Friday, April 15, 2011

04.15.2011




END OF THE DAY WRAP UP - When looking at the three charts above from todays intraday movements there are signs showing the market should break out to start the day on Monday (Sunday night in the West). There is no signs for this rally slowing down and the signs from the chart is on Gold showing a nice time consolidation for four hours after it had three nice up ticks. The final candle of the day gives us reason to think that we can make moves to higher gains. For the silver chart we have a pattern where the uptrend line is going at a higher ascent rate as the resistance line. The last four resistance hits would be the peaks and the three support handles. Like Gold in the final hour this candle looks bullish and if it can hold $42.80 for more than a couple hours to start the day, I'd be getting pumped for the likelihood of testing new upside areas. The Silver to Gold ratio is also showing bullishness at the end as it has had constant resistance tests all day and the final candle is also a breakout one.

This image to the left has some nice upside fibonacci targets. To enlarge/download any image all you have to do is click on the photo and if you want to save it then after you click on it you should be able to save an image by right clicking and choosing "Save image as". Friday was another up day and this has been a common theme to end the week. Every Friday seems to have huge gains and I am proud to have been able to put this information up on my blog hours before the market broke out on Friday. Next Friday I think is "Good Friday" and I don't think the market will be open then, but I am not sure. All that aside, the hourly candle chart has broke away from the two moving averages (One and Five Day). It is not over extended because there are three red candles before the final two green candles. This indicates to me that it corrected a small amount through price and is once again breaking out. My best prediction would be a move to the $43.25 area as the market opens and then consolidating after that in some manner. The last two resistance areas are $42.80 and $42.50 which are areas to keep your eye on as we move into next week as possible support areas.



Inflation Adjusted Chart


Many months ago I made a video explaining why it was such a great time to buy silver and not to concern yourself with $24 silver being way to expensive. I don't like buying high, nor do I like selling low and when it was breaking past this area we seen many great setups show that it was great to buy silver. In this chart there is an inverted head and shoulders pattern that lasted from 1991 to 2010 and the moving averages were showing signs of a breakout also. The breakout has happened as this chart is moving closer to an equilibration point somewhere in the middle. The expected target on this head and shoulders pattern is currently set at around $52 as yet another reason to give this area major resistance status. What is missing from this chart is older data which suggests that we are still extremely undervalued as well as information to what fair value was in the 1970s. If you line up where $43.00 is currently on the chart now you can see we are back to 1973 levels and because of this it gives reason for more upside targets. It's been pretty much a straight line up since the 2010 breakout and picking tops is a fools game here because there is no such thing as up too much when people are still rushing to get in. By knowing this psychology it makes it easy for me to have the "BUY AND BUY NOW" on my long term sentiment. The length from the mid 70s bottom to its 1980 peak was that of around a seven fold gain. If we add 7x on our bottom of $12 from 2008 this gives us a price objective towards $84.00.



Gold to Silver Ratio


If anyone wants to tell me that gold has bubbled, the only way I will believe you is if you mean gold priced in silver (aka the gold to silver ratio). The ultimate bubble we are facing right now is that of fiat currency and dollars. Therefore almost everything is going up in price for good reason. That reason is inflation. As far as the ratio is concerned, it closed April 15, 2011 at 34.58 and it keeps going lower and lower with no end in sight. If you are making wagers for the ratio to go higher because you feel or see that the market is down way too much then you might be a little early. If we use the terms of "Overbought" or "Oversold" then I would still say this chart is overbought because we are well above the historic sixteen to one ratio. For many years and centuries the ratio of gold to silver was usually around this level and it wasn't until this past century when things got a little out of control. I have my personal opinion where the ratio should be and at the highest it is around a ten to one mark and considering gold has very little productive tangible uses that I know of, it wouldn't shock me to find out that an ounce of silver has more value than an ounce of gold. Picking tops and bottoms for the most part can be a fools game and unless you have really good information to work with, I would not advice of such a thing.

