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As you know, we
have been expecting a move on silver
to the downside since we called the double top and those that traded
that technical pattern walked away with
a handsome profit. Much of our
guidance has been from the Commitment
of Traders Reports which showed
that the commercials (inside smart money) was aggressively net short while
the large cap speculators were
considerably net long.
It turns out my
Sunday is going to be extremely
busy with a family function so I wanted to get this post up tonight for anyone following along to consider. As always I welcome any commentary
or questions.
Both of
the charts I use to analyze
the COT reports show that while
the commercial short positions decreased a tad as did the spec longs, (this should have been expected on that 4% down move we had a week this
past Friday) they have
not decreased substantially
and the charts clearly
show that the shorts are still
shorter than they were at
the March 2012 $37.00 top and the large spec long
positions are also still greater than they were at
that same time.
 
So when we
look at these two charts, we
can deduce that there is
a high probability that silver may face another round of selling before these positions clear themselves to the degree that we
can confidently go bullish again.
This next chart
also shows that silver, up until now has traded in perfect lock-step with the Fibonacci retracement levels. Also, I read some articles indicating that silver had put in a small inverted head and shoulder pattern however, if we do take that potential
inverse H&S pattern into consideration
then the move from the
break of the neckline at
$31.76 is complete. The
move up from the neckline
has surpassed the low at the bottom of the
“Head” in that pattern so if you are watching that pattern, in my view, it
has now met its required completion. Here’s the chart that show’s how perfectly silver has traded with the fib levels.
By Elliott Wave counts,
a move to the 50 day moving
average would have been ideal to complete the bounce count but it is not required given that the bounce, according to the
Elliott Wave counts has already met the necessary levels to be considered complete.
Therefore, while there may
still be some upside potential
present (to the 50 day
MA), I highly favor the view that this
bounce is near or at completion
and the high of the day on Friday signalled the end of the bounce.
In m view, we should see renewed
selling. If the COT Charts
did not still flash bearish signals then I would not be taking this
view. However given that they
do, I can’t with
confidence state that this
correction is over. A sustained
rally or a strong close above the 50 day MA would probably lead me to
abandon my short view but
for now, I continue to be
of the view that we should see
a resumed move down as early
as the start of next week.
Please read my disclaimer
and note that this post is not a recommendation
to buy or sell.
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