Wednesday, March 23, 2011

03.23.2011

Silver breaks above $37.00 and 800mg of Gold





$1.00 gain now under 3%

Silver at $50 would make a one dollar gain worth 2% and at $100 would be 1%. This makes each dollar gain, worth a little less as it grows exponentially. For now, the trend is at a nice level higher right now and it did break well from the one day average and had one leg higher. The resistance level was given as early as Sunday when I placed an image for upside targets to reach $35.96 and then $37.36. The $36 level as we can see on this chart was resistance and became support for a decent amount of time making it a nice hit. The second is the current one which as been a small hit at least with the consolidation that it is going through. If this level breaks the next upside target is $39.70. Lets wait and see how we settle at this significant point. Markets can correct through time, which is what happened with the $36 level and is looking the be the case as I write this in the late afternoon. They could correct through price and if this is where we start a 3-5% down trend then this would not be a surprise what so ever and which means $36 is now projected support on any moves lower. This chart is over extended and still requires it's first five day test and because its over extended from the average, it can take a few days for a test some times.
Volatility has been very low and because of this, it makes me feel inclined to view this as another leg higher in the next few hours/days until this chart can settle out. It is designed like a VIX where it can only stay high and low for a period of time and thus when its at the upper band it will have to go lower within' time as is the case with lower volatility. This means the moves in each hour has small moves then they did before and thus you are getting eight cent moves in an hour in comparison to ten or twelve a few weeks before. The general synopsis on this is with lower volatility it means higher prices for silver as well as I would expect that the increase of volatility will continue with the higher prices and thus when this chart gets at least to 13 or 14 for a new high in silver. Then the prices should making this chart go back to the top end of the range.

Direction from 52 week high/low


When the chart is in the area or at the 0% level, this means new 52 week highs and lows are being put in. We made another new 52 week high today by going over $37.00 with more on the horizon. When we look at the moves on the chart we rarely ever make a new 52 week low by that of breaking support and rather this low gets taken out because of time. The 52 week low is currently $16.94 and will stay below $18.00 until August giving reason for a big move on the upside. This is the furthest silver has been from their 52 week low this millennium. For the downside there was only one occasion that the market had a decent fall on here, which was 2008 when it went from $21 to $8.


Gold to Silver Ratio update


A break below 39 on the gold to silver ratio as it is now over 800mg of Gold for one troy ounce of silver. There isn't many whom would consider the 800mg price and I could very easily state its over 0.8 grams now as another price for the ratio. Historically the ratio is sixteen to one and there are many whom consider it should be much lower than that because of the limited supply of silver versus gold as well as the uses that silver has in comparison to gold. We are seeing Gold barely up for the year right now and with Silver closing 2010 at $31 per ounce it seems safe to say Silver is doing fine in 2011 with gains of around 20% this year alone. This is silver gaining in real money as gold seems to be the best measure of currency. My prediction is for the gold to silver ratio to keep on falling not only to the 16 level, but even lower and possibly a test of the par value of 1 to 1. Before we get there, I would expect a decent dead cat bounce on the ratio where the market gains a decent amount before ultimately going much lower. An example of this might be seeing the ratio go to 20 to 1 and then back up to 35 to 1 before having a test of the 10 to 1 level. It's also to safe to assume that when the ratio goes higher that both gold and silver will sell off with major percentage moves in silver making this to be the case. If Silver tops at $85 and falls to $50 then I would guess that ratio would meet up at around 20 to 1 when silver is $85 and when the fall to $50 occurs the ratio could be 35 to 1. Guessing tops and bottoms can be a fools game and what I mainly want to point out is that the silver rally will have a correction at some point, and all this is will be a "best guess" for silver to come here and have a correction. It's better if you are selling silver based on the price going much higher into gold for the obvious reason that you don't want to be stuck with those fiat debt notes if you time your sale as the currency explodes. This way if the markets head lower you can sell back your gold for silver and in return get a few more ounces of silver then you previously had and if the markets keep going higher and you are wrong with a silver top, then at least you have some gold that is safe for a currency collapse and should gain a little on top. I will continue to adjust the message of the market, but it's only a possibility/probability for myself to sell a few ounces of silver for gold as it starts to approach above $70 per ounce. I'll keep you posted.

LunchTime Trade - 5second Line Chart


This is why the breakout was an easy call!

1 - The volatility was very low. The highest point on this range was $36.97 and the lowest was $36.87. This means over 45 minutes we were seeing a 10 cent range or less than one third of one percent. This doesn't favor much for the sellers


2 - Where did we come from? Where do we have the potential to go? This is a line by Brian Shannon whom I quote on many occasions and I do because he is very smart and a great teacher and the answer is we had made new highs breaking $36.76 from earlier. Therefore after a big run the market is trading sideways (aka bull flag or correcting through time).

3 - Hourly Volatility that was shown earlier on the blog is light and it most likely will have the pattern of highs and lows on the silver chart end during an increase of volatility. Most likely a good high volume/volatile push higher will give this market an area where it can be a good top for a few days. I don't think so now

4 - The charts shown higher highs from the original one of $36.87 and near end of this chart on many occasions the market took decent dips lower it was brought back with higher movements. Had you played this from a technical level you want to see it break $36.97 which it had done and thus made great gains.

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