Silver Chart and Notes

For you Silver guys out there, by request...

With all the recent selling occuring in the silver market, the chart informs us that metal still remains mired within a very broad trading range that has contained price for the better part of 15 months now.

The top of range is from $35 - $35.50 while the bottom of the range is between $27.0 - $26.50. Within that range silver had put in what appeared to be the beginning of an attempt to start a trend back in October with that strong upside reversal week but it then seemed to run out of steam as it approached $35 and now is sinking lower once again.

There is a bit of psychological round number support at $30 although that is not really all that much in the way of actual technical support. Very strong support lies down near $28 and extends all the way to $26.50. This region has proved to be rock solid in terms of buying support for that same 15 month period mentioned above.

I am of the opinion that for silver to take out this significant support level, an enormous shift  in sentiment would have to occur in regards to the overall global economy. In other words, in spite of the easy money policies being followed by the FEd, the ECB, the BOE, the BOJ and the stimulus measures of China, sentiment would have to shift in concluding that none of it is working and the global economy is heading for a sharp contraction in spite of the massive amount of liquidity being injected and the negative ( in real terms ) interest rate environment that now exists across many of the major industrialized nations.

I am also of the opinion that one would also need to see copper prices collapse sharply for silver to violate this downside support level. If that were to happen, that too would tell us the market now believes that all such stimulus measures by the Central Banks is fruitless and doomed to fail.

While no one can predict the future, especially with the entire global economy in a place that none of us have ever witnessed in our lifetime in regards to the sheer magnitude of the debt overhanging it, I suspect that these same Central Banks would waste no time in dusting off another version of the next round of QE were sentiment to deteriorate that badly. Let's face it - that is all they got!

For now it appears that the US economy and the economies around the globe are stabilizing. That does not mean that they are healthy; it merely means that central bank actions have stop the bleeding of the patient and got him stable. It is quite another thing for the patient to leap off of the table and start dancing. I do not expect that to occur at all especially without any serious structural changes being made in most of the Western industrialized nations.

Heading into the end of the year the thinning trading conditions are going to allow for some exaggerated moves due to liquidity issues. Keep that in mind if we see any sharp short covering rallies or even rallies caused by some new buying. I am looking out more to the start of the New Year to get a better sense of what to expect but as I wrote in an earlier piece this week, it would not surprise me one iota to see another YEN CARRY trade develop this coming year with commodities benefitting from another influx of hot money chasing yield in this pitifully, obscenely low interest rate environment.