Very interesting, possibly telling chart

[DeanStockwell]

Circled in red are the factors that cause me to be extremely worried...

Something BIG is going to happen...IMO it's not possible for silver to be ranging now until something tremendous happens...possibly volatility silver has never seen before. Volatility never seen before in the commodity markets.

As I've said before, I feel like a psychiatrist examining an unmedicated, severely bipolar patient.

I've tried calling this top many times; and I'm out of paper silver positions for now. The reasons are still the same...technical indicators which have a high degree of accuracy; and now the bearish signals are growing as exponentially as the price of silver.

But I'm prepared to buy and buy HARD if we crash soon. Yet I'm not going to make a prediction, as I do not have a current long or short position.

As crazy as it sounds, this chart is the most extreme I have ever seen in my lifetime.

Looking at this chart, do you become concerned? Can anyone else post charts to justify the price rise, or to suggest that it will extend further? Or are technicals out the window; and we are riding on some kind of energy which has swept the market, never before seen in any market of our time?

[DeanStockwell]

In all respects this was a response to Neilgin1's thread about the power behind this bull market.
He recently said:

"Thirty years, trading commodities and physicals, and i have never seen anything trade like silver, circa 2008 to today.

the power behind it, is so intense. a lot of guys say its a short squeeze. Yeh, sure, shorts are being squeezed, no doubt, but its not only that, there is new money coming in, there are a lot of old time players ramping up physical positions.....foreign money, everything, and my only entreaty to ya'll is this: dont be foolish and try to pick tops, don't get it in your minds that silver is overvalued, because the reality is, that silver is vastly undervalued.

thats not just my opinion, that's the ticker's opinion, the screen. used to be a "ticker", now its a screen, and its saying, "I want TO and I WILL go higher".

[aristobolus]

I bet you never saw figures like this as well http://www.usdebtclock.org/

[geewhzz]

http://research.stlouisfed.org/fred2/series/BASE

look at the blip in 1999 which blew up the nasdaq bubble and the housing bubble, and then look at the recent years.

[moparal7]

I think silver has a long way to go. Looking at the Acc/Dis part you can see a base from May 08 to Sep 10. The Smart Money is acccumulating. The run up is in process now.I have read in other posts how members have heard complete strangers talking about silver. One must be cautious now. When people on the street are talking corrections are almost sure to follow. There will be a couple of shakeouts before the top. These shakeouts will separate the boys from the men.I could not post any of my old charts because my scanner is broke. This is my first post and I am amazed at the intellegence of and info given by the members.

[ed_vantage17]

So if/when the major correction comes, what do you see as the bottom? Will we be back to 20 years of $5-$10 an ounce or are those days gone forever?

[beauanderos]

Dean, try posting a chart that compares what you're displaying with an inverse of the dollar's pricing action. They're probably close to being parallel. If the dollar weren't depreciating so rapidly, your technical analysis would be screaming "get out!" As it is, though, perhaps it is just saying "better be careful, this is unusual." I agree, you could sit back and watch for now, limit new buys, perhaps pull some profits. And yet, time and again, I've felt inclined to do just that, and remorse for lost gains would have been my companion had that been the action I had taken. Those who retort "this time it's different" are not claiming that parabolic charts don't return to the mean, but that a chart like silver's would have the amplitude of the advance attenuated by accounting for the concomitant degradation of the dollar accompanying it. In simpler terms, it's not as bad as it looks. And finally, it's not just the dollar that's depreciating. This is a global phenomena. Whatever drivers that some use to justify a pullback are not limited to America, so a recession or depression would have to worldwide to degrade silver's industrial usage.

[beauanderos]

Another factor which may be diverting some of the expected impact of a projected pullback is already in play. That is, the silver mining equities have regressed a fair amount already from their 52 week highs, some as much as fifteen and twenty percent. Investors continue to pile into silver ETF's, and perhaps by some perverse reasoning, could this be their form of holding a physical core not to be traded? I do know that since GLD and SLV were created, money flows into those entities have retarded the usual price performance of the related equities. One other factor that does indubitably represent a headwind is seasonality. That is a very real force to be reckoned with, and I would predict, if not a pullback due to that annual phenomena, then at least a slowing of silver's climb, allowing the moving avg's to approach silver's current position, and smoothing some of the volatility being experienced. "Hey, hey, hey... let's be careful out there."

