Monday, April 11, 2011

04.11.2011



Fibonacci Analysis on all Levels


Fibonacci retracement is a very handy way to measure direction in the market by understanding where it is on it's chain and how the battle is going. When you are below the 38.2% level of price you are considered to be bearish. When you are above the 61.8% handle the net result is bullish and in between the two is neutral. Therefore in a range from 100 to 101 bearish is below 100.38, bullish is above 100.62 and neutral is in between Down below is the fibonacci levels that will be clarified in the next paragraph for what it means for the current market. The highs for every time frame but the longest are all the same. When you see that all of the levels have the same level as high you are breaking out on all levels. If the low is at the same number on every time frame makes the opposite true that is a powerful bear market. In this case we have all but the longest term time frame at the top of this list with the highs being greater in 1980. It's not that hard to be very bullish in this environment because of heavy inflation. The numbers would be way off on the adjusted for inflation statistics but we will stick with nominal prices for this example. Therefore, it is not that much of a challenge or really easy to be at all time highs every now and again. Oh wait a second! Silver has not for a while and it's supposed to be a gimme because over thirty years of inflation should naturally increase the prices. The Stock Market is much higher from every level ever traded at during the 20th century because of inflation which is very natural and Silver is not. This tells me that it must be one of two things as a reasonable cause. The first one is a brutal supply and demand collapse of Silver from its peak in 1980 to it's bottom. We must have seen silver not be needed as much and/or mass productions. Maybe some other base metal can do the work silver can? It could have been one of those things. However, the "OR" or also the second thing it might be to prevent new highs is the manipulation of the prices. This is my best guess and when people state that technical analysis doesn't work in manipulated markets, this is where I disagree with it in that you can use technical analysis to identify and track the manipulation. With that being said, because we know that $52.50 has been the Long Term high for over thirty years we can start to get a handle on exactly if silver is up too much or not.

Lets start short term for the last few hours. What a crash today as we seen a big move of over $2.00 in a few hours. This is about the forth or so time I've seen this happen since we got above $20.00 and I'm used to it and if I panic about what could be I just look at the 1980 high as well as a piece of paper that says "Legal Tender" and laugh. However the market is bearish right now at $40.11 (8:35 PM EDT) because it is below $40.61. If we maintain this low and rally higher I would expect this level to be resistance to some degree. If it can make higher lows after the resistance the odds favor a breakout. If it can't make a higher low on the even shorter term time frames I would consider at least a test of the previous lows from earlier today.

Intermediate Term found support at the 61.8% level almost to the penny with the five day moving average and remains bullish. Having some more tests of this level is totally fine, but if it can't hold well the next price move lower is to $38.66. Because we have held the "Bullish" mark and the five day average is rising I am giving the benefit of the doubt to the buyers in this market until they can convince me otherwise.

All Long Term time frames shown in the image give us the comfort to know that it is going to take a lot to destroy this trend. Throw in the fact mentioned in the first paragraph that inflation makes it almost impossible to lose. The longest term time frame shows $19.64 as the 61.8% and we have confirmed this to be a break above to have at least a test of $50.00. This has been confirmed for almost a half year now when it broke the $29.00 barrier the second time in December. How we get there is anyones guess from here. The lows from $8.46 in 2008 give us the 61.8% level at $22.76 which is well above where we are. That is why I like the Fibonacci Upside level for this time frame using the $4.00-$8.00 range. I've explained this enough where everyone should know what I am talking about, but if not we have a newly confirmed move coming to $48.36 like we do to $52.50 on the long term. If we have further selling in this market or any decent correction the Mid-1 Levels of $35.11 and $31.44 seem to work the best for support. Thank you for your reading this article. Good luck in your trades


Volatility Arrives!


The silver market kept selling and selling and selling today as it retraced $2.18 from its high in the early morning session for a total of 5.2% from that period to the lows made today at $39.79 at 3:12pm EDT. The move to this level was where the rising five day moving average was located and thus it found support at this level, which is also the area of previous resistance last week. Because the five day moving average is rising and the market has been having magnificent rallies this month, both the sell off was not a surprise today, nor was the rally from this period. The market is still up around six percent for the month of April. The volume that entered today's market was very high as SLV shares had their second highest volume day since the two days back in November when outrageous volume came in to crush the market from $29.00 to $26.00. We never got hit that bad, but we still took a decent beating. As far as the intermediate term sentiment being switched to SELL SMALL-HOLD, the way I most likely will look at this level for a while is to buy on dips and to avoid purchasing on peaks. This means as of the market close at 5pm EDT that we are on a dip right now. If the market makes new highs back above $41.00 again, then the sentiment would be moved back to SELL again. The most likely scenario is a pullback of around 15% and from the $42.00 level that would work out to around $6.50 off the price $35.50. I am not that confident a significant dip will occur as of yet, but it is definitely possible. For the short term, the most likely scenario that I can come up with is that market to move to sideways consolidation and might be a little while before we take out today's low or highs and stay in a range from around $40 to $41.50. That is only an educated guess and the message of the market will be the best indicator to use.

The volatility sure took off today as the index I have been using skyrocketed as there were six hours of the 23 hour Monday trading day that had over one percent moves from bottom to top on the market. Therefore, I stated I was not going to call an intermediate term top until I see this volatility pick up and that is exactly what happened. The movements are getting stronger. It's still early on and the fall out from today will give more information, but nothing goes straight up or straight down and corrections are a natural part of the cycles for markets.

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