Tuesday, January 24, 2012

Silver Update

Click on the Chart to Enlarge

This chart shows 9 bear market rallies in silver from this bear market and the two prior bears.  You can see that most of them were in the 2 month range with the red box being where 7 of the 9 topped out.  The typical rally was 20-40% and 2-3 months.

The current silver market has rallied for 1 month and already is up around 30%.  The daily stochastics is overbought.  So my best guess as to how this will unfold, is for a pull back over the next couple weeks followed in the next month or so by a rally to a new high or a retest of any high that forms soon here.

The weekly stochastics has about 4-6 weeks before it will flirt with overbought territory.  So we may need to see that weekly momentum get more extreme before the market turns down in earnest.

Also while not shown on the chart here, past bear markets I've studied would suggest that the declines to come in this continuing silver bear market, may not be as aggressive as the ones we've already seen.

From a pattern perspective, the rally up from the Sept. low took 4 weeks, then the decline to follow took 9 weeks into the Dec low.  In a typical "flat" pattern with such a time differential between waves "b" and "a" the "c" leg will usually take half the time of the prior two combined.  That would suggest a 6-7 week rally up from the December low.  That would fit well with the projections of these prior rallies also.

So if you are holding silver or looking to short again, that is the set-up to look for.

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