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Bob Hoye
Institutional Advisors
April 3, 2006
written on Mar 30

According to industry sources "Barclays Global Investors is applying to list 13 million shares backed by 129 million ounces of silver in an arrangement similar to that for the streetTRACKS Gold Trust shares. Under this structure, silver will be held in the Bank's vaults and each share will represent 10 ounces of Silver." There is no question that this has been having a huge influence on the supply/demand balance for silver (taking as much as 21% of the annual production off the market). All informed investors are aware of these facts.

Silver prices have been outpacing gold since the middle of 2005 when Barclays originally applied to the SEC for a listing. (The Gold/Silver ratio has declined from 65 to 52).

With the imminent arrival of the ETF the upside market momentum is stretching the technical indicators to levels not seen in years. The monthly chart is generating upside exhaustion signals. In past examples, the condition can run for a week or so. The only occurrences have been:

Feb & March 1974
Sept & Oct 1979
Dec 1979 & Jan 1980
Feb & March 2006

The weekly chart is generating a signal as of this week. In the past thirty-five years there have only been eight sets of signals. The best buys occurred on a correction to the 89-week exponential moving average.

Jan 4/74 through Feb 22/74
Feb 23/79
Sep 21/74 through Oct 12/74
Jan 4/80 through Jan 18/80
Jan 7/83 through Feb 18/83
July 30/93
March 19/04 through April 09/04
March 31/04?

Traders should move to an underweight position in silver stocks or implement a two-day trailing stop-loss. Look to overweight on a correction to $8.50 over the next few months.

-Bob Hoye
Institutional Advisors


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