"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


Thursday, October 27, 2011

Silver has reached a key technical level

"Let the good times roll" is once again the motto of the stock market perma bulls as the Europeans graced the world financial markets with a gigantic sized punch bowl to help slake the thirst of the liquidity junkies. Mix in a dose of a better than expected US GDP number and it was "RISK ON" in a big way.

Silver, as expected when the risk trades are in full force, outperformed gold to the upside putting on nearly 6% against gold's 1.5% gain.

Note the chart and you can see that it has climbed exactly to the key Fibonacci 50% retracement level of its recent decline off the August high. It has also punched slightly above the 40 day moving average (dotted line) which a large number of fund traders monitor and is not far from the 50 day moving average.

If you recall the recent Commitment of Traders data, it showed a very low level of hedge funds on the net long side of this market, most of them having washed out over the past few months. If that crowd becomes convinced that the Europeans have effectively dealt with the sovereign debt crisis ( papering over the losses of the banks), they will pour money back into silver with a vengeance. Just take one look at what they have done to the copper and crude oil markets.

A push through today's session high puts silver on a path to make a run at $37.30 - $37.50.

Downside support is back near $33 followed by $32.50

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