Tuesday, March 22, 2011


Silver holding well above $36.00

The market is holding well above both the 24 hour and 120 hour moving averages (or one and five day) as it is now battling the top part of the previous resistance level of $36.75. The failed move on the break below the five day moving average has pretty much now made a fast move to the upside. I say pretty much the slowest fast move I would allow is one up close to the previous resistance area and thus we are now close to $36.75. The chart is in need of a pull back at some time, but there is no reason that has to be at this point. The last correction was the move this morning breaking below $36.00 but they never stayed that low for that long. This is a correction and a failed move correction. The reason it failed was because it was able to get back all of its losses back and re-continue it's current up trend which could state that a fast move should follow or that of another leg higher to probable target of $37.34 pointed out earlier this week on the blog. If there is a pullback then I would look to see how it places with the rising five day moving average as well as the important 61.8% and 38.2% fibonacci levels and the breakout low is $33.69. To calculate take the difference and multiply the percent level and add that number to the 33.69 low.

Currently silver is starting the rally off better than the rally started in 1979 by doubling its value from the breakout bottom. $35.50 is double because $17.75 was the breakout bottom and it has been flirting with this level for a little while now where in 1979 they were playing around with 50% for the same amount of days. As cool as it maybe to say "We are kicking 1979's butt" based on performance the large task is still at hand to not only get up to the 200% level on the right hand side of the chart, but the 700% gain it topped at the $50 level back in 1980. One step at a time and this current time silver is thirty-six and a half and showing breakout signs. We are still a little way away from going parabolic today, silver did go parabolic and fast going from $8 to $18 in a short period of time which resulted in the gain on the chart. For this market to get to 200% to match the gains of 1979 we need to get a little over $50 per ounce ($17.75 x 3 = $53.25). To match the $50 high of 1980 we need a 700% gain on $17.75 or ($17.75 x 8 = $142).

This image shows the distance from the fifty day low and high on the silver market. Quite simply the Formulas are the following

50Low (Cur-Low)/Low
50High (High-Cur)/Cur

Correct me if I am wrong, but this formula should be designed to match the variances where if the market is down 50% it would work for 100% as the down moves are capped to under 100% to the downside.

Throwing this variable aside, by looking at this chart we can see that from the low there has not been many pullbacks. The pattern the way I see this is showing signs of another run higher as it is now less than two percent from the 0% bottom mark and when an index makes it to 0% this always means new highs and lows. The run up from the fifty day low is not as high as the previous gain was and a run to test the 50% barrier on this chart at least seems like a likely target. A test to this level can also mean that you break through you thus are now setting future bars. Regardless, this is the indicator that I think looks better when you combine using both the high and low variables. On Wednesday the 52 week high/low variables over the last few years will be posted at some point throughout the day.

The moving line chart on this month to date silver chart is a very simply made volatility chart. It is as simple as finding the percentage moves per hour in silver with the formula (high-low)/low and then taking the average of the last 30 and 120 hours/periods and add the two numbers together and there is your index. This tracks how volatile the moves are within' the market. They say the VIX is the volatility index and yet if the dow drops 500 points we should see the VIX go from 24 to 40 within' the day. If the Dow drops 200 points we should notice a move to the 30 area and if the Dow gains 200 points it might drop to 20. Therefore its designed to be a fear index and not volatility and thus not state it to go up on down moves and down on up moves. Regardless of the fact, we are seeing the volatility fall during this rally which would be more normal to have up moves on lower volatility.


  1. I'd like to second Terry, thanks a lot for your fascinating analysis and interpretations.