Today In Silver

Here is the latest technical analysis on silver with the assistance of Eidetic Research, our institutional-level technician. The lack of posts on Silveraxis during the past few months have been in large part due to being busy at Metal Augmentor (new website design to launch soon) and partly out of deference for giving the silver move some space to play out. We are now coming back because this rally stage of the market may be in the very latter stages. More stuff will be posted soon.

We’ve had some recent discussions with our market technician partner at Eidetic Research in order to help us gauge the current situation in precious metals and other markets with an emphasis on silver given its notable recent behavior. While our own outlook will always remain our own, we are heavily influenced by Eidetic’s technical and market observations. The reason is simple: the analysis is more useful, apt and accurate than any other technical work out there. With the above understanding out of the way, we’ll paraphrase and embellish Eidetic’s views below. Our own supplemental and dissenting thoughts will be presented in separate market updates to follow.

According to Eidetic Research, there is not a huge amount of insight that can be gleaned from near-term gold or silver at the present time that the charts don’t already make rather obvious. Tellingly, a $41 area swing target for silver didn’t contribute much to the recent price action as the moon metal powered through the low 40’s range and is now within striking distance of the January 1980 all-time spot market high of $50-something. Last Monday’s top reversal from around $41.70 could have threatened the trend but a lack of follow through and then an upside reversal into Thursday with a new bull market high on Friday revealed just how strong this market is currently. Unsurprisingly, the price action to end last week has translated into aggressive buying of silver into early this week.

Importantly, the recent exuberant performance by silver has not undermined the market. Indeed, there are presently no specific nearby price levels below which silver would need to drop for there to be lasting technical damage. Overall, silver appears to be in an accelerated third wave of an even larger wave three — what Elliott wave theorists call a “third of a third” (i.e., Wave 3 within larger Wave III of the sequence that began in 2001).

Silver should continue to outperform gold until it no longer does — in other words, there is no nearby ratio of gold to silver that has technical significance. That said, there could always be a bounce in the ratio if silver hits a meaningful downdraft in the short term. Even with the technically overextended conditions, however, silver is telling us in the macro scheme of things that eventually it will narrow its ratio to gold to the 15-17 area (around where the 1980 top was made).

Read more…

silverax Technical Analysis Market Update, Technical Analysis

The following is an example of the quality of technical analysis available to subscribers of the Metal Augmentor service. Just before the following technical analysis was published, we speculated on the imminent breakout by silver from its intermediate triangle pattern.

Silver Market Technical Analysis
by Eidetic Research

Note: All charts in this technical analysis can be enlarged to full size by clicking on the chart.

The foundation of our technical approach to analyzing markets rests on three principles: pattern recognition, momentum conditions and wave analysis. Although our initial monthly chart above features wave annotation, we are presenting it more for perspective than wave interpretation. In this analysis we want to concentrate on momentum conditions but we will revisit the above chart in our concluding remarks. For now, our longer term perspective on silver is that the market completed a major down price cycle in November 2001 at a Comex nearby futures low of $4.0150. Since then new up cycle trend development has encountered heavy selling pressure around $20. Prices have backed down, sometimes aggressively from highs around $20 in March and July 2008, December 2009 and May 2010. Our August 21, 2010 silver market analysis discussed the potential for a near-term move up to the $21.20 area given the upside completion of a May-August 2010 triangle pattern (pictured here). The pattern did complete to the upside so we are expecting further gains from a current price at $19.90 as we write.

Our favorite gauge of price momentum conditions is the stochastic(s) oscillator but we also rely, albeit to a much lesser degree, on Wilder’s ADX indicator. For those unfamiliar with the indicator, it may be defined thus:

ADX attempts to measure the trending quality of a market . . . The indicator measures the strength of the trend, regardless of direction; the higher the value, the stronger the trend.

