Sunday, August 17, 2008

Silver Tests Half-way Point

to be completely honest, I didn't expect Silver to go as low as it did. '...but it is what it is,' as Gary puts it. what follows is not a declaration that the market's hit a final bottom, but rather a modest attempt to assess what is. as I said last week, 'it's all just guessing until the price action demonstrates its resolve not to go lower.'

however...with the wishful thinking of the bulls now thoroughly stultified, it is my suspicion that the whipsaw's positioned to soon snap back and gash the pride of the bears.

fortune turn and turn again
a boomerang out of the moving train
take a look - see it spin
en route to shatter rear windows amain.

a promotional article put out by EWI mentioned that Silver's decline surpassed 'the 50% retracement of its entire BULL market from the 4.01 area to highs near 21.35!'

as you may Know, as a rule I do not use intraday highs and lows when sizing up the long term price fluctuations of Gold or Silver. instead I look at the London Fixes. some may call that arbitrary, but I prefer it, as it serves to filter out the noise.

on Thanksgiving 2001 the London Fix hit a low of 4.065. in May 2006 the high Fix came in at 14.94, then the subsequent collapse produced an ultimate low Fix of 9.72, a reaction of something less than 50% of the bull market at the time. but if one had been basing his calculations on the intraday extremes, then the retracement would have actually exceeded 50%. that's how they getcha.

the high Fix this March was 20.92. so a 50% retracement of the entire market would be 12.49. the Fix on Friday was 12.82. so by my reckoning the 50% line's still in tact. whether it holds or not is another matter. but the point is that the market for actual bullion metal was cleared at 12.82. if there was any real Silver sold for 12.20 Thursday night, I'd love to Know where.

well, I hope that was as tedious for you to read as it was for me to type out. but now that we've dealt with that little point of pedantry, let's take another look at the Bimetallic Ratio.

that's the same chart I posted on Thursday, but updated to reflect Friday's closing values. you will notice that the last boxes have moved up near the half-way point of the chart. that means that not just Silver priced in Dollars, but Silver priced in Gold too has given back nearly 50% of its bull market advance.

so we watch the London Fix this week, and we watch the Ratio. oh, and I guess if you got nothing better to do it'd help to keep an eye on the 5 minute charts. what else? oh, Comex open interest. if it doesn't keep declining this week then there's still something fishy in Denmark.

(my previous recent posts on Gold and Silver can be found here, here, here, and here.)