By reversing the gold to silver ratio to the silver to gold ratio we have adjusted (or reversed) a downtrend to an uptrend. I have put some upside fibonacci on this chart based on the range this traded in for quite some time. I look at this fibonacci upside like a video game. The first level (161.8%) is very easy to take out and as you move up the ladder the challenges get harder and harder. Below is the grading I have for each level

161.8% @ 532.9 - Pretty much no resistance
261.8% @ 582.9 - Fast move to this level from the previous and no resistance
423.6% @ 663.8 - Found support at previous level and then this level was positive resistance. It was positive because it kept the higher low pattern going and finally broke through afterwards.
685.0% @ 794.7 - This was resistance for a very short period of time and then a sudden breakthrough
1109% @ 1,006.5
1794% @ 1,349.2
2903% @ 1,903.7
4698% @ 2,801


The 1,000 level is big for me because this means one gram of gold will have the same value as one ounce of silver according to the fraudulent paper markets and thus the ratio would 31.1 when it is 1,000 on this chart. Because of the resilience this market has shown, I like the chances that we test this level very soon. The trend is your friend and right now the trend here is bearish on the gold to silver and bullish on the silver to gold ratio.



THREE CRASHES


The charts on the outside is the crashing and burning the stock market has faced in two different time frames. Once was at the end of the 20s and the other one a few years ago. The middle chart in the image has the reverse of silver or the chart one would be trading if they are short the silver metal. I put the name "JP Morgan Crash" because baby, these guys are crashing very soon and this makes me smile. When we look at these charts what stands out to me is how green the stock market charts are and how red the silver one stands out. When the silver market goes up there is a red candle on this chart because its a down day for short sellers. If silver goes down then its a green candle because its a good day for short sellers. There have been 362 up days and 249 down days since the market bottomed for Silver in 2008. That means that its an up day 59.2% of the time. In baseball having a .592 winning percentage makes your a dominating team and I would have to say the same is true with Silver. That is the reason why it's so red because the short sellers have had a bad day almost three times out of five. During the 2008/2009 crash in the DOW (Chart on the right) there were 163 up days and 182 down days and only down 52.8% of the time. I think the big reason it looks more "Green" is because during the bear market there were many days when the market had big gains. In fact there 29 up days alone where it gained more than 2.5% which is more common in bear markets. In 1929 to 1932 time frame there were 316 up days and 367 down days or down 53.7% of these days and 75 of the 316 up days were those which had greater than a 2.5% gain.



Volatility


What does the message of the market tell us as of the close on this volatility? We were in a very low volatile state and then the action picked one week ago and this would mean based on how I look at this chart is we are average or at an equilibrium point. At least we are based on how the last couple of months have been. The breakout in September would have most likely seen this chart have an index around 5 as it was very boring and productive as it was like watching grass grow with the break to $24.00. That was then, and as today is concerned this would tell the me the volatility coming from strong to weak as it did is in an indecisive mode. Very similar to when markets correct through time and the break of this could very easily give us the edge to where the market will go. If we break to the upside and the market goes higher this leaves two possibilities. The first is that we do that parabolic move we have all been waiting for where 5% up or down days become common. The second would be that it would indicate that the market is running out of stream and setting up and intermediate bull trap where we will get at least a regular price or time correction. If the market goes lower with heavy volatility then an intermediate term top would be expected. If the volatility remains in the same area where it is today of having a few one percent moves here and there and never an extreme one then I would give the benefit of the doubt to the buyers and trust the pullbacks more than I normally do. If the volatility moves lower, then I would consider this to be bullish to neutral and standard the gains are usually decent and not heavy. The move from $34.00 that gained well over 10% on low volatility. The reason for this is because sellers were not aggressive to profit take that much nor were buyers for buying in mass quantities.


