Note: This will be my last post till April as I have no time for trading this month, and could use some time off, frankly.
I love how silver traded this week. My prediction from last week calling for a net consolidation turned out to be on the money ("though this week may show a lot of volatility, my guess for the weekly close is between $34.60 and $35.60, which will be the area between the 34-week and 55-week moving averages, in a pattern similar to 2009"). Note how ho-hum the weekly chart looks after the Tuesday melt-up and the Wednesday scare:
So, first, silver *finally* hit the downward trend line connecting peaks on the log daily chart and the daily-chart of closing prices:
This of course called for a dip and perhaps a longish correction, but what happened instead was another suspicious vertical drop, such as has been happening with great regularity, often at important technical points, though in shorter and shorter intervals, since November 2010 (as per "Ranting" Andy Hoffman's astute observation). This out-of-nowhere violence downwards had even (get ready for this!) Dennis Gartman crying foul ("The market's plunge may not have been solely the result of pure market forces, but may have been the result of a very real effort to 'manipulate' the market lower"), as well as bigwigs like Jean-Marie Eveillard (First Eagle) and Cesar Bryan (Gabelli), who appeared on King World News and joined Bart Chilton (CFTC, Hair Club for Men) in legitimizing Eric King as a trustworthy news source.
Note the gold-silver ratio had been following my green dotted-line downwards before moving up a bit in the last few days:
What to expect for March? I'm thinking we'll get a weekly close on the peak-connecting downward trend line on the weekly chart soon (see first chart), before another brief correction. I'm keeping an eye on the "10-year yield in silver" chart, which bounced off the blue dotted line yet again:
The purple channel continues to be resistance, and when you throw in the "10-year yields paid in crude" chart, which just hit the bottom of the channel this week:
as I explained a while ago, it suggests interest rates are going up, since I wouldn't bet on oil getting cheap any time soon. Higher interest rates suggest to me really high silver prices in the near future. At least that's how I will continue to bet until I see the heretofore highly reliable 10-yr/silver ratio chart lose its cred.
Gold performed worse, which shouldn't be surprising, as it appeared to be the target of the massive dumping strategy I alluded to above. Well, the bastards got the weekly out of the black channel. Kudos. Note though that that happened briefly in 2008 too (see grey squares). So hard to say whether we recover quickly or retest the red dotted line at $1650 in the coming weeks.
I'd be surprised (though not shocked; nothing shocks me) to see a move below $1650 on a daily-closing basis, because I believe the red channel on the below chart established itself after the late December shenanigans (when a deep correction to the lower blue trend line looked conceivable. Note that the top of the red channel is in the stratosphere).
Alright, good luck trading friends, and see you soon.