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Silver's Big Decline: Disturbing but Necessary?

IMG Auteur
Published : August 17th, 2010
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FOLLOW : Mining Stocks, Silver
Category : Investing

 

 

 

 

In this article, we would like to point your attention to the big picture regarding the silver market - since both metals usually move together the below analysis should prove useful to gold investors as well. (Click to enlarge)

 

 

On the very-long-term chart this week, emphasis is given to the TRIX indicator, which has declined somewhat in the past weeks. This is a bullish signal for the long-term as important developments usually occur after the TRIX reaches zero. There is a possibility that this level may be reached in the relative near-term, possible once we've seen the end of the summer decline.

 

A sharp decline in silver’s price could cause a substantial decline in the TRIX, which would be a healthy and normal development for the market. The coming decline might appear scary at the first sight, but if it does materialize - please keep in mind that it's something that will allow the market to move even higher in the long run.

 

Previous "second" rallies for the white metal have often been followed by declines after silver failed to move above previous highs. After that we've used to see corrections that took silver much lower - correcting 50% of the preceding rally. Silver may or may not get this low in its next decline.

 

The current retracement level is based on the 2008 low and the 2010 high. Since the 2008 decline was generally an unordinary development, the $14 target (as visible on the chart above at the 50% retracement) might be too low, and perhaps the $16 level would hold.

 

Summing up: Technically, lower silver prices will be healthy not only for silver but also for gold and mining stocks as well. We have seen massive rallies quickly follow severe declines in silver’s price. This may, in turn, eventually lead to higher silver prices, possibly the next rally would take silver to $25 - $35 area.

 

Disclosure: No positions

 

All essays, research and information found above represent analyses and opinions of Mr. Radomski and Sunshine Profits' associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Mr. Radomski and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above belong to Mr. Radomski or respective associates and are neither an offer nor a recommendation to purchase or sell securities. Mr. Radomski is not a Registered Securities Advisor. Mr. Radomski does not recommend services, products, business or investment in any company mentioned in any of his essays or reports. Materials published above have been prepared for your private use and their sole purpose is to educate readers about various investments. By reading Mr. Radomski's essays or reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these essays or reports. Investing, trading and speculation in any financial markets may involve high risk of loss. We strongly advise that you consult a certified investment advisor and we encourage you to do your own research before making any investment decision. Mr. Radomski, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

 

Przemyslaw Radomski

Editor, www.sunshineprofits.com

 

  

 

 

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Przemyslaw Radomski is the founder, owner and the main editor of www.SunshineProfits.com. Being passionately curious about the market’s behavior he uses his statistical and financial background to question the common views and profit on the misconceptions. “Don’t fight the emotionality on the market – take advantage of it!” is one of his favorite mottos. His time is divided mainly to analyzing various markets with emphasis on the precious metals, managing his own portfolio, writing commentaries, essays and developing financial software. Most of the time he’s got left is spent on reading everything he can about the markets, psychology, philosophy and statistics. Mr. Radomski has started investigating the markets for his private use well before starting his professional career. He used to work as an informatics consultant, but this time-consuming profession left him little time for his true passion – the interdisciplinary market analysis. Establishing www.SunshineProfits.com gave him the opportunity to put his thoughts, ideas, and experience into form available to other investors.
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