1. From one perspective, the daily
silver chart has become technically overbought. A number of key indicators
and oscillators have risen to levels that are worrisome to some analysts.
2. To view the daily chart, please click
here now. When an asset becomes technically overbought, the price of it
doesn’t necessarily have to stop rising. Sometimes
the price can accelerate its rate of ascent.
3. The Keltner lines on this chart are like the banks of
a river. When the water level of a river is low, the water stays between the
river banks. If the amount of water in the river rises, it can push beyond
4. Please note the mid-August
timeframe. Silver roared up to the upper Keltner “river bank”
at a price of about $29, and many indicators and oscillators then signalled that a correction was imminent.
5. It was very tempting to sell a lot
of silver as that happened. Incredibly, instead of correcting, the price of
silver then surged over the next 4 weeks, all the way to $35.
current set-up on the silver chart is very similar to that mid-August period. I wouldn’t buy silver here, but I
would be very careful about how much you sell, to “avoid a correction”.
7. When assets are trading at
relatively low prices, it is generally wise to err on the side of holding a
bigger position than you feel comfortable with, and I believe that adage
should be applied to the current silver market.
8. The move from $29 to $35 was a
phenomenal gain of about 20%. If silver were to gain 20% again, while
technically overbought, it could rise to $41 very quickly.
9. It’s important to understand
the difference between a drawdown and the destruction of wealth. Silver is
overbought on the daily chart, and that means it could decline, rather than
“overflowing the river banks” and surging higher.
10. So, the question you need to ask
yourself is whether you really need to avoid every decline that occurs in the
silver market. I would suggest that all silver investors should work at building
the intestinal fortitude required, to endure a $5 decline comfortably.
11. Even a $10 decline should cause the
investor to experience nothing more than mild discomfort, because these types of sell-offs do no damage to the silver asset
12. Please click
here now. You are looking at the monthly chart for silver. It portrays a
much longer term picture than the daily chart does. The picture here is best
described as “extremely
13. Silver has staged a significant
breakout from a key downtrend line on this big picture chart. Almost every
indicator and oscillator is flashing a “major
uptrend in play” signal.
14. Note the ROC indicator at the bottom
of the chart. It’s showcasing a rare head & shoulders pattern. That
suggests that silver may be “coiling”,
for an enormous momentum-based move to much higher prices.
15. Please click
here now. You are looking at the monthly chart of the FXI-nyse, an ETF that mirrors the “Chinese Dow”. It is an index of 25 key
Chinese companies, and you can see a “budding
breakout” in play, taking price just above the major
16. Institutions around the world have
recently poured cash into Chinese companies, and they may be ready to pour in
a lot more. China is a creditor nation, with hundreds of millions of its citizens still living on farms.
Another rush into the cities by Chinese farmers would create enormous long
term demand for both silver and gold.
17. Fundamentally, I believe here are 4
major reasons that the long term silver chart looks “ultra-bullish”. First, the market is probably
anticipating a substantial recovery in the Chinese economy, and perhaps
additional government stimulus.
18. Second, the US fiscal cliff is
likely to be resolved in a manner that encourages “risk on” institutional investors to take action on
19. Third, I expect the European Central
Bank will announce measures that calm worries about not just Greece, but
Spain and Italy, too.
20. Fourth, while the fiscal cliff will
likely be resolved, I think the US Federal Reserve will expand the current
level of stimulus being provided by QE3, probably in January, and this action
could cause a near-vertical spike in all risk-on markets.
21. Silver is likely to be the greatest
beneficiary of these 4 key events, even if they play out
only partially. If they play out as I’m predicting, I would expect silver to blast through the highs at $50,
by early in the new year.
22. Silver at $80 is realistic, if these
“fab four” events play out well.
23. Please click
here now. This is the daily chart for the Global X silver stocks fund,
and you can see that while the daily chart for silver itself may be somewhat
overbought, silver stocks are arguably oversold!
24. One of my favourite
technical oscillators is the 20,12,7 Stochastics
series. It’s flashing a very significant buy signal. The “fab four” fundamentals for silver could double or
triple the price of this ETF within months, and
many of the individual components may be set to do even better!
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