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Although
some technicians we respect think bullion’s correction will stretch
into summer, we think it will be over within a week. In our experience,
powerful bull markets recoup violent selloffs with rallies that are just as
violent. Silver’s correction has been violent indeed, savaging quotes
by 25 percent in just a few days. The catalyst for this brazen shakedown was
news Sunday night of Osama bin Laden’s death. Who needs bullion when
the world is about to become an oasis of peace, right? Yeah, sure. When the
revelers return to their senses the world will still be a dangerous place,
the central banks will still be printing money by the trainload, and nothing
will have changed to diminish the defensive appeal of precious metals.
 
Under
the circumstances, we doubt that Silver will need much base-building to
launch an assault on the supposed $50 “barrier.” We view that
number not as impenetrable supply, but rather, as a fat carcass waiting to be
picked clean by voracious buyers. Let J.P. Morgan and their ilk try to hold
the line at $50. They’re going to be dead meat eventually, so why not
now? In our years of experience on the trading floor, huge supply tends to
coax forth huge demand. As traders like to say, opportunity moves to size.
And while the bad guys may have deep pockets and the ability to create tons
of “paper bullion” at will, any suspicion that they are trying to
cap Silver at $50 is going transform otherwise docile, go-along buyers into
aggressive opportunists. This will prove to be equally true for Gold, we are
certain. The Chinese government, for one, has given its blessing to any
citizen who wants to buy the stuff. Want to stand in their way?
Precise Numbers
From a technical standpoint, July Silver, currently
selling for about 39.260, looks like it still has a ways to fall. To be
precise, we see a turn from exactly 37.165, a “Hidden Pivot”
support identified by our proprietary method of technical analysis. (Click
here for detailed information.) However, if that
support is breached on a closing basis, we’d infer that still more
weakness awaits to as low as 35.390. Whatever the case, we’ll be
speculative buyers at either number, using the “camouflage” entry
technique that hundreds of Rick’s Picks subscribers have
learned by taking the Hidden Pivot
Webinar. With regard to Gold, look for the June Comex contract, currently at 1518.20, to turn decisively
from exactly 1491.80. If the rally out of the hole is as strong as we expect,
you’re going to see bears diving for cover by week’s end or early
next.
Rick Ackerman
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Information and
commentary contained herein comes from sources believed to be reliable, but
this cannot be guaranteed. Past performance should not be construed as an
indicator of future results, so let the buyer beware. There is a substantial
risk of loss in futures and option trading, and even experts can, and
sometimes do, lose their proverbial shirts. Rick's Picks does not provide investment advice to
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purchase or sale of any security or investment. From time to time, its editor
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Contents © 2011, Rick Ackerman.
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