Silver Memory


A few months ago I was showing a chart for how Silver traded within' a fifty cent gap and I stopped doing it for a while. I was using SLV data and I have changed directions a little on this channel and stopped doing it. This one is very easy to maintain and is designed for ten percent moves. The first level goes from $20.00 to $21.99 as that is exactly a ten percent push from bottom to top. All the other ones are not exactly 10% but are very close to that measure. It is measured by taking every days highest level, lowest level and its close. What this chart indicates to me is that $26.00 to around $32.00 had the highest amount of trades or longest duration in time. This is the only level that has endured a correction within' this bull market as we seen in December and January. It seems every level on here trades for around fifty ticks. Because there is three of these recorded by dividing the fifty we can estimate we stay in these ranges for around seventeen days. We entered into $43.00 at the very end of the day and now have two points on the new scale with the high and close being in this range. For the previous one to reach fifty area it would need at least twenty ticks or six to seven days of trading in that area. This also gives me reason to raise these best expected support levels to the $38 to $39 level from its previous mark of $35 to $36.



WEEKEND VIDEO

Not sure why I can not embed it, so the direct link is here


OTHER PEOPLE ON SILVER



DonHarrold April 14, 2011-> He watched a youtube video the other day where someone else said $42 was overbought as the video started off. Don's view is to short the market as he sees the spot price being overbought. Also had a phone call unnamed whom is an enormous bull who has not bought since $27.50 and I guess thinks its going lower.

VIDEO LINK

I tried to search for that other Youtube video whom is also bearish at $42 and was not able to. This is what I found. If you know of anymore published at the earliest on Thursday, please let me know.

IchimokuCharts April 14, 2011-> Status was bullish. Video Link Here

FX Times April 14, 2011-> Bullish and is viewing resistance at $43 followed by $47. Video Link Here

XTBIndia -> April 15, 2011-> See's one bearish trend and still calls market super bullish and suicide to short. Chart Link Here

BrotherJohnF April 14, 2011 -> Buillsh on the trend and has been expecting the market to shoot up to $50 for a quite a while now without much getting in it's way. Video Link Video Link Here

PeterTrial1 April 15, 2011-> Rallies because of Global inflatioanry news and weakining dollar. Video Link Here

Lindwaldock April 15, 2011-> Mentions Bolivia and mining news and people going into paper silver from stocks. He says silver prices to hit $50 in the next month. Video Link Here

Silverbuzzsuccess April 15, 2011-> Metals Rally due to Job Reports. Video Link Here

Brain Shannon April 15, 2011-> It's a fools game to pick a top in this market. Video Link


Ira Epstein April 15, 2011-> Market is a runaway. The power of people wanting to own silver is overwhelming. Ira also states you never know how high is high. One should be looking for buy signals and not sell signals with a rising 18 day moving average. Video Link Here

4 comments:

  1. Thanks EndlessMountin for a great article everyday!

    ReplyDelete
  2. Dear EndlessMountain,

    I am a newbie trader. Currently I have profitable positions in silver. But with silver hovering around $43, I am not sure whether to sell all my longs here and take the profits and then wait until a pullback or a move above $43.15 to buy back longs positions. Or should I buy some hedges here? The events on past Monday is still reeling in my mind. I was profiting big when silver was nearing $42 but then it sold off hard and hit my stops at $39.75, leaving me with much smaller profits.

    Seems that many people are very excited about silver here. I am wary at the moment.

    Thanks and Best Regards,
    Sugi

    ReplyDelete
  3. I've been having lately false stop losses as well. And what is funny, it didn't use to happen with Silver yet nowadays it happens, now twice in a row. And I fear it will happen soon again. At around $42 there should be a support, but my stop loss is at $42 as well. It's a really tough call to sell there because if the support holds, the stop loss was for nothing but if the support breaks, the downside will be fast from there.

    I trade with 4-6x levarage so the stop losses are quite necessary there.

    ReplyDelete
  4. This comment has been removed by the author.

    ReplyDelete