Guest Post: Silver: Ready to Pop or Drop?

Submitted by FMX Connect

Silver: Ready to Pop or Drop?

Volatility is About to Expand

On several occasions in the past, we’ve alerted readers to potentially big moves in markets using our Trend-Vol alerts, Precious Metals being the chief focus. Trend-Vol is an early warning system that focuses on several factors to predict movement. Those factors include: historical and implied volatilities, skewness and Bollinger Band width.  This momentum indicator warns when volatility is about to increase and directional moves can be large, quick, and profitable, even after the original trigger goes off.

Simply put, and stated here often; volatility breathes. We believe that it is about to exhale soon in the Precious Metals, particularly Silver, but Gold is on the radar as well. What we do not know is in which direction the markets will head…. yet. 

A Silver Trend-Vol Retrospective

We can show some historical behavior in Silver when the signal triggers using the chart above.

1. Here Silver gave a mid-day signal that you might have bought and held with a stop at the top band line which also coincided with the 100 SMA. You would have been rewarded with at least $1.50 had you knew where to place trailing protective stops. This even if you only bought the close of the break out day and held for 3 days.

2. This was a quick 2 day trade that had you again bought the close of a very strong day, you’d have had an opportunity to sell $1.00 to $2.00 higher the next day.

3. This is where the CME margin raises just proved to be too much for the market to bear. If you sold the initial day’s close despite it being over a $3.00 down day, you’d have still had $5.00 left in the move the next day, and if you were brave with overnight orders, another $3.00+ the next.

To be fair, as in every system, devils lurk in the details. Like, how to determine what an entry point is and what is a fake out; Where to put your initial stop-loss and how to trail-stop winners. These vary depending on the trader’s style bankroll and VaR management. This may help:

• Risk 1 to make 2-3 on your trades.
• Use daily low/highs and the Bollinger Band line for trail-stops
• The lowest risk signals come at end of day, midday signals may reverse hard.
• Conversely, waiting for end of day to confirm a signal, often misses a good chunk of the move.
• The best daily alerts often coincide with a 60 minute B-Band widening from a tight position.

Get Ready

Silver and to a lesser extent Gold are poised to move. You can make a case for either direction. Today’s action was very constructive for commodities in general. But Gold and Silver were the weak performers.

The charts show bear-flags, but stochs are in the process of reversing. Fact is, we can see what we want based on our own bias. What we are much more confident in is that in the next week, the Precious Metals will have a move of their own. 

If you are in the camp that Europe must print money to solve its problems, despite the evidence that Germany is getting its way for now then put on your buying shoes. Ditto if you see Helicopter Ben cranking out more greenbacks in response to a Euro debasing or political pressures from our Keynesian overlords.

If you believe that we are on a deflationary spiral, and that there simply isn’t enough money to buy anything at current inflated prices, and there will be no QE3 and that Europe will have enough (levered) money to solve their Grecian woes then get ready to sell Mortimer. Just remember that straddles don’t care which way the market goes.

Last week we told people to keep their powder dry. Now it is time to load’em up. We’ll update you on a direction when we see it in the markets. – Good Luck.

Comments

[GoinFawr]

"Now I ask you, I ask you in a quiet tone of voice: Is the gila copter a machine of pleasure?"

[endurion]

I am the president of a precious metals wholesaler of an equal size with Tulving (whose domain name seems to have expired). I can tell you that the massive drop in the silver price caused our order volume to spike up about 500% for about 1 week. 

Since then, however, order volume has dropped off a cliff... and this has been industry-wide. A great deal of the physically available silver inventory for immediate delivery was consumed during that week-long buying binge in the $28-$31 range. Most mints are a few weeks behind, but the government mints are keeping regular allocations to all distributors, i.e.: US Mint, Royal Canadian Mint, etc.

If people weren't so spooked about buying more silver right now, the shortages would be *much* more pronounced. If silver moves more than $2-$3 in either direction I would expect order volumes to spike up significantly once more and this will exascerbate the existing strain on the inventory.

Right now we have over 40,000 ounces of US Silver Eagles availabe for immediate shipment for $2.75 over REAL spot on 500 oz. or more. PM me or email me if you want credentials, at cdolson [at| treasureislandcoins [dot| com  ... you can place an order by calling us 701-282-4747. Let my guys know you called about this message.

[Cult of Criminality]

what interests me is

There are those that say silver is a industrial metal and it is being treated as such in the futures market..or Dr copper rules the roost

Now we all know the manipulation by the powers that be is what really takes it down. either way  looking at the charts this morning copper has broken resistance so if Dr copper rules the roost silver should break upwards also.could be a headfake

I have felt they were no longer linked due to criminal behavior, guessing today/tommorow should tell the story.

just an observation.

[MillionDollarIdiot]

Wow Buzzzsaw your one angry trolll. Miss the bull market ? 

Silver and gold could go either way from here, if you can hold for serveral years than it doesnt matter, they will be alot higher. Stop being a troll and buy and 30 if it falls buy again. Simples. That said though prediction of "andrew maguire" is for us to retest and overtake previous highs in January  if you know anything about silver you know who he is so migh be worth listening troll.

:D

[overmedicatedun...]

PM miners think they sell when paper PM's are driven lower?

The miners have broken from the banksters and they will set the price..

the fact miners now control supply that is new to the market -the scam of bankers who made miners use future sales to banks for capital..has been washed away with the record prices miners have been getting..

the good miners have their own capital now.. see NEM or PAAS.

this change is putting a floor on prices and driving the CME crazy. 

[Conax]

Great news for us! Thanks alot for this post.

[zangs]

Gold may go way up, OR it may go way down.  Or it may go up or down a little bit.  You can make a case for either depending on your bias.  But what I do know is, SOMETHING is going to happen.