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Sunday, July 31, 2011

Silver - August Turning Point

After a crash such as Silver experienced in May, there is most commonly a capitulation type of bottom followed by a strong rally.  For example, SPX capitulated in March 2009.  Silver never capitulated, but rather the lengthy period of sideways trade from mid-May to mid-July seemed to absorb the selling pressure sufficiently to bypass a capitulation.

The end result is that Silver could have one additional push higher in coming days due to the larger cycles in place.  From my point of view, the cycles for SPX are very negative going into August 10th +/- 1 day.  Lately Silver has been inversely correlated with SPX, therefore, Silver could be setting up to push higher into the 10th. 

However, due to the larger cycles, this also means that Silver topped in April, and a major lower high could complete by mid-August with a steep decline to follow. 

The picture for the US Dollar is the opposite.  There are clearly serious problems with fiat currency in the long run, but this is not the time for a real crisis in the US Dollar. 

After the topping process is complete, extreme weakness is anticipated for Silver.  With some small bounces along the way, the target is $18, and eventually much lower.  Ultimately, I see all of this being the early stages of a long term bull market for Gold and Silver.      

2hour Chart
        
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15 comments:

  1. SCJuly 31, 2011 at 10:34 PM

    As suspected on Friday, there was weekend news regarding a debt ceiling deal.

    SPX may take a few days and bounce into the 1320's, and maybe near 1330. The problem is that the cycles are really negative going into Aug 10th. So another downturn seems unavoidable.

    Let's see how things shape up early in the week.

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  2. SpudthorpeAugust 1, 2011 at 12:30 AM

    Thanks SC, I'm glad to see another post from you.

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  3. ThaiHawaiiAugust 1, 2011 at 1:43 AM

    So your call is 18 dollar silver and then new highs above 50?

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  4. MuzzAugust 1, 2011 at 4:25 AM

    Hi SC hope you had a good weekend? Thanks for the analysis on the SLV. When you are able can you post your chart on the SPX and what your thoughts are in the next few weeks. I agree there will be a short term bounce here but weakness will be back shortly. I would be interested to hear where you feel this market could drop to. We could even see sub 1200 on the SPX before seeing another rally up. It would be nice to catch the next drop I think it could be a good trade.
    Also would love to see your take on gold at the moment.

    Thanks SC :)

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  5. SCAugust 1, 2011 at 6:44 AM

    Thai,

    Once Silver has topped, I see it declining rapidly to $15-18. It should see a longer and larger bounce there, but the real bottom is still likely lower. Eventually, a multi-decade bull mkt for Silver and Gold looks probable.

    Thanks Muzz, yes charts coming for SPX and Gold.

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  6. comatAugust 1, 2011 at 6:51 AM

    Hi SC, so you think that silver will bounce from here to higher to 43-44 before turn over or silver will drop some then bounce?When you intend to cover your short in silver? Pls give your thought .Thanks

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  7. MuzzAugust 1, 2011 at 7:16 AM

    Markets are wild at the moment, up and down like crazy.

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  8. SCAugust 1, 2011 at 7:23 AM

    Silver may decline further early this week.

    Yes, that sure was an interesting start to the day for SPX.

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  9. BlakeAugust 1, 2011 at 8:15 AM

    SC- you sure that silver has more upside? Gold and silver look very heavy and i am pleased with the dollar reaction today. Maybe just marginally higher, but sure doesn't look like 43 is in the cards to me judging by today's action

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  10. AnonymousAugust 1, 2011 at 8:23 AM

    SC, what do you think the SPX will do from here?

    Went long at 1300 hoping for a rally, got bit on the ass!

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  11. SCAugust 1, 2011 at 8:29 AM

    The main point is that the cycles for SPX appear negative going into Aug 10th. So regardless of how things may bounce around early this week, I think there is going to be downward pressure into the 10th for the mkts.

    So if Silver is going to make a last push the window is open until the 10th.

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  12. SCAugust 1, 2011 at 8:34 AM

    Generally for SPX the probability seems better for a bounce in the early part of this week, and then things may deteriorate later in the week and especially early next week.

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  13. AnonymousAugust 1, 2011 at 2:46 PM

    SC, i have a question. if main market starts panic liquidation - it will sell speculative positions first, including silver, wouldn't it? why do you think traders would hold silver or even push it higher here?

    also, mining stocks look ugly, just like they did in April before metals turned south.

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  14. SpudthorpeAugust 1, 2011 at 3:55 PM

    There was mild buying on weakness in SPY and QQQ today, for the first time in weeks. This often occurs at market lows, which would support the call for a minor uptrend over the next few days. http://online.wsj.com/mdc/public/page/2_3022-mfgppl-moneyflow.html?mod=topnav_2_3000

    (I am still very bearish overall; I am only talking about the very near term).

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  15. SCAugust 1, 2011 at 7:54 PM

    Silver/Gold can act as a safe haven in times of fear, but yes, I agree overall it is just another speculative asset.

    Gold miners are starting to weaken for sure.

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