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Downside Targets for Silver
As the CME keeps hiking the margins on Silver Future Contracts aggressively, as Tyler has been reporting here about every day now, the price of the white metal finally gets hammered, as investors are running for the hills.
It seems like every floor for the price gets taken out at the moment! As the days go by, we are getting the feel that this is becoming more than a normal correction. It looks like the first phase of the secular bull has been completed!
As we experienced with gold breaking out of phase 1 back in 2008, it also was followed with a vicious price correction, for the top around $1,030/ounce all the way down towards $700 per oz (or even a little lower intraday): a 32 percent correction!
If history can be any guide, we could expect a similar or even more aggressive price correction for silver in the coming months. With a top around $50/ounce, this delivers a potential downside target for silver of $33.5/ounce, a 5-dollar-drop from today's price.
The gold correction of 2008 started end of March and ended in the midst of November. If we project this time frame on the current silver correction, we will be probably see the lows by the beginning of 2012.
Of course, we all know that the white precious metal can be an aggressive beast when it comes to its price action. This means bigger drops in a shorter time frame.
Time for a look-up of the silver chart and what potential downside targets we could expect in the coming weeks/months.
This first downside target already is in place and will most likely be taken out, which are the 50MA and the 38.2% Fibonacci retracement level, that come together around $39.
The next Fibo retracement targets -- 50% and 61.8% -- are at $35.4 and $32 respectively.
A full Fibonacci retracement (100%) is at the last breakout of the silver price, at the intermetiade top of $21 per ounce, which would result in a 58% price crash!
Keep in mind, silver experienced similar huge corrections in the past (2008), but we think a sixty percent drop is a bridge too far this time around.
We see a good and realistic downside price target for silver laying at the current 200MA, trading at $28.2 per oz, which would result in target price of 28 dollar: a 44 percent correction from the top!
If this 10-dollar-drop for silver would take place, we think it would probably be in place already by September/October, about a half year from today.
So we repeat our advice: loosen up on your speculative positions, but be sure to keep those core silver positions in place, whatever the price correction may be!
For more of our thoughts and targets on Gold and other commodities, check out our newest release of the Commodity Report coming Monday!
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Yes it can be manipulated down. No surprise. However this summer when we see further lay-offs and hammered margins taking down more businesses good old fear will take over and people seeking any safe harbor for their assets will push it back up again.
And don't forget the nationalization of multinational corporations. Falter on the debt, and the house of cards will collapse.
However, even this reversal had to be accomplished through a decrease in leverage. The Fed is pumping free money in and the CME is increasing margin rates.
Liquidity in - liquidity out
It bring is a raft of questions. For one, are their efforts in concert and part of an overall plan?
Silver Futures could be $33-$28 but physical will be a lot higher.
I love chartists :) BTW this is 'law of large numbers' ?
P&F from another board
http://stockcharts.com/def/servlet/SC.pnf?c=$SILVER,P&listNum
The silver bugs say 'right on schedule, bitchezzz'!
Sell in May, and go away
Buy in July
An watch the price go sky high
+$2 trillion more for you, for me, and for Timmay! We all saw this coming and got out of our spec positions over the last month while retaining our core physical.
So what do the silver bugs say today... fight club promises.
Apmex still offering $3 over spot for physical Ag? $38 over spot for Au?
Silver bugs say: So, where's the physical?
It is the last desperation of Masters with CMEs help. They are showing their desperation and investors may see it and call them on it. The correction is not the normal, there is a lack of silver and they will do what ever they need to.
Lets see China and others take advantage of this correction and buy buy buy more.
I don't believe we can look at the history to see what will happen this time. Too many are aware of the real value of silver now. This is great for those who had not gotten physical before to load up on it.
I certainly don't believe it will take half a year for silver to thumb it's nose to those who manipulate it. Could it also be the debt ceiling about to be hit also have something to do with this? Money for JPM to cover it's shorts won't be readily available, so desperate moves are happening now?