[brian0918]

I don't believe silver is anywhere near a bubble. Sure, it is going parabolic, but it may simply be arriving at a "new normal". The last time silver was in a bubble was for a very specific reason - the Hunt Brothers were attempting to corner the market, an action which was not sustainable in the long-term. They were leveraging up buying with borrowed money. It only took a significant enough dip in prices for them to be unable to meet the margin call, and burst the bubble.

So in that case, silver prices clearly were unsustainable at a fundamental level. Can you point me to a *fundamental* reason why silver prices are not sustainable at this level? In Zimbabwe, silver prices skyrocketed, but that didn't mean they were ever going to come back down again - the currency was permanently debased. We're doing the same thing in the US.

Comex has been repeatedly hiking margin requirements for silver lately, trying to shake out people like the Hunt brothers, yet this doesn't seem to impact the price.

The reason why this is different is because people and nations are using gold and silver as a store of value now. They used to use the US Dollar as a store of value, but that is not working anymore. If they didn't have such short memories, they would realize that the very reason the US Dollar became a store of value was because it was backed by gold. When that ended in the 70s, the US Dollar was not redeemable for anything scarce or finite, so there was nothing preventing the inevitable decline in dollar purchasing power. Can something that is used as a store of value enter a bubble? Certainly - people can speculate (e.g. mining stocks), but right now mining stocks are flat. In a silver bubble, mining stocks should be soaring from speculation.

Is it possible that silver/gold could drop back down for an extended period, despite never entering a bubble phase - maybe, if world governments create some new fiat currency as a store of value. But that currency will only last so long as they are able to leech off of productive countries foolish enough to buy into the currency. Once they run out of other people's money to spend, that currency will fail like all others, and people will flock back to gold and silver.

[beauanderos]

I don't believe silver is anywhere near a bubble. Sure, it is going parabolic, but it may simply be arriving at a "new normal". The last time silver was in a bubble was for a very specific reason - the Hunt Brothers were attempting to corner the market, an action which was not sustainable in the long-term. They were leveraging up buying with borrowed money. It only took a significant enough dip in prices for them to be unable to meet the margin call, and burst the bubble.

So in that case, silver prices clearly were unsustainable at a fundamental level. Can you point me to a *fundamental* reason why silver prices are not sustainable at this level?

Comex has been repeatedly hiking margin requirements for silver lately, trying to shake out people like the Hunt brothers, yet this doesn't seem to impact the price.

The reason why this is different is because people and nations are using gold and silver as a store of value now. They used to use the US Dollar as a store of value, but that is not working anymore. If they didn't have such short memories, they would realize that the very reason the US Dollar became a store of value was because it was backed by gold. When that ended in the 70s, the US Dollar was not redeemable by anything scarce or finite, so there was nothing preventing the inevitable decline in dollar purchasing power. Can something that is used as a store of value enter a bubble? Certainly - people can speculate (e.g. mining stocks), but right now mining stocks are flat. In a silver bubble, mining stocks should be soaring from speculation.

Is it possible that silver/gold drop back down for an extended period, despite not ever entering a bubble phase - maybe, if world governments create some new fiat currency as a store of value. But that currency will only last so long as they are able to leech off of productive countries foolish enough to buy into the currency. Once they run out of other people's money to spend, that currency will fail like all others, and people will flock back to gold and silver.

good post. The reason there was a price dip was because the CFTC at that time made an arbitrary unilateral decision that only selling could take place, no buying. Of course the price fell! The Hunts were made out to be scapegoats, yet they did nothing wrong. Contrast that to all of the "insider trading" of the commissioners and their cronies who profited immensely by going short before this action was taken, but were never prosecuted for their ill-gotten gains.

[beauanderos]

Three reasons that silver still has room to run:

http://moneymorning.com/2011/04/29/the-/

[BOHICA]

Three reasons that silver still has room to run:

http://moneymorning.com/2011/04/29/the-/

That article should be required reading for everyone here. It is full of insight and information. Thanks for posting the link!

[aristobolus]

I think silver has a long way to go. Looking at the Acc/Dis part you can see a base from May 08 to Sep 10. The Smart Money is acccumulating. The run up is in process now.I have read in other posts how members have heard complete strangers talking about silver. One must be cautious now. When people on the street are talking corrections are almost sure to follow. There will be a couple of shakeouts before the top. These shakeouts will separate the boys from the men.I could not post any of my old charts because my scanner is broke. This is my first post and I am amazed at the intellegence of and info given by the members.

