Send this article to a friend: September |
Silver Gets Knocked Down Before It Goes on to Win the Fight In my September 5th article entitled “Silver Takes a Much-Needed Breath”, I stated the following:
This is a very low probability scenario right now, but I’m throwing it out there as a possibility to watch, especially if we break 16.20. ~17.50 proved to be the low, exactly as forecast, but since then we have hit a lower high of 18.81. Scenario 1 (“S1”) may still be intact and wave (4) is just deeper than expected, targeting 16.50 in an ABC move lower where A=C in size before heading up again in wave (5). If so, the C wave down to 16.50 is under way now and we just completed wave i to 17.80. Resistance for the wave ii bounce is at 18.19, the 38.2% Fib, or 18.42, the 61.8% Fib, before lower again in wave iii of C. In this scenario, we cannot go below 16.20 as this would violate the peak of wave 1 and we would have to consider S2 and S3 instead. If S2 is playing out and wave i of 3 completed at 19.75 and this is wave ii, we could fall all the way back down to ~15, the 85.4% Fib of wave i, before wave iii of 3 begins. A break of 15 would bring S3 into play, the worst-case scenario. If 15 is broken in S3, described above, then new lower lows below the low of 13.62 in December 2015 are likely. I have to stress again that this is the worst-case scenario. In order for this to become a higher probability scenario, we would need to see supports at 17.50, 16.50, 16.20, the 200-day moving average (15.75), 15, and 14.27 broken. We’re a long way from that outcome yet, but it is a possibility, hence I share it here. My primary scenario remains S1 unless 16.50 is broken, with confirmation below 16.20, then I would switch to S2. Only a break of 15 with confirmation below 14.27 would make me consider S3. I have been saying for many weeks now that extremes in the weekly technicals, sentiment, and positioning, rivaling or exceeding those at the peaks in 2016 and 2011, would ultimately lead to a significant pullback. Unfortunately, we have barely made a dent in those extremes so far… From a fundamental perspective, as I shared last week, I don’t believe we will see the Fed revert to QE unless we get a crash in equities first: “No crash, no QE.” If equities rise, the likelihood of QE falls even further. If they do fall, the rising risk of deflation could weigh on Silver as it did in 2008. Until the prospect of QE increases substantially and the extremes we’re seeing in the data are corrected to a greater degree, the risk-reward favors further downside in Silver, imho. That said, I believe this will provide perhaps the greatest buying opportunity in Silver ever. Given the unsustainable debt load in the U.S. that can never be repaid, pending recession, exploding deficits, and unfunded liabilities coming due, it is only a matter of time before the Fed is forced to revert to QE as the buyer of last resort for U.S. debt that no one else wants. When it does, I expect the dollar to fall and Silver to soar to unimaginable heights. It’s inevitable, imho. For those of you interested in buying the physical metals, I recommend you check out sprottmoney.com for the best prices, customer service, storage, and delivery services. I use them exclusively for all of my purchases of physical precious metals.
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