"Money for JPM to cover it's shorts won't be readily available"
The definition of "money" is the key.
if the silver bugs could junk articles, they'd junk this. they expect every asset to crash except their beloved silver, and maybe gold.
silver 9 months ago- $18
silver now- $38
poor silver bugs
ha ha ha. +1
Exactly, the trolls don't talk about that do they? No doubt, people that bought in at in the $40 - $50 are probably shitting themselves right now but if they did their homework, bought physical and holding they will be alright.
they won't do their homework, they have to wear the dunce cap and stand in the corner of the classroom.
Actually, that is an inevitable outcome, yes.
Not really. Because nothing in the way of the fundamentals that made bugs into bugs has changed, most are just waiting for the bottom to buy more.
It's only the trolls making noise about how upset we are, whereas most of us are calmly watching what we figured was coming anyway. This was predicted a long time ago. One of our most dedicated bugs has called for spot to fall much lower than 20. (Good luck finding physical though) Most of the bugs are dollar cost averaged so low that the above mentioned 58% drop still leaves them in the green. If you've spent much time actually reading what the bugs say, you'll notice that they/we aren't in it for the quick buck anyway.
It isn't the first time a big correction has happened; it may be the last for a very long time to come.
Colonel, here's how I "played" the metal: Sold several hundred silver items on eBay in the last month. Generic rounds, lots of Canadian silver dollars, proofs, and such (most were 80% silver). Sold lots of proof commemorative silver rounds in various forms. Most of this collector oriented junk was bought in the $6 to $8/oz range. It has been sitting in boxes for years. Took the proceeds from sales and rolled into silver Eagles, other Mint products that were nearly at spot, and set the remaining cash aside for future purchases. Nary a paper product in the transactions other than the nasty old fiat that was necessary due to the monopoly set up by our wonderful government.
Oh, yeah, I did trade a few junk silver quarters for some produce at the farmers market. Do you know how many ears of corn you can get for a silver quarter? Try it.
Charting and TA is useful to me only in seeing the parabolas -- one does not have to be a financial genius to know that a correction was on the way. RSI looking pretty good today. Buying spree is in the cards... soon. I've started shaking the bushes to stir up past sellers and inquire as to their willingness to sell anything they might have on hand. Tip o' the hat to JPM and CFTC.
yep. March 17-19 2008 ... Bear Stearns ... 20% correction in 2 days ... transfer of short positions to the morgue
Well said, Colonel.
I'm not entirely sure this is yet the drop I've been waiting for (and actually, I'm waiting principally for a drop in Au, not Ag), but it's certainly starting to look like a re-run of the hit comedy-drama Summer of 2008. And we pretty much know how that movie turns out.
So I'll be putting some FRNs on ice and calling-up my shiny-stuff outlets, just in case.
Nicely said Colonel. Been long since $12.88. Anyone in the game that went through the $14 - $19 roller coaster knows this is how it's played. Patience my friends.
That's right ColonelCooper. I have been out of Ag 'paper' for over a month. I know the fundamentals vs. the COMEX gamesmanship and have no concerns; other than finding a good entry for another paper position.
If the drop takes 2 to 3 months, I don't care. By than I'll have extra funds to load up again.
It would actually be a nice thing to see this happening. 28$ is 20 euro. Nice round figure for eagles :)
Let's hope there will be still some for sale by than.
Hey I did it again! I top ticked silver almost to the dollar ! I think I melt some physical silver I have make a bullet out of it and let it go through my head. I took the profits at 38$ sat all the way to 50$ and went back in at 47$ am I stupid or what ?
No, it's normal, the combination of human psychology and manipulated highly volatile markets will do that. Hey even Isaac Newton did the same thing in the South Seas bubble (and that was a bubble).
Ouch! FWIW, I guessed that we were most likely looking at over-exuberance for those 2 weeks leading to $50. I risked being left behind--which would have been a real bitch--but got lucky.
Don't underestimate the role of dumb luck--win or lose.
jesus christ, you have JPM pulling out every dirty trick in the book, you've got the CME colluding in trying to keep the massive shorts solvent....you have blatant market manipulation, and this dope wants to still play with the charts?