Welcome to the forum; based on your opening post you will be an asset to our community.

[DeanStockwell]

Physical holders don't panic.
Paper players...I don't know what I would do in this situation. We could see silver end up positive tomorrow; it wouldn't surprise me. Asia has lately been notorious for volatility and large price swings which are reversed by New York's close. I'm just glad I'm not holding; trading just compounds my insomnia.
Dollar is down as of now...very odd that silver is down 8%.

This COULD be a buying opportunity, but I have a bad feeling about this drop. The technicals support it, and as silver taught me last month(that market education tuition ) trying to catch falling or upwards-shooting knives is a very dangerous business. This could extend itself down much further. If you bought in at much lower levels I would still take some profits, though maybe not as much as I advocated before. Good luck to everyone!

[RR GUY]

If, and that's a big if, silver is going to move higher, it is going to have to consolidate the gains. That being said, I would expect a failure at the 50 day MA, and some shakeout between the 100 and 200 day averages. The short term charts reveal a double top at 48 or so and I would expect this to hold for some time. The long term holders and central governments will also want to clear out the speculators which will take some time. The fundamentals may change the technical picture some, but only time will tell.

[shinnosuke]

If, and that's a big if, silver is going to move higher, it is going to have to consolidate the gains. That being said, I would expect a failure at the 50 day MA, and some shakeout between the 100 and 200 day averages. The short term charts reveal a double top at 48 or so and I would expect this to hold for some time. The long term holders and central governments will also want to clear out the speculators which will take some time. The fundamentals may change the technical picture some, but only time will tell.

So when you see claims on this forum of $100 silver this year, do you just shake your head in wonder at the bullish exuberance? When some claim there is a whole new paradigm at work, do you just ignore them? Not trying to pick a fight...but if you are right about that "big if" of silver moving higher, I want to know more.

[beauanderos]

When things begin to fall apart, they will do so very quickly. The world by the end of this year could be a place entirely unfamiliar to you now. Prices will do what they will, I expect that both silver and gold will be much higher by year's end... but you may not like your environment.

[RR GUY]

If, and that's a big if, silver is going to move higher, it is going to have to consolidate the gains. That being said, I would expect a failure at the 50 day MA, and some shakeout between the 100 and 200 day averages. The short term charts reveal a double top at 48 or so and I would expect this to hold for some time. The long term holders and central governments will also want to clear out the speculators which will take some time. The fundamentals may change the technical picture some, but only time will tell.

So when you see claims on this forum of $100 silver this year, do you just shake your head in wonder at the bullish exuberance? When some claim there is a whole new paradigm at work, do you just ignore them? Not trying to pick a fight...but if you are right about that "big if" of silver moving higher, I want to know more.

This is after all a pro-silver board so I expect rampant bullishness here. I am neither a bull or a bear. I have been a long-term owner of silver for over twenty-five years with a very low cost basis. I invest in silver and gold for three purposes, first and foremost to store value, second, because I prefer a portion of my wealth to be tangible and lastly, because I've been a coin collector since I was a kid. I think that what sets my views apart from many investors on this board is that five and ten percent moves mean nothing to me, but mean real profits and losses for other board menbers. One thing that I have learned as an investor in multiple asset classes is not to be too sure about anything. With regards to silver's move higher, well anything is possible. However, nothing goes up in a straight line. I'm a contrarian investor by nature, and thus I don't think that we are there yet in terms of the public's participation in this asset class. Like I mentioned in my previous post, the charts do not lie, and clearly we have much backing and filling to do if the asset is going to move higher.

[shinnosuke]

If, and that's a big if, silver is going to move higher, it is going to have to consolidate the gains. That being said, I would expect a failure at the 50 day MA, and some shakeout between the 100 and 200 day averages. The short term charts reveal a double top at 48 or so and I would expect this to hold for some time. The long term holders and central governments will also want to clear out the speculators which will take some time. The fundamentals may change the technical picture some, but only time will tell.

