Silver Lining

By: Joseph Russo | Thu, May 5, 2011
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Though Markets often Rhyme they rarely repeat:

Silver Monthly Bars

With everyone and their grandmother calling a blow-off top in Silver we thought it prudent to present an alternate perspective.

Above is a continuation chart of Silver dating back prior to the Hunt-Brother top at 50.36 in January of 1980. Though at first glance the parabolic rise into the 1980 high looks similar to our current advance in 2011, they are by no means the same.

The big bang from 1975-1980 was "J" shaped meaning that there was at first a slow unassuming rise then a more abrupt and persistent short-lived parabolic explosion, which came out of nowhere. The rally from 10.70 in September of 1979 to the 50.36 print high in January of 1980 took all of 5-months to blow its top.

In contrast, the rally from the November 2001 low of $4.01 is defined by distinctive wave structure and consolidation periods. Rather than a short-lived five-month rocket launch without notice, the current move in Silver has lasted for ten years, and has telegraphed its intentions rather generously along the way.

The large uptrend channel drawn from the prospective cycle-degree [A] and [B] waves of 1980 and 2001 is divided by a dashed mid-channel.

Silver Weekly Chart

The monthly bar segment presented above right shows the gap-down open and subsequent decline in May breaching this mid-channel line of would-be support. In light of its failure, there is another dashed mid-channel of support resting just below near the $35 level.

Above is the weekly continuation chart of Silver from its most recent $8.53 print low in 2008. Consolidating to the tune of 58% from its journey north of $20 in March of 2008, Silver resumed an otherwise orderly advance in October of that same year.

Two years later in November of 2010, Silver broke above 26.70, which is the halfway point between its $3.05 low and the historic Hunt-Brother high. After printing a high of $31.09 in early 2011, it pulled back nearly 14% and retested the milestone within the month and began what many now perceive as a three-month parabolic blow-off top just shy of the historic high.

As noted in the long-term monthly chart that began this article, Silver has at least two remaining upside targets that are quite viable going forward. In our contrary technical assessment, Silver maintains an upside price target window that opens at 52.58, and closes at 82.91. The general timeframe for that window spans from June 2011 through 2021.

If such targets are to be achieved, the wave count resident in our weekly bar chart above is the count most likely to be in force. Such a count suggests that the recent print high was that of an intermediate (3) wave, and the current move down will don the eventual (4) wave label.

Given that fifth waves tend to extend in the commodity arena, and that Silver may be approaching only that of an intermediate 4th wave decline, one must not ignore the possibility that Silver's primary 5th wave advance may jettison the poor man's gold to $82 dollars per ounce. At that stage, a blow-off rally might then witness Silver lunge for the $100 mark and possibly fail.

Whatever you do, don't bet the ranch on another 21-year bear market following Silver's April 2011 print high just south of $50.

Trade Better/Invest Smarter



Joseph Russo

Author: Joseph Russo

Joseph Russo
Chief Editor and Technical Analyst
Elliott Wave Technology

Joseph Russo

Since the bubble, 911, and the 2002 market crash, Elliott Wave Technology's mission remains the delivery of valuable solutions-based services that empower clients to execute successful trading and investment decisions in all market environments.

Joe Russo is an entrepreneurial publisher and market analyst providing digital online media solutions designed to assist traders and investors in prudently and profitably navigating their exposure to the financial markets.

Since the official launch of his Elliott Wave Technology website in 2005, he has established an outstanding record of accomplishment, including but not limited to, ...

  • In 2005, he elicited a major long-term wealth producing nugget of guidance in suggesting strongly that members give serious consideration to apportioning 10%-20% of their net worth toward the physical acquisition of Gold (@ $400.) and Silver (@ $6.00).

  • In 2006, the (MTA) Market Technicians Association featured his article "Scaling Perceptions amid the Global Equity Boom" in their industry newsletter, "Technically Speaking."

  • On May 6 of 2007, five months prior to the market top in 2007, though still bullish at that time, he publicly warned long-term investors not to be fooled again, in "Bullish Like There's No Tomorrow."

  • On March 10 of 2008, with another 48% of downside remaining to the bottom of the great bear market of 2008-2009, in "V-for Vendetta," using the Wilshire 5000 as proxy, he publicly laid out the case for the depth and amplitude of the unfolding bear market, which marked terminal to a rather nice long-run in equity values.

  • Working extensively with EasyLanguage® programmer George Pruitt in 2010 and 2011, the author of "Building Winning Trading Systems with TradeStation," he assisted in the development of several proprietary trading systems.

  • On February 11, 2011, he publicly made available his call for a key bottom in the long bond at 117 '3/32. Within a year and half from his call, the long bond rallied in excess of 30% to new all time highs in July of 2012.

  • For the benefit of members and his general readership, he responded to widespread levels of economic and financial uncertainty in the development of Prudent Measures in 2012.

  • He publicly warned of a major top in Apple on October 26, 2012 in the very early stages of a 40% decline from its all time high.

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