Silver Market Update
... at the top line of the channel
22 November, 2004
gold's rate of rise has accelerated significantly over the past
couple of weeks, silver has only succeeded in moving ahead incrementally.
The reason for this is plain to see on the 6-month chart - the
price is continuing to be restrained at the top return line of
a clearly-defined trend channel. Looking at this chart in isolation
we would probably conclude that it is more likely to retreat
than advance from here - which is why we are not looking at this
chart in isolation.
Much greater overall perspective
is provided by the chart going back to July 2002, this starting
point being chosen so that we can place the point of origin of
the parabolic uptrend shown on it. Notice how the price has found
support at this parabolic uptrend on 5 occasions, and above it
in October 2003, so there can be no doubt that this is a valid
and important trendline - this provides us with the security
of having a predetermined exit point - if the price breaks below
it, it is a clear sell signal.
Having said that, it is not expected to. On the contrary, given
the accelerating uptrend in gold and the parlous outlook for
the dollar, silver is expected to break out of the trend channel
shown to the upside, which should lead to a rapid ascent. There
is some resistance in the area of last April's high, but it is
not likely to prove to be much of a hindrance, as the price did
not remain up there for long, so there is little overhanging
Should the dollar now plunge
as expected and gold make a run at its upper long-term trendline,
meaning a move to the $480 - $500 area, silver is expected to
race ahead to a peak considerably above last April's high in
the $8.40 area. Such a move would result in an extremely overbought
condition, of course, and take the price way ahead of its parabolic
support line, and it would therefore be expected to be followed
by a reaction/lengthy period of consolidation.
US dollar charts may be
viewed in the current Gold Market
Maund is an English technical analyst, holding a diploma from
the Society of Technical Analysts, Cambridge and living
in southern Bavaria, Germany.
Visit his subscription website at clivemaund.com.[You can subscribe
No responsibility can be accepted for losses that may result
as a consequence of trading on the basis of this analysis.
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Inc Miami USA