Bonkers

The talk on bubblevision today centers around commodities - as Jim Cramer's button would say, "buy, buy, buy!" I argued for a move in commodities several times over the past few months as the CRB broke to the upside (and the bond market has basically still ignored it!) and I argued (but did not buy entirely) that Silver was about to explode, back in September - though to be honest, I never expected the move to be this quick. Overall, the move upward then across the commodities spectrum is not a surprise to this writer. There are some canaries in the coal mines though. First, crude oil is dragging mightily though as I argued yesterday, the fundamentals are not exactly supportive of the current price levels, no matter where the dollar sits. At the same time, the trend is higher for black gold and perhaps it is just waiting at the station before the next big move arrives. Anyway, with all of the talk of silver today and the huge move the past few weeks, lets give an update to the note from September, using the Trender Model that I feature often.

First and foremost, Silver is closing in on the $28 target that I mentioned back in September. Upon review of the chart though, i would argue that $26 would have been a better target (which has been taken out easily) followed by a move towards $30 next. Like the GLD support that I mentioned a few weeks ago at $119, which happened to be a target level from the breakout from lower levels, Silver now has major support at the $26 target. If it holds after this parabolic move, then the $30 level would be my next target. At the same time though, if you look at the bottom two charts and the circles shown, Silver is now overbought similar to 2004, 2006, 2008 and now 2010 (every 2 years?). Each time this metal has corrected hard and given the open interest levels that historically have been in this contract, it will not take much to knock it down if a few hedge funds get interested in doing such.

So I am probably a buyer on dips above $26 with a stop below that level to play the decline down towards the $22/24 area. I wish I had followed my original note and held the silver that I bought at the time but what can you do! Trend is higher and the CRB is not quite at its target just yet. Thus the bulls still have supports.

Related articles

• Gold and silver on a tear (money.cnn.com)
• Top 5 Commodity Performers in 2010! (trak.in)
• While Gold Fights the Political and Financial War (lewrockwell.com)
• "Fake Money, Real Silver" and related posts (goldnews.bullionvault.com)