"When misguided public opinion honors what is despicable and despises what is honorable, punishes virtue and rewards vice, encourages what is harmful and discourages what is useful, applauds falsehood and smothers truth under indifference or insult, a nation turns its back on progress and can be restored only by the terrible lessons of catastrophe." … Frederic Bastiat

Evil talks about tolerance only when it’s weak. When it gains the upper hand, its vanity always requires the destruction of the good and the innocent, because the example of good and innocent lives is an ongoing witness against it. So it always has been. So it always will be. And America has no special immunity to becoming an enemy of its own founding beliefs about human freedom, human dignity, the limited power of the state, and the sovereignty of God. – Archbishop Chaput


Wednesday, October 8, 2014

Silver Showing Some Signs of Bottoming?

I want to stress that the grey metal has NOT YET confirmed this however. It is showing some stability here just above $16.50 as it oscillates around the $17 level.

I have noted two resistance levels that have formed on the chart. The first comes in near $17.50; the latter, and the more formidable, shows up at $18. If the bulls can push the price up past both levels, we will some significant short covering.

The reason for the comments is that Monday's bizarre trading day in which the US Dollar completely erased all of its strong gains from last Friday's jobs report, sent the entire commodity complex soaring higher. That wild day impacted the price charts of many individual commodities ( remember that 30 cent rally in the beans?) and painted some chart patterns that have the pure technically-oriented traders perking up.

Remember, our markets are run by computers and these computers are "pure technicians" in the sense that they do not care, nor do they consult, fundamentals. As such one cannot ignore technical developments in markets.

With the Goldman Sachs Commodity Index continuing to swoon ( it is threatening to take out a 27 month low today!) it is difficult for me to envision silver mounting any kind of sustained rally, especially with copper having trouble near the $3.00 mark. Still, bears will need to be alert to any violations of those upside resistance levels.

I should note that Australia's Perth Mint reported some very strong sales of its silver coin ( 757,000 ounces in September and 819,000 in August). According to Dow Jones that was double what it had been selling a the few previous months.

While that is good news it is not enough to shift the sentiment towards the metal overall at this point. Silver needs a STRONG Economy with lots of industrial demand ( think cell phones, tablets, electronics, etc.) and growth to spur it strongly higher. I know I shall incur the wrath of the silver perma-bulls with this next comment but frankly I do not view silver as a safe haven. It is too bulky and too hard to transport in size. For a store of value in inflationary times however, it can be quite good.

For now, perhaps the market has found a level above which it is comfortable trading with prices having fallen far enough for the time being. Given its 23% plunge in price in three months time,  it is not unreasonable to see some consolidative type trade.

With the FOMC on tap, there is no telling what we will get. The market could make another fresh leg lower or it could take out resistance and move higher. I simply do not know.

One quick comment and chart - Unleaded Gasoline scored a 46 month low in price today! I for one am quite happy to see this and I am sure a whole lotta other consumers are as well.

As I said above, this underscores the deflationary type environment we are seeing in the commodity complex which is why I am a skeptic when it comes to silver. I will say this - if silver does fall below that low from Monday this week and especially below last Friday's low near $16.64, I would not rule out a further fall to near $15.00.


  1. Thanks Dan, good stuff.
    If oil keeps dropping the way it has lately the metals will assuredly share the pain.

    If "surprises" like this keep popping up in oil we'll have $80 in short order...and sub$1180 gold and sub $16 silver will follow.
    In the end I think the oil turbulance is all about Russia with the Saudi's playing a key role.
    "Oil futures fall sharply after surprise supply increase"

    By Claudia Assis
    Published: Oct 8, 2014 10:44 a.m. ET

    SAN FRANCISCO (MarketWatch) -- U.S. crude-oil inventories rose by 5 million barrels in the week ended Oct. 3, the Energy Information Administration said Wednesday. That contrasted with expectations of an increase of 2.1 million barrels, according to analysts polled by Platts.
    Oil futures declined further after the data, with the November contract CLX4, -1.87% recently falling by $1.67, or 1.9%, to $87.13 a barrel on the New York Mercantile Exchange. Gasoline inventories rose 1.2 million on the week, and supplies of distillates increased by 400,000 barrels, the EIA said. The analysts polled by Platts had expected gasoline stocks to decline 1.1 million barrels and distillate supplies to decrease by 800,000 barrel.


  2. Looks like declining Western gasoline demand trumps Emergin Mkt demand, kinda like physical pm's.

    Hubert, did you get DAX sell signal today?

  3. oh yeah foxnews et al all over the big consumer savings on winter heating oil and transportation costs. on the other hand $TRAN the transports looks about as bad as $XAU. transports had provided yet another 'dow theory buy signal' last month yikes.

    soybeans got on their cell phones in a hurry today as the rain forecast shifted further south in the belt. what happened to all the 'south america burning up with heat' from mon-tues?

    "U.S. corn highest priced of the major exporters following this week's rally.".. many wanted to sell 3.50 in dec corn, stop above 50-dma.
    in ZW dec chi wheat-many wanted to sell 5.10-5.15, with a stop above Dan's 5.20
    ..ZS nov beans the sell was 9.50 yest. stop above the gap fill 9.57.

    eur/usd still grinding for 1.27-1.2715 many want to sell.. interesting usd/jpy at 1.0840 (peaked below 1.0800 range and now regained it).

    1. RE: $tran. Ebola trumps lower fuel prices.

      For all the boom & bust cycle fans out there. Kinross Gold's share price went under $3.00 today. putting its market cap around $3 billion--so it is now worth about 40% of what it paid for Redback Mining back in 2010.


    Crusher in Council Bluffs Iowa dropped spot soy basis bid by 23 cents to 48 under the Nov... Lincoln, NE crusher dropped soy bid 10 cents to 40 under.

    basis at the gulf dropping for all ags, why buy ahead of the usual lower harvest prices.

    fomc minutes next, possible hammer for SPX after a peak below last week low.

  5. Nice work Dan. 45 minutes to go...
    Silver has seen a near 10% drop so far from the Key $18.65 support level.
    And another 10% and we get a near perfect $15.00 handle...

  6. fomc minutes taken as 'dovish' nice pops by NQ ES ZN GC SI to name a few!

    NDX we have that former july high at 3997.50, in conjunction with the NQ 4000 round number, will make for short covering and longs above, and shorts may hang on below.

    eur/usd hits the 1.2715 as well!

    ok wacky weds. we got the volatility for the 4th straight session!

    1. thanks for your frequent updates. they are appreciated.

  7. "Tomorrow should be the tell for if the pattern holds true, we should see the Dollar reverse course and move higher tomorrow ( by the close )"

    Euro soaring right now! I think the turning point will be tomorrow when Draghi speaks in Washington.

  8. Great post Dan.

    US$ support at 85.2? then 84.8?

  9. Interesting post. Dan's chiefs have reached their target for Silver and covered?

  10. out of eur usd since we broke through 1.27. This rally could be violent. I'm out of the way.

  11. NUGT up over 17% so far today!!!!!!!!!!!!!!!


Note: Only a member of this blog may post a comment.