Silver Market Update

By: Clive Maund | Mon, Apr 10, 2006
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Silver has put in an excellent performance over the past few weeks, and the question naturally arises as to how much longer the current near-vertical uptrend can continue. Although cautious in the last update, it was stated that "Although the current intermediate uptrend is definitely getting "long in the tooth", there is scope for further upside before it has run its course, and it may end with a spectacular vertical blow off move that takes it to a short and intermediate-term overbought extreme." - and that is what we have seen/are seeing.

On the 6-month chart we can see the strong gains by silver over the past month, but it should be clear that although we might see a brief period of even steeper advance before this uptrend exhausts itself, silver is now extremely overbought as indicated by short-term oscillators and moving averages gaps. This is now an increasingly high-stakes game and is regarded as the province of the brave - or the foolish. In order to avoid sleepless nights two alternative strategies are suggesting for handling this situation. One is take the big profits on offer immediately, and although we obviously don't like to do this as we are not operating as a charitable institution, adopt the philosophy of "leaving a little for the next man (or woman)". The other is to automatically exit on a closing break of the 10-day moving average, which although it involves loss of some profits, avoids one getting caught in a potential serious downdraught that such a break might lead to.

The 5-year chart puts recent gains into a broader perspective, and on this chart silver's overbought extreme is even more obvious. Admittedly, "it might be different this time round", but we are happy to let others run the risk of finding out whether this is true. Given that markets tend to go down twice as fast as they go up, can you imagine the speed of the descent if this breaks down? - to get some idea try looking at April 2004.

 


 

Clive Maund

Author: Clive Maund

Clive Maund,
CliveMaund.com

The above represents the opinion and analysis of Mr. Maund, based on data available to him, at the time of writing. Mr. Maunds opinions are his own, and are not a recommendation or an offer to buy or sell securities. No responsibility can be accepted for losses that may result as a consequence of trading on the basis of this analysis.

Mr. Maund is an independent analyst who receives no compensation of any kind from any groups, individuals or corporations mentioned in his reports. As trading and investing in any financial markets may involve serious risk of loss, Mr. Maund recommends that you consult with a qualified investment advisor, one licensed by appropriate regulatory agencies in your legal jurisdiction and do your own due diligence and research when making any kind of a transaction with financial ramifications.

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