Thursday, April 14, 2011


I'm starting to get the feeling that many people have now come to the conclusion that silver is bullet proof. First off let me warn you that we still haven't seen anything that looks like a daily cycle correction yet, and gold is now moving into the latter part of the timing band for that short term correction. When gold dips down into that trough silver is going to follow.

Next let me show you a couple of longer term charts so you can get some idea of just how overbought this market is and how dangerous this is becoming especially this late in the cycle.

In the first chart I've noted that silver has now rallied 100% above the last C-wave peak.

That's much larger than any other C-wave rally. It's pretty rare to ever see an asset rally 100% above a prior peak. That alone warrants caution. I also noted that silver is currently stretched 60% above the 200 DMA, also a new all time high.

I suggested in a nightly report that we could easily see a $3-$6 correction in silver once the move down into the daily cycle trough begins. I have a feeling most people at this point think that's virtually impossible. But is it really? Look at a $6 correction on that long term chart.

A $6 correction is almost insignificant. It wouldn't even take silver back to the 50 DMA. A $6 correction would just be a normal pullback to test the March pivot and ease the extremely stretched conditions.

I'll tell you what else a $6 correction would do. It would destroy all the over leveraged players. It would convince everyone that the silver rally is finished. And more importantly it would set silver up for the final spike higher to my expected target of $50 during the final daily cycle. 

Ask yourself, are you so heavily leveraged that a move back to $36-$37 would completely freak you out and knock you out of your positions?

When gold gets this deep into a cycle a move higher by the dollar almost always triggers a correction. 

The dollar is due for a short term bottom any time now. I expect this time won't be any different in that a dollar rally will trigger gold's move down into the impending cycle low.

This late in a daily cycle and this stretched above the mean it is becoming increasingly dangerous to keep your foot to the metal (pun intended). If you're driving 200 MPH you might want to slow down to 100-120 for the next week or two.


  1. Toby

    I am getting mighty frustrated with my PM stocks despite the fact gold and silver are making new highs. What happened about the fortunes that were going to be made as you wrote a few posts back? The stocks are laqgging big time and it seems rather late in the day for them to turn around, we got a toppy stock market, the summer doldrums ahead, and silver stretched well above its 200 MA. Doesnt look like i will be making my fortune this year anyway. Whats your take on the juniors Toby? Because they certainly got me miffed of late.

  2. You need a subscription to the premium site. Then you would know why I think the miners are lagging.

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  4. This blog called the correction before it happened, when most were riding the euphoric silver waves of soaring success and salivating over sublime sacks of silver salutations. Good job. I have subscribed to this blog. Keep being real. Bravo!


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