Hello? Can we call a spade a spade? Can we say what's really going on --- at least amongst ourselves here on zerohedge?
Playing these games and pretending what's going on is in any way legit helps perpetuate the fraud, and the power of the criminals manipulating the commodities indices....
has this guy bothered to look at what's happened to the dollar during this savaging of gold and silver? IT HASN'T MOVED. So.....on what planet -- where there's a free market --- would you change your gold/silver for dollars? when gold/silver rebound even slightly, what's going to happen to the dollar?
yeah, okay, i'll hang my hat and my future on a chart, right....hello?
You’re right, this is blatant manipulation. But, it is manipulation to cover previous manipulation.
JP Morgan and CME have been running a paper PM market which has been four to five times larger than the physical market. They lowered the margin requirement to allow in the sheep to be sheared. The manipulators got sheared themselves when people started demanding physical PMs they didn’t have.
The charts are worthless because they won’t show the fundamentals until the PMs bottom out and over correct. Load up on PMs when the dollar declines again. Think of this as an opportunity.
Here's a chart of sorts that you can hang a hat on:
http://www.caseyresearch.com/sites/default/files/MajorCorrectionsinSilve...
It shows historic corrections in silver and the current one is about average -- so far.
Exactly. They are manipulating the money into bonds, into "safety" since the reset of the world is fleeing them. No unmanipulated market. Just hold your gold and silver.
I for one would like to thank Blythe and her flying monkeys for giving us a dip. Now if I can just find some physical left in the market...
Good luck with that...
$28 sounds damn good to me!
I agree. If this isn't insider trading between the big boys, I don't know what is? The manipulation the past year has sealed the deal that my 32 year-old ass will never buy into a market again unless there are some hangings. I'll just keep paying my modest mortgage, fixing my mustang up and buying booze to ensure that when the shit does enter the fan, I can party!
And here I thought I was the only 32 yr old Mustang owning ZH'er...am I Bizarro johnnynaps...or is johnnynaps Bizarro Grifter? hmmmmm... :-)
I'm not all that sold on TA, I'm not a hardcore finance guy I still don't understand how drawing a bunch of lines from peak to peak or trough to trough has anything to do with the underlying bond/equity/commodity/whatever; and doubt it has even less relevance in markets as heavily "managed" as we have today.
That said...I, for one, am cheering on a crash in silver, it went too high too fast, kept my powder dry & will happily back the truck up once we see it in the low 30's. Finally got both my parents on board, but told them to hold off once we crossed $35.
Once some guy decided to look at markets as being some sort of fungible process governed by immutable principles of human nature with regards to transactions in those markets.
They looked at data on a page. Somebody got the idea to make charts from the data. The charts proved helpful in predicting future price movements.
Lots of other people started drawing up the same charts and basing their trades on them.
Over time, the charts themselves became self-fulfilling prophecies as more and more people found it easier to hit a button on their keyboard and pull up a chart than to do anything resembling DD with regards to a security. If enough people believe that a stock will bounce off its 50 moving average, and trade accordingly, the stock will bounce off its 50 day moving average for no reason other than the proliferation of chartists in the investing community who together anticipate such a move and then make their trades.
Then somebody realized that in order to maximize profits, they needed to tweak their system to trigger trades right before the other TA guys hit the trade button. Multiple competing systems arose.
Competition ensued with the ultimate prize being the right to claim possesion of a system which always hit the exact point where prices turned. Having such a system, or even hitting the goal once in awhile, became to be seen as affirmation that you were the baddest, meanest, smartest mutherfucka in the jungle, since you had outsmarted everybody else, bestowing you with the God-given right to hurl insults at all lesser mortals.
Not having to do any research, there seems to be a small percentage of TA guys with a lot of time on their hands, which they seem to spend going on blogs and message boards to brag about how great they are, to insult people who won't instantly acknowledge their wonderfulness, and to cajole newbies into jumping onboard their current trading positions.
in other words ... charts work till they don't
Commodities are being taken to the woodshed with no corresponding ramp in the USD or equities
where is the money going?
The money is going into zero maturity bonds:
Cold hard cash.