Originally published February 27th, 2011.

After last week's update called for a near-term top in silver we got one more up day, thanks to the antics of the Libyan "fruitcake" digging his heels in and resisting being swept away. After that silver did indeed start to correct back although it ended the week with an up day.

On its 8-month chart we can see that silver backed off after hitting an adjusted "bullhorn" target - in last week's update we had targetted it at a trendline drawn across the early and late December peaks, but it exceeded that, so we then found that it had actually stopped at the trendline drawn from the November high. Now it is very overbought, as is evident from the intermediate MACD indicator at the bottom of the chart, so if the situation in the Mid East starts to cool, we could very easily see a substantial reaction shortly. However, we should remain aware that this situation is very fluid and if the problems in the Mid East intensify, leading to gold breaking out to new highs, then silver could break above the restraining trendline shown which would be expected to lead to a very steep ascent, but as set out in the Gold Market update, price and volume action in stocks is portending a correction that could be severe.

The silver COT, while not yet showing the extreme readings that all but guarantee a change of trend, shows Commercial short and Large Spec long positions that are a lot less bullish in their implications than they were several weeks ago.