126564-gold-and-gold-stock-performance-during-deflation-and-inflation

    palmer

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  17. -C. Sorry, don't believe Israel will hit Iran. Also, thanks friend for the timelines and price targets on gold/silver. Watching & waiting. Sis

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  18. No, the USA might tho :P

    If Ahmadinejad isn't just blowing smoke the time to strike would be soon, yeah.. They're working on the cork to the genie bottle as we speak if they're really enriching to 20%.

    Course maybe the economy can't take more war so we have to let him do what he wants, who knows.

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