Originally published March 23rd, 2008.

Although it may retreat a little more over the next week or two, Silver is now at/close to buying territory after its violent correction last week. Much of what has been written in the Gold Market update applies equally to silver and so readers are asked to refer to this information in that update.

Silver got hammered after it broke down from a clear Double Top that we had correctly identified before it collapsed, when the danger was made clear on the site. It also broke below its parabolic uptrend, which was another factor exacerbating its drop. The rapid plunge that followed has already unwound the prior overbought condition and has brought silver back down close to the support of an intermediate uptrend channel line that we had earlier delineated, with an underlying support level not far beneath in the $15.50 zone, arising from earlier trading around that price. While silver may retreat a little further towards the trendline, and may break below it which would probably lead to the development of a trading range above the support level shown on the chart, it is now essentially back in buying country. With it now being very oversold on a short-term basis, as revealed by the RSI indicator at the top of the chart, what we are likely to see is an immediate bounce, followed by a more gentle zig-zagging retreat back towards the trendline, near which it will be viewed as a strong buy for a resumption of the long-term uptrend.

There has been some speculation in recent days that the reason why gold and silver fell so heavily last week was that a part of the rapidly dismembered carcass of Bear Sterns was a large gold position that got dumped onto the market. This may be possible but it seems far-fetched. What is more believable is that Bear Sterns may have been scapegoated because it went its own way and didn’t play ball with the other big players on the block and is believed to have been heavily shorting the dollar. So it was scuttled and JP Morgan, a major shareholder in a private corporation called the Federal Reserve, which just happens to have a lot of influence on the US economy, was granted first rights of salvage, the name of the game being to cherry pick the assets and farm the debts and trash off onto the taxpayer. The JP Morgan elite must feel like the islanders on that Scottish island Eriskay when the boat crammed full with crates of whisky was shipwrecked and washed onto the rocks, which story inspired a highly amusing film called Whisky Galore.