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Yesterday's high volume breakout
above its 50-day moving average marked completion of the intermediate basing pattern and
the start of the next
major uptrend in silver. Everything in now in place for
a substantial uptrend to develop in coming months that should
take silver comfortably to new highs. Fundamentally yesterday's breakout was due to the realization in the markets that QE is set to continue, whether called QE or not, and
in fact it must continue,
as any attempt to apply the brakes at this late
stage would result in a
global systemic economic
collapse. Hyperinflation will be
the inevitable end result,
as will prices for gold
and silver at levels that many
now would consider to belong solely in the realms of fantasy. We already
had a foretaste of this coming ramp
in Precious Metal prices earlier this year with
the big runup in silver prices, before powerful interests decided the time was right to put the boot into
the little guy by repeatedly hiking margin requirements over a
short period. This served
big money interests in 2 ways - first of all it crashed the silver price so that they
can move in and scoop up more of it. Secondly big money is not all at concerned about margin requirements, since being wealthy
in the first place they don't
need to bother with margin at
all, although it suits them to use it at times to maximise leverage. What the hiked margin requirements did do was to throw the little guy off the train, and like one of those old westerns big money is stood at
the open end of the train carriage lighting up a cigar and grinning with satisfaction as
the little guy rolls down the embankment and is left lying
in the dust as the train chugs
off into the distance without
him.
Our 6-month chart for iShares, which is a good proxy for silver, shows the now extraordinarily bullish setup
for silver. For some weeks it was
not clear whether the C wave of the now completed A-B-C correction would
take the silver price below the A wave low in May, which for iShares was exactly at
$32, and had Greece not
been bandaged up it would have, of course. The first sign
of improvement was the breakout from the C wave downtrend channel about a week ago, after which
the price was temporarily restrained by unfavorably aligned (falling) 50-day moving average, which forced a test of support at the
top line of the channel, which
we correctly anticipated. Then just yesterday the price blasted through the 50-day moving average on the highest volume
for weeks, the importance of the resistance in the vicinity of this average being illustrated by the way the price gapped above it - a bullish "breakaway" gap. This is what we have been waiting for. This marks the end of the intermediate base building phase and the start of the next major uptrend.
The picture could not be more bullish. The price and its 50-day moving average have corrected back almost to the rising 200-day moving average which is now coming
into play to support a major advance. The volume
pattern during the base building process has been positive, with
volume contracting, and the Accum-Distrib
line shown at the top of
the chart rising, indicating accumulation. Finally
the COT charts are at their most bullish
for ages with Commercial
short and Large Spec long positions being at their
lowest levels for a very long time.
The lower COT chart is courtesy of the renowned Scarborough Bullion
Desk in England.
Clive Maund
Diploma Technical Analysis
support@clivemaund.com
www.clivemaund.com
Trading the precious metals and Energy
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