Silver Market Update
After the Plungelet
September 27, 2004
Silver has staged a hesitant recovery following the "plungelet"
in early September which revealed the continuing fragility of
this market following the vicious plunge back in April. On the
plus side the price has, so far, remained above the parabolic
uptrend visible on the 2-year chart. The sort of action we have
seen this month, a sharp decline followed by a weak, hesistant
recovery is normally followed by renewed decline.
It is now very important that
silver succeeds in holding above its parabolic uptrend - this
means that we don't want to see it break below $6. The bearish
Elliott wavers maintain that the April plunge was an impulse
wave, i.e. a wave in the direction of the primary trend, and
that the subsequent rally is merely a bear market countertrend
move. I can see the point that they are making and will be forced
to agree with them should the long-term parabolic uptrend fail.
Ferocious declines such as we witnessed in silver in April do
normally kick off a longer-term downtrend, but not always. An
outstanding example was the 1987 general market crash, which
although a big deal at the time, now looks like nothing more
than a blip in an otherwise relentless uptrend that continued
right up to 2000. What will greatly improve the pattern and reduce
risk substantially will be if silver can break above the clear
strong resistance level at $7, at the top of the April gap. This
is our buy signal, and will probably synchronize with a gold
breakout above $430.
September 27, 2004
Maund is an English technical analyst, holding a diploma from
the Society of Technical Analysts, Cambridge and living
in southern Bavaria, Germany where he trades US markets.
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