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Joseph Russo

Joseph Russo

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Silver Lining

Though Markets often Rhyme they rarely repeat:

Silver Monthly Bars

With everyone and their grandmother calling a blow-off top in Silver we thought it prudent to present an alternate perspective.

Above is a continuation chart of Silver dating back prior to the Hunt-Brother top at 50.36 in January of 1980. Though at first glance the parabolic rise into the 1980 high looks similar to our current advance in 2011, they are by no means the same.

The big bang from 1975-1980 was "J" shaped meaning that there was at first a slow unassuming rise then a more abrupt and persistent short-lived parabolic explosion, which came out of nowhere. The rally from 10.70 in September of 1979 to the 50.36 print high in January of 1980 took all of 5-months to blow its top.

In contrast, the rally from the November 2001 low of $4.01 is defined by distinctive wave structure and consolidation periods. Rather than a short-lived five-month rocket launch without notice, the current move in Silver has lasted for ten years, and has telegraphed its intentions rather generously along the way.

The large uptrend channel drawn from the prospective cycle-degree [A] and [B] waves of 1980 and 2001 is divided by a dashed mid-channel.

Silver Weekly Chart

The monthly bar segment presented above right shows the gap-down open and subsequent decline in May breaching this mid-channel line of would-be support. In light of its failure, there is another dashed mid-channel of support resting just below near the $35 level.

Above is the weekly continuation chart of Silver from its most recent $8.53 print low in 2008. Consolidating to the tune of 58% from its journey north of $20 in March of 2008, Silver resumed an otherwise orderly advance in October of that same year.

Two years later in November of 2010, Silver broke above 26.70, which is the halfway point between its $3.05 low and the historic Hunt-Brother high. After printing a high of $31.09 in early 2011, it pulled back nearly 14% and retested the milestone within the month and began what many now perceive as a three-month parabolic blow-off top just shy of the historic high.

As noted in the long-term monthly chart that began this article, Silver has at least two remaining upside targets that are quite viable going forward. In our contrary technical assessment, Silver maintains an upside price target window that opens at 52.58, and closes at 82.91. The general timeframe for that window spans from June 2011 through 2021.

If such targets are to be achieved, the wave count resident in our weekly bar chart above is the count most likely to be in force. Such a count suggests that the recent print high was that of an intermediate (3) wave, and the current move down will don the eventual (4) wave label.

Given that fifth waves tend to extend in the commodity arena, and that Silver may be approaching only that of an intermediate 4th wave decline, one must not ignore the possibility that Silver's primary 5th wave advance may jettison the poor man's gold to $82 dollars per ounce. At that stage, a blow-off rally might then witness Silver lunge for the $100 mark and possibly fail.

Whatever you do, don't bet the ranch on another 21-year bear market following Silver's April 2011 print high just south of $50.

Trade Better/Invest Smarter


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