The indicator itself appears as a line that may move between values of 0 and 100 (see indicator on silver chart below). In the past we did a study of the reliability of the indicator (10-period and applied to Comex gold prices) and our conclusion is that as far as its application to weekly charts goes, it is a better gauge of trending power in up markets than it is in down markets. We also adhere to the view of other technical analysts that the indicator needs to be rising and above a threshold of 20 to confirm a sustained trend condition.

Read more…

silverax Technical Analysis

We are very fortunate to have access to the technical expertise of Eidetic Research over at Metal Augmentor. Going forward Eidetic has informed us that we will receive shorter-term technical analysis that is frequently updated in addition to the big picture technical reviews that we are so fortunate to receive every few weeks or months. This is very exciting and we feel it makes the Metal Augmentor service a must-have for any investor interested in not only the metals but other markets where big profit opportunities exist.

Here is a bit more information about Eidetic Research for those who do not fully appreciate what this recent development really means. Eidetic is a highly-respected institutional level technical service that is of a quality rarely if ever made available to the investing public. Indeed, we don’t think any retail-oriented technical analysis even comes close. Moreover,  we firmly believe only a small handful of institutional technical analysis, costing thousands of dollars per year or more, can hold a candle to Eidetic. Fortunately this is not well recognized at present simply because there isn’t much of Eidetic’s work in the historical public record to examine. We say “fortunately” because otherwise Eidetic would probably not be available to investors such as Metal Augmentor subscribers. In the future should Eidetic decide to start providing technical work to institutional investors again, we are hopeful that Metal Augmentor will be able to negotiate an ongoing arrangement with Eidetic.

From time to time I will reprint the silver portion of these technical updates here at SILVERAXIS in the hopes that those of you who are on the fence about joining Metal Augmentor as a Founding Member will finally get a clue. If you do wish to join, go to the Metal Augmentor home page and add your name to the mailing list. Any day now we are going to open the service to new subscribers and if you are on the mailing list you will be among the first to find out.

So here is the latest silver excerpt from Eidetic Research:

Silver – Jly

All trends are up. Resistance 19.50 – 19.90, then 20.35 – 21.50. Support maybe 18.90 plus/minus; more probable 18.60 – 18.26. Upside potential a test of major resistance above 20.00 that defines the March 2008 intermediate-term top. Ongoing rally development from the early Feb low at 14.775, basis the active nearby futures, reached a new high Thur at 19.865. Gains were lost by the close* which established a small top reversal range. Some followthru weakness on Fri, including range expansion, suggested that short-term buyers may be running out of nerve. Rising daily stochastic values are near 80, a level generally considered “overbought”. Look for some two-sided consolidation between 19.00 – 20.00 on Mon-Tue.
ER 5/16/2010

Please note that for analytic purposes we use the Globex afternoon close at 5:15 pm ET as our Comex closing values rather than the official Comex settlement. In our view, it is absurd to consider a 1:30 pm ET official settlement as a legitimate close when other major futures markets such as Chicago treasuries and forex trade for hours beyond the Comex settlement times.

Disclaimer: Futures and options are inherently risky and should only be considered by highly risk tolerant investors. You can loose more than the amount invested and sometimes even more than the amount in your brokerage account so it is critical to seek the oversight or advice of a licensed professional if you do not have extensive experience trading futures and options.

Don’t mistake the above for your typical broker or market technician drivel that you might have access to, this is the real thing and not otherwise available to you normally unless you are an institutional investor or bank trading desk and paying thousands of dollars for such a service. This is not some amateurish charting by a wanna-be, magic numbers, astrology or some other BS either, it is the result of decades of nose-to-the-grindstone professional technical expertise that has actual utility helping people make money in the real world.

If you want to thank me, just go and join the mailing list and sign up for Metal Augmentor so you can be alerted when we open it up again to new Founding Members. Now that our new system is almost ready to go, we are going to be kicking ass and taking names. What, you don’t want thousands of dollars in investment and technical research for almost nothing? It’s your loss (and literally somebody else’s gain).

silverax Technical Analysis