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Silver Looking Increasingly Ominous, Crash Ahead?

Commodities / Gold and Silver 2011 Sep 11, 2011 - 11:42 AM GMT

By: Clive_Maund

Commodities

Best Financial Markets Analysis ArticleThe picture for silver looks increasingly ominous and it is suspected that we are close to a major breakdown that will lead to a violent plunge, of a similar nature to that which occurred early in May. The picture has darkened over the past week with increasingly bearish action by gold and a major dollar breakout, that was predicted on the site a few days before it occurred in the article The Great Dollar Shocker.


The year-to-date chart for silver shows the rally from the May - June lows to be insipid and weak, especially given the sparkling performance by gold over the past several months, but perhaps this is not so surprising given the "shock and awe" treatment meted out to silver speculators early in May, some of whom understandably appear to have adopted a "once bitten twice shy" approach to silver ever since. However, there is an old saying that "hope springs eternal in the human breast" and, knowing this, silver's cheerleaders have been shepherding their surviving flocks back into silver in recent months, but sadly our latest charts suggest that they are likely in for another fleecing and they may not survive the next one.

While we have had some trouble with the wave count over the past several months - most Elliot wavers get lost in a labyrinth of excessive mentation, which is why, as practical speculators, we don't bother with wave theory much and instead focus on more usable indicators like support and resistance levels and volume - it is now looks like a very dangerous wave pattern is completing in silver - the B-wave of a large A-B-C correction, and if this interpretation is correct, which is being made a lot more likely by the increasingly bearish action in gold and the dollar breakout, we could be about to witness a devastating C-wave crash in silver, which will wipe a lot of silver speculators. With the price and its moving averages now considerably more tightly bunched than they were before the May smash, there is the potential for the price to break down rapidly through these moving averages, despite their positive alignment, take out the support near the May - June lows and enter into a near vertical descent.

On its 6-year chart silver looks like it is completing a classic large top formation. First it rose vertically to hit its most overbought levels late in April since the good old days of the Hunt brothers back in 1980. Then a panic selloff hit, triggered ostensibly by hiked margin requirements (of course, its being insanely overbought had nothing to do with it), all of which was accompanied by the huge volume characteristic of a top. Lastly, the johnny-come-latelies are corralled into silver by proliferating cheerleaders to drive the weak rally back towards the highs that we have seen over the past couple of months. There is just one instalment left to go, the drop down to the support shown at the lower boundary of the top area, the failure of that support, and the final devastating plunge that leaves hordes of silver speculators hung up in the large top area and smarting from massive losses. clivemaund.com subscribers are prepared for this with our Complete Toolbox for Capitalizing on a Gold & Silver Plunge.

By Clive Maund
CliveMaund.com

For billing & subscription questions: subscriptions@clivemaund.com

© 2011 Clive Maund - The above represents the opinion and analysis of Mr. Maund, based on data available to him, at the time of writing. Mr. Maunds opinions are his own, and are not a recommendation or an offer to buy or sell securities. No responsibility can be accepted for losses that may result as a consequence of trading on the basis of this analysis.

Mr. Maund is an independent analyst who receives no compensation of any kind from any groups, individuals or corporations mentioned in his reports. As trading and investing in any financial markets may involve serious risk of loss, Mr. Maund recommends that you consult with a qualified investment advisor, one licensed by appropriate regulatory agencies in your legal jurisdiction and do your own due diligence and research when making any kind of a transaction with financial ramifications.

Clive Maund Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

colin syme
14 Sep 11, 05:38
Gold silver versus Fiat money

It depends what your motivation is; making a quick buck or protection against debasement, inflation or complete currency collapse.

Most small investors fall into the latter group and a dip,or worse in the silver price presents an opportunity to pile in and buy even more.

The fact is that while interest rates remain low there is little advantage to sell their metal at a loss, then lose even more as inflation eats away their savings.

Most people l know have little or no faith that paper money is worth the paper it is printed on and l suspect that a fall in the price of silver and/or gold will make very little difference to that attitude.


N. Alan
14 Sep 11, 14:55
Fundamentals

Just curious as to why you don't touch on the fundamentals driving the silver price? As far as I am concerned technical analysis is only good for finding entry and exit points. Other than that it is pretty useless. Would like to see you touch on the silver fundamentals. Maybe if you researched them you might change your mind on the direction of price.

And further, what about your past predictions? Why don't you tell us how you fared on those?


Sovereign
18 Sep 11, 13:37
Counterpoint to assertions in this article

Clive, your article is clearly demonstrative...

Technical Charts function with the presumption that their underlying assets are being traded in a free market.

Charts are virtually worthless in manipulated markets. A(nother) Class-Action was just filed against JPM for manipulation of silver. The ramifications are huge.

And, let's not even bother to consider the underlying fundamentals here. For example, there are reported to be physical shortages in the ETF SLV of some 38 million ounces of physical metal... and from 50 to 100 to 1 paper contract ounces for each physical ounce above ground...


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