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Inquiring minds are watching silver futures get smacked this
Sunday evening. Here are a couple of charts to consider.
Silver 15 Minute Chart
Silver Monthly Chart
The monthly chart looks ominous. It seldom pays to chase spikes like that, regardless
of fundamentals or perceived
fundamentals.
Where to From Here?
I was not even going to comment on silver tonight because of my sale last Wednesday as noted in Taking Silver Profits - Swapping Silver for Gold.
What changed my mind was
a post this evening by Zero Hedge: More On The Silver Dive: "Massive Sell
Orders" Coupled With Bolivian Nationalization Halt Combine
For Perfect Weak Hand Shakeout Storm
Looks like
the old sell into low volume trick to flush
the stops and kill the weak
hands has worked again. Throw in last week's two CME margin hikes and Friday night's margin bonanza by MF Global,
and one had a perfect storm set up for another wipe out in silver to start the week.
In the meantime, silver promptly managed to retrace
over 50% of the move shortly after
the dump. At this point whatever holders remain following last week's margin action and this evening's fine example of shock and awe will likely
need far more energy and
capital to be shaken out
by the same entities whose primary goal is to prevent the surge in silver and ongoing capital-sapping collateral calls. Since none of
the actual fundamentals before the long-term trajectory in silver (and gold)
have changed, this appears like a
rather attractive entry point.
Lastly, one should recall that silver
had a mini 10% correction last week
and not only promptly recovered but nearly passed the $50 level shortly thereafter. This time will not be any different.
I Don't
Know, Zero Hedge Doesn't Either
Perhaps Zero Hedge is correct. Silver may be
headed higher, much higher. However, he sure as hell does not know.
Ironically, in spite of saying
"this time will not be any different",
he is banking
precisely on "this
time is different".
The reason is parabolic spikes never end well. The problem is figuring
out when they may end. As for me, I see nothing attractive about buying
silver at $43 in a parabolic spike, when it was
$17 less than a year ago.
Technically, there is minor support at $30 but there is no major support until the low $20's.
That said, I have been wrong
many times before and I may be wrong
again. However, I do not see a good buy-the-dip setup here, in parabolic spike correction that may have just started, when anti-dollar sentiment is extreme, in a seasonally unfavorably period for precious metals.
Regardless of what happens, there is a lot of merit for being on the silver-sidelines until August when seasonal factors are more
favorable, and rabid bullishness
may have worn off.
Of course, this time could
be different.
What's Going
On?
If silver corrects further,
expect GATA and all of the silver
conspiracy advocates to
come out of the woodwork screaming
"manipulation".
Instead, I propose the "real deal". If silver corrects hard, it is because everyone
and their brother is already "all in". When no buyers are left to support silly prices, crashes happen.
Should silver propel higher, then it will
be because the pool of greater fools has not yet exhausted itself.
Mish
GlobalEconomicAnalysis.blogspot.com
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Thoughts on the great
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