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Silver Update
Published : December 04th, 2012
477 words - Reading time : 1 - 1 minutes
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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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Dan Dontrose

Dan Dontrose is the editor of The Fundamental View
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