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Hello all,

Amazing week...absolutely what trading is all about I think. The emotions experiences with silver this week are to the extreme that is for sure.

I think based on this week's events; it is time for a bit of effort on the Tech Analysis side of things. I have done this for a couple of stocks in the past, but seeing I don't trade stocks pretty much anymore due to being in the real financial crisis (my own opinion based on the broken money system that the masses haven't caught onto just yet) silver is very attractive to trade of late. This info is NOT a recommendation, just my opinion. What you choose to do with this is up to you. I hope you find it of value and can employ it for your benefit going forward. I think that is the nature of many on Hotcopper.

Calling the bottom is always a brave call and usually a setup for failure. I will put some charts up to see where we may be at. I personally never worry about bottoms or tops...been burnt many times based on those greedy motives. I prefer to trade with the trend and not try to swim against the stream. Let it do all the work.

My target audience here is for the traders amongst us. So those who don't refer to chart etc because you aren't inclined I wish you well. The indicators on these charts I use are well worth researching so I will leave that up to you. For me, I can ONLY trade with charts...they are my GPS in the maze of the streets of the stock market. Manipulation or no manipulation as they will tell you what to do. It is up to the operator to act correctly (I am still constantly being reminded of that re reduced capital haha). I usually identify entries by shorter time frames that these I will put up, but it is a longer term situation in this effort. The price for people looking to enter who haven't as yet, is more attractive now so there will be MORE people interested going forward.

The first chart (1) below is a daily showing the year to date with a Fib retrace indication of the recent correction in relation to that:

This is an overview of the calendar year to date. You can see the obvious violence of this week's retrace. Enough to strike fear in even the most seasoned traders out there. It is however only a retrace. Separate your emotion for your trading and fear in the market opens you up to opportunity. I sense a good op coming up.

You can see from the indicators at the bottom of this image, that MACD, RSI and Will%R have all been burnt off...MACD is yet to truly indicate a buy as yet but generally looking very oversold. We are also sitting pretty much on the 61% Fib retrace. I am not saying it is the bottom, but even with the margin increases, all sorts of theories out there etc it is looking very technically good right now. Further downside from this chart is possible, but limited. A retest of this recent low a high probability though - be open to that. The 200day SMA line is visible below the current price action. This would be the lowest support IF a further fall occurs. Sitting around $30 at the moment. Plenty of trading to be done before then and owning physical only more justified.


Chart 2 below is a closer up on the actual retrace this last week:

In this chart, I have set up the Fib retrace indicators assuming the recent lows are that. The analysis of indicators re the previous chart warrants that at the moment.

I think the retrace should it prove trend change to be the case, will on the lower side of the fib retrace levels...ie 38-50%. This is based on the violent fall. It usually reduced the energy/extent in the bounce as people are still looking to short.

I also think there will be a double bottom test like there was at the $50 testing the last couple of weeks. So keep your stops open or close on the scalps and not 'back the truck up' just yet. If this bounces, be careful of a further dump. I think there will be upper resistance at $40 based on these retrace levels near term. The 4hr chart below I think will show some validity on that. There is a lot of effort it seems to prevent rises. That effort could push it down to the 200SMA $30 support line should this potential bottom fail. I will call that the likely absolute bottom based on the info here right now. Fundamentals in my opinion make that a futile effort and only buying this overall suppression effort time.


Chart 3 below is a 4hr to see a bit closer:

Following on from the oversold indicators of the previous 2 charts, you can see these indicators have actually turned. ADX (trend change indicator) has changed indicating a change of trend now. It may only be a sideways pause while the MACD, RSI and Will%R move to an overbought situation allowing for a further drop - or double bottom (as I have previously mentioned). More time will be needed to establish that and I suspect the US session Monday will enlighten us.

In this chart, MACD Histogram does show a divergence (ie Lower candles but higher lows on the histogram). That is usually a trend change indicator. This is a good example on divergence.

The 20SMA line has crossed the 200SMA pretty convincingly, and the 50SMA is also heading down too. So, if the 50SMA crosses the 200SMA a real serious drop would be open. I think that they will get close and may even slightly cross but not much further. Obviously the time frame on this is quite long (month or two if played out). I think this will work out to the time the Fed Reserve outlines what happens when QE2 ends. QE3 will boost commodities and precious metals due to inflation being unleased even more than now. It may have a real negative edge however, as the flimsy US economy will be even more transparent that it is now and optimism may be lost.

