By: Clive_Maund
Silver has fallen back over the past week as expected, and although its uptrend
from late June has now failed, which is viewed as significant, it managed to
hold up above nearby support which may generate a bounce early next week.
However, this should not be a cause for celebration by silver longs, as overall
the picture for silver continues to look precarious in the extreme. We can see
why on the year-to-date chart below, which shows that silver appears to be
completing the B-wave of a large 3-wave A-B-C decline, the 3rd wave of which,
believed to be imminent, is likely to be really severe and will devastate silver
longs.
On its 6-year chart silver looks like it is completing a classic large top
formation. First it rose vertically to hit its most overbought levels late in
April since the good old days of the Hunt brothers back in 1980. Then a panic
selloff hit, triggered ostensibly by hiked margin requirements (of course, its
being insanely overbought had nothing to do with it), all of which was
accompanied by the huge volume characteristic of a top. Lastly, the
johnny-come-latelies are corralled into silver by proliferating cheerleaders to
drive the weak rally back towards the highs that we have seen over the past
couple of months. There is just one instalment left to go, the drop down to the
support shown at the lower boundary of the top area, the failure of that
support, and the final devastating plunge that leaves hordes of silver
speculators hung up in the large top area and smarting from massive losses.
clivemaund.com subscribers are prepared for this with our Complete
Toolbox for Capitalizing on a Gold & Silver Plunge.
The likely reason for a severe decline in silver, and in commodities
generally, and a heavy correction in gold, which is another deflationary
downwave that has been signaled by the dollar breakout, is discussed in more
detail in the Gold Market update.
The latest silver COT, shown below, looks quite bearish with a quite high
Commercial short and Small Spec long position. In comparison, the gold COT looks
considerably more positive.
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