Sunday, May 20, 2007

Not Out Of The Woods Yet, But...

It was nice to see Silver close the past week above the 200 Day Moving Average, but we are not out of the woods yet. We have a lot of technical repair work to do. Silver has been down 5 straight weeks. Going back three years on a weekly chart the closest downturn in time we can find is May/June 2006...down four weeks out of five...that equals this spate of weakness. And given a choice, I'd take the past four weeks over those five weeks last Spring...that was UGLY.

First we need to quickly get back above 13.03. Which, coincidentally, would break the present downtrend line. 13.03 is ours, and we must get it back from dem Rat Bastids if we are to force some short covering and get this vermin back on their heels some. Our next hills to take would be the 20 Day Moving Average and the 20 Week Moving Average. Cracking these might prompt some bulls back into the market and accelerate the short covering.

These are not tall orders, and are certainly achievable. Nothing happens until, and unless, we break the downtrend.

I have posted a Big Picture of Silver above more as an observation than a prediction. With summer fast approaching it may be a bit much to expect the "Big Break" to occur in the next 6-8 weeks. But hey, these are strange times to say the least. Silver continues to stay above the important 65 Week Moving Average...and it is important that it does so.

I'll let the Weekly picture above speak for itself. There are a number of similarities between the 2004/2005 major consolidation off the much heralded, at the time, high of 8 and the May 2006 to date consolidation we have been enduring. I believe this second major consolidation is longer because we are consolidating a HUGELY overbought market now as opposed to 2004/2005. The major differences between the two consolidations are the time frames in which they took place. But given that "anything can happen" in these markets these days I wanted to share this "observation" with you.

Silver Resistance: 12.90 / 13.00 / 13.11

Silver Support: 12.85 / 12.82 / 12.78
__________________________________All prices SPOT

Gold Resistance: 664 / 666 / 670

Gold Support: 660 / 655 / 653

An interesting narative: Hedging at its most basic

Commentary by Roger Wiegand that is worth noting:

Precious Metals Rallies Will Not Be Denied
As gold and silver have climbed steadily in price since 2001, the longer term rally is quite young. To date, the only players have been professionals and smaller gold bugs.Our guys and gals in the street, the dominant retail trade, who mostly own mutual funds and less exotic markets than precious metals, remain the largest force. We are still often surprised to discover how the herd marches through life completely oblivious to gold, silver, oil and grain rallies. Yes, these folks are actively whining about unleaded gasoline prices and blame big oil for the crunch. But, just a few months ago, it was reported Exxon-Mobil earned 9 cents a gallon; net while the government’s take was 56 cents. Who is ripping off whom? Exxon’s profits while dramatic, as a percentage of sales, are grossly exceeded by several high-tech companies. Keep your eyes on the larger picture and our longer trends.

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