Chart 4 below is based on 2hr candles:

The main reason for showing this chart is the candles at the bottom. There is a very good Doji. And, after this, the green candles are larger than the red suggesting the bulls are starting to win back some ground. So support seems to be reforming in a little way. But you would expect after such a large drop some reverse movement was on the cards. So, caution is still suggested for the long trades. Be open to a double bottom as I have mentioned M

MACD histogram / candle divergence is again visible indicating trend chance is a possibility.




SUMMARY:

An amazing week. Many have suggested a correction was due, and trying to enter the overbought conditions was very tough. $50 test was a good lesson, and obvious....now.

I think the correction in silver is almost over but will not call a bottom. The shorter term charts do indicate at worst right now a pause is on the cards. MACD divergence on some of the shorter term charts indicates a trend change is on the cards at some stage. MACD, RSI Will%R all backing that up also.

There are some very big, high level musical chair games being played at the moment that most of us are not privy to. It is obvious though and only likely to continue. See this as an opportunitiy.

There is some recent sentiment that the US economy is growing in strength. My personal belief on this is mainstream media commentators that have no idea of the fundamentals...telling people what they want to hear - everything is going to be ok and leading them to the slaughter coming. So take that into account with what I say.

You cannot pay a debt back that is bigger than all the money out there. Period. And, you cannot have $2T deficits for very long before something serious has to be done. Have a look at the Euro US$ chart if you want to know what debt issues cause on a currency.

The IMF is calling for an alternative reserve currency:
http://www.presstv.ir/usdetail/164779.html

This move will only increase destabilising conditions. Which paper currency would you want to hold in that transition?

China is threatening to dump their US reserves:
http://www.thetrumpet.com/?q=8207.13.0.0

China has been dumping US$ via Mining asset purchases worldwide for some time now. Moving into hard assets while taking their time not to reduce the US$ value too quick themselves. Unless there is an interest rate increase in the US, giving better returns to the Chinese, this will only continue - maybe at a quicker rate. A rise in US interest rates will mean debt repayments of the US Gov on there ridiculous debt could push them into bankruptcy. The media has pushed this move by China is due the mining boom. I believe in part true yes, but with Japan in very bad shape now, the 3rd biggest consumer of commodities has been very badly reduced. Any boom will likely not now be the case. This has yet to be felt in the markets based on world GDP figures. It will take time to filter through. So, compounding the paper money failure more likely.

The media is playing up Currency wars between China and the US. This is because China does not have a privately owned central bank manipulating them. And, China's sounder economic basis. It is making the US look like the emperor with no clothes as it is.

Here is an outstanding lecture by Joan Veon on Central Banks ruling the world:
http://www.youtube.com/watch?v=vEJdeWvGIZU

When it is realised that more unstable conditions return (to the downside), not stability on these huge unsolvable fundamental issues.....where will people want to preserve their assets?

I believe most large global US companies these days extract their profit from external sources to the US and with the Fed Reserve printing that into oblivion only going to have the DOW rise via US exporting inflation. So, a rise in the DOW these days is a misleading indicator though still fundamental at the moment.

$50 was a target for the end of this year. It was almost breached within 5 months. At some stage it will be breached this year. I sense an outstanding long coming up and a break of $50 will be another buy indicator also. Technically breaking the previous resistance.

I highly recommend BrotherJohnF channel on YouTube for very wide ranging Silver analysis. He does almost daily updates at the moment. Much better than me.

So, trade well my friends. I think the volatility seen this week is only likely to be continuing. For me this week it has meant trading with larger stops using smaller holdings per trade. Adjusting the leopard spots so to speak as the game changes. Profits when correct trades are made based on this will be just as good based on the price movement. Move your profits into a long term physical investment. I don't thing sub $40 prices will be around for long (if available) for that on the physical front.

This analysis is on the electronic charts, and many here have stated that actual physical prices are different. That requires a different area of expertise. Invest that time on gaining it.

Good luck all, preserve your wealth and look to greater community support of each other.