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We’ve been watching the silver market with
great interest over the past month or so. My time this morning is quite
limited but I wanted to fill you in on a few observations and personal levels
I am watching. The question for investors now is whether or not this is just
another correction of the recent bounce or if this is a bigger correction
emerging, one can really do some damage to the silver price. As I wrote in my pre-weekend update, silver had already satisfied the upside
target of the small inverse head and shoulders breakout. I felt that a turn
could be imminent and this morning we are seeing it.
 
As the chart shows, we now have a few scenarios that
have come into play.
Because I am confident that the breakout off the
inverse head and shoulders is complete, and with today’s
massive down day so far, the 50 day moving average comes into play. Silver
is, as I write this, just a few cents above the 50 day moving average. If
silver is to be rescued it will be with that 50 day acting as support. If
silver collapses then we could be on the verge of a bigger decline.
The reason I say that is that the 200 day moving
average is now below the up trending channel from the move that started in mid August. should that up-trend
channel (bottom channel line) be breached then I have strong confidence that
this time, the 200 day will be taken out with conviction which will mean that
a larger correction is certainly unfolding.
Elliot Wave counts suggest that 33.80 is key but I’m not so sure this time because as I
write this, we’ve already breached that level.
In my view key levels to watch now are $33.21 on the
spot market which marks the 50 day moving average and the bottom channel of
the up-trend line that has been in place since August. If those are taken out
we could see a massive reversal.
However, there is a bright side to all of this. As I
have been preaching forever on this blog, my main proxy for silver and base
metals “long” has been Tinka Resources.
A complete update is coming later today but, I am personally using all
weakness in Tinka to load up. Those wanting a
background primer for my almost 2 years of coverage on that stock (first
recommended at .20 cents) need only click on the Tinka
tab in the right sidebar and you can see a history of all my updates. For
now, let’s focus on the metal. Today’s drop is not insignificant.
There are still massive commercial shorts out against large spec long
positions and historically this has always ended badly for the bulls.
I will continue to update accordingly. Please feel
free to chime in.
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