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Aren´t silver investors funny??
- they were raving bullish when the price was close to $50, now that it's down
about $15 and near to $35 they are despondant. In
the words of that famed alien with pointed ears, this is "highly
illogical". Here on earthbound www.clivemaund.com we have a simpler term
for it: "plain nuts". While picking an exact top or bottom is never
easy, you can always rely on the collective behaviour
of idiots as a guide. So the fact that they are now wary is good news for
silver.
On its 6-month chart we can see how silver went
parabolic to become fantastically overbought by the end of last month, as
shown by the oscillators at the top and bottom of the chart and by the huge
gap that opened up with its 200-day moving average. During the week before it
crashed down there were clear candlestick warnings of imminent failure, with
a marked Reversal Day appearing that took the form of a long-legged doji that came close to being a strongly bearish
"gravestone doji". Now that it has
crashed down close to very strong support and the uneducated public have
become alarmed and turned bearish, we are seeing the opposite type of
candlesticks appearing - long tailed bullish candlesticks, including a
"bull hammer" on Thursday. This is saying to us that a significant
tradable rally is imminent, even though there is likely to be a another downwave later that
takes silver to a lower low probably in the $28 area to complete the reactive
phase.
 
The leveraged silver ETFs magnified the manic
depressive lunacy of silver speculators of course, with the ProShares Ultra Silver shown below, which appeared on the
site as part of an article about silver bull ETFs and Call options in same,
taking a more than 50% haircut in under 2 weeks. It has arrived back in a
zone of strong support is a state of massive compression - meaning that it
has reacted back fast and deep into the preceding major uptrend, a situation
that normally results in a big relief rally.
It is worth taking a look at the silver COT chart
here in relation to the 6-month silver chart. Although the COT chart was
highly deceptive ahead of the collapse as it looked bullish, it is still
useful as it shows that we have the lowest Commercial short and Large Spec
long positions by a substantial margin for the period of this chart, and in
fact going back further - at least a year. This means that at least as far as
the COTs are concerned, there is room for a big rally in silver going
forward. Actually the COTs are even more bullish than this chart would
suggest, as it is up to date as of last Tuesday, and it thus reasonable to
suppose that the Commercial short and Large Spec long positions have dropped
back even more on the sharp drop in silver that occurred on Wednesday and
Thursday of last week.
As we are professionals in the field of market
analysis, but not in the field of psychiatry, we of course only have layman's
terms to describe the crazed state of mind of the average silver speculator,
such as bonkers, dippy, doo-lally, gaga, garrity, kooky, loco, moonstruck, off their rockers,
round the twist, a few slates short of a roof, lost their marbles, mad as a
March hare, not firing on all plugs, round the bend, unhinged etc and you may
be able to think of some more. They would make great subject matter for a PhD
thesis, but we don't really want the men in white coats turning up and
dragging them off, despite the title of this article - we need these people
to keep buying high and selling low so that we can the exact opposite.
Clive Maund
Trading the precious metals and Energy
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