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Technical observations of

Bob Hoye
Institutional Advisors
Posted Oct 3, 2009

Silver closed September at $16.67; the highest monthly close since July 2008. In the process it generated the seventh monthly Sequential Sell Setup in forty-five years.

It takes nine months for this pattern to build as prices move progressively higher. While it does not imply that prices must reverse, it does mean that the support at September's low ($14.65) becomes a 'line in the sand' for all, but the longest-term investors.

Four of the previous instances saw prices violate the support and then decline by another 17% to 28% (down 35% to 44% from the high). This would equate to a lower support of $12 to $10.50.

The two remaining examples of 1972 and 1978 were followed by the largest percentage moves on the upside (17 & 20 additional months). The key was the ability to move steadily higher in the months immediately following the setup.

click to enlarge

For details of the Sequential pattern refer to "The New Science of Technical Analysis" by Tom R. DeMark.

Weekly analysis also shows silver to be overextended with support around the 34-week average, coinciding with the September low.

Oct 1, 2009
Institutional Advisors

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