To Infinity And Beyond

Silver's recent performance is proof positive that being out of Silver is much riskier than being in today. The path of least resistance is clearly up. Trading this Precious Metal is not for the feint of heart. If you do insist on trading, it is clear that you should always keep a core position in Silver to take advantage of it's power price appreciation potential. It could be summed up easily, trading Silver now could be very costly, profit wise, versus just sitting tight in your positions, and being right.

Volatility will now become the word of the day in the Precious Metals markets. The past 48 hours are just a small example. Look no further than Platinum to see the potential price swings Gold will experience as it moves to "Infinity And Beyond". Platinum was down almost $100 in this just passed commodities reaction. And then bounced hard and fast.

Oil. Oil obviously was the catalyst to yesterdays mega bounce that hammered the shorts further as they stuck their heads up for air. In Ted Butlers recent essay: http://news.silverseek.com/TedButler/1204651474.php he has surmised that NY COMEX shorts are short more than 395 million ounces, or more than 225 days equivalent production.

The shorts in silver and gold, as well as in many other commodities are in a very difficult position; they are, quite literally, up against the wall. Their collective open losses are of a magnitude many times greater than anything they have ever experienced in the past. In fact, it is my observation that these concentrated shorts have actually lost (on paper and in meeting resultant margin calls) more than they made in total over the past five or ten years. The shorts have gotten absolutely hammered.

Look no further than this fact to see why being LONG Silver is the ONLY smart play in this market. The COMEX warehouse stockpile is presently about 134 million ounces. Where are the shorts going to get the Silver to cover 395 million ounces? Silver is lagging the overall global rally in all commodities. Silver has yet to even reach one half of it's all time [nominal] high of $50. Gold has surpassed it's previous "all-time" high. Platinum has not only passed it's "all-time" high, but it's inflation adjusted high as well. The same for Oil. Wheat? Wheat is well on it's way to the "Beyond". Silver is, and remains, the best "value" in the commodities world. That alone makes Silver "the must own" commodity, as the US Dollar unravels. Silver will reward those with the conviction to hold it with huge profits.

Now, considering the volatility. Why all the fireworks? 395 million short ounces underwater versus investors seeking positions in Silver at a value [dip buyers]. The Silver shorts, particularly the weak ones, will be looking to cover their asses on any break in price. Combine the short covering with the dip buyers and you get powerful bounces off any breaks in the market. And these bounces can, and as we saw yesterday and last night, often go to new and higher highs. "Overbought" indicators can become very misleading in a market like this. Case in point, Platinum. This is why I use and post 4 hour charts of Gold and Silver.

Yesterday, as seen on the chart posted above, Silver offered significant value at it's overnight low of 19.37: Trendline support, 40 period moving average, and 38% Fibonacci. The vault in Oil following yesterdays inventories numbers may have been the catalyst to the commodities sector bounce yesterday, but for Silver, buyers were staring value in the face and were beginning to line up before the Oil numbers were made public. That is why it moved so quickly off it's lows yesterday...short covering and dip buying...a volatile stew if ever there was one.

As you can tell by the charts above, a lot occurred just in the time I have been writing this. As a matter of fact the volatility the past 2-3 days is the primary reason I have not been able to sit down and address my blog [which is one year old today, thanks for reading!] Geez, just in the last 15 minutes Silver broke lower to 20.19. Volatility baby! Value is what you seek. Buying "value" limits your downside risk, which should never be ignored even when the path of least resistance is up. At 20.19 Silver clearly shows great value on a one hour chart. On my four hour chart, 20.19 Silver shows good value, but value none the less.

Timid buyers should determine value and the use buy-stops ABOVE the market to catch the bounce higher. It's safer than trying to catch the proverbial "falling knife". Investors, if you think Silver is going to $30, $50, $150, what are you waiting for? ...you should be in Silver now, and not worrying one little bit about any of this volatility.

In Silver, near-term support has firmed around 19.30. Solid intermediate-term support rests near 18.15. Long term support in Silver now rides with it's 50 day moving average.

In Gold near-term support has firmed around 950. Solid intermediate-term support rests near 930. Long-term support in Gold rides with it's 50 day moving average.