So when you see claims on this forum of $100 silver this year, do you just shake your head in wonder at the bullish exuberance? When some claim there is a whole new paradigm at work, do you just ignore them? Not trying to pick a fight...but if you are right about that "big if" of silver moving higher, I want to know more.

This is after all a pro-silver board so I expect rampant bullishness here. I am neither a bull or a bear. I have been a long-term owner of silver for over twenty-five years with a very low cost basis. I invest in silver and gold for three purposes, first and foremost to store value, second, because I prefer a portion of my wealth to be tangible and lastly, because I've been a coin collector since I was a kid. I think that what sets my views apart from many investors on this board is that five and ten percent moves mean nothing to me, but mean real profits and losses for other board menbers. One thing that I have learned as an investor in multiple asset classes is not to be too sure about anything. With regards to silver's move higher, well anything is possible. However, nothing goes up in a straight line. I'm a contrarian investor by nature, and thus I don't think that we are there yet in terms of the public's participation in this asset class. Like I mentioned in my previous post, the charts do not lie, and clearly we have much backing and filling to do if the asset is going to move higher.

Alright, I see where you are coming from now. Common sense approach. Gotcha.

[DeanStockwell]

Looks like technicals aren't dead!

If the extreme technicals worked on calling the correction, then they are now telling me to BUY-BUY-BUY.

We are riding along the 20 SMA...I'm in SLV at $43.72, Cut losses at $42.50, take profits at $46.

As I said last night, buy silver spot below $44.50...the 20 SMA is a perfect entry point for this play.

Downright sexy chart. Circled in green are my bullish reasons.

[68Camaro]

Have to say, while I am still listening in on the chance that I will learn something, I don't understand what's so profound about the above. I've personally documented elsewhere here an expectation of a correction near 50, expecting down to the 42-43 level. Several others have make similar predictions. I don't claim any specific insight other than common sense. Probably I was just lucky. But that's what it has done, so far. All the technical screaming of an imminent correction up through the mid 30s, late 30s, early 40s, mid 40s went for nothing.

A week ago the technicals were "insane". Now, a minor correction - an expected one at that, and it's sexy and buy, buy, buy. Seems odd to me.

Another poster further above says that the charts "do not lie". Hmmm... They only never lie when someone happens to guess right. The times they are wrong just don't get mentioned much afterwards...

[DeanStockwell]

Charts do not lie. The only error comes from misinterpreting them
I'll quote myself: "I've tried calling this top many times; and I'm out of paper silver positions for now. The reasons are still the same...technical indicators which have a high degree of accuracy; and now the bearish signals are growing as exponentially as the price of silver."

Now, I feel we are oversold short term, and by looking at the charts one can clearly see that. Technicals have been bordering on insane for a while now...and I readily admitted that I was wrong in trying to call the top in april.

Accept the fact that markets oscillate: technicals are one way to determine if prices are over or under extended.

I'm waiting for the silver rebound, then I will initiate a long gold/short silver play to play the G/S ratio like Market Harmony suggested last night.

Only time will tell who is right...although the technicals are usually accurate when they are this extreme.

[68Camaro]

Well $44.50 seems "good" to me also. Bought some more physical today.

[Rodebaugh]

Solid Call Dean.....respect.

[68Camaro]

Not focusing this on Dean, but regarding analysis in general.

I'm an analyst by education and training, though a completely different type of analysis. I now manage a department of analysts of a number of types. What defines a good analyst is when they can make a consistent, accurate call, which is numerically within 10% or better of experimental data - and do it in advance of the experiment. An analyst who's work is only published after the experiment, when they have a chance to tweak the analysis to fit the data, is merely a curve-fitter. The world of economic TA (in my view) is full of people that either analyze only after the fact and then claim success, or only publicize their successes and ignore their failures.

For Dean, still willing to learn. Guess the question I would pose to you, which I pose to my analysts when something goes wrong, is this, if you would answer it. (Apologies if you did further above, because I haven't necessarily caught up with all past posts.) Looking back a few weeks, is there something that you now think you should have considered differently, within TA, that would have led to you to a different - and correct - conclusion of what has happened very recently? The reason I ask this is the most important thing is to be able to correct mistakes going forward. I'm asking specifically about silver because I would dearly love you to be able to accurately predict the next top (especially if you share it!).

Oh, and could I tell you the mistakes I've made.... They would fill volumes. But hopefully I've only repeated mistakes a few times.