Originally published October 23rd, 2011.

Over the past week silver has behaved as predicted in the last update, breaking down from its potential Pennant pattern and dropping gently back towards support in the $29 - $30 area, to enter our "accumulation zone" shown on its 4-month chart which turned it higher on Friday, and while the pattern could still be a bear Pennant with an amended lower boundary this is looking considerably less likely - it looks like the Pennant has aborted. It is thus thought that we are late in the base building process.

The times of greatest opportunity are usually masked by danger, and there is certainly great danger at this time of Europe failing and thus a lot of associated fear in the markets. Could things get even worse and tank the markets, possibly including gold and silver? - yes, of course they could and we looked at this blood curdling scenario last week, but whether or not this occurs one thing is clear - the normally right Commercials are banking on a resolution of this crisis and soon, and if things do get even worse it is safe to assume that their positions will become even more lopsided. The silver COT charts remain at their most bullish ever, and Commercial short positions dropped even more last week to a record, which just by itself suggests that silver is bottoming.