Young Bui

ILVER took quite a tumble in a three-day span early in October, starting from the low 40’s and falling as low as 26 during the euro market. It has been stomach-wrenching for those who are new to silver. For me, it is a great time to go bargain-hunting for silver. I will let Clive Maund, who predicted this decline with his technical charting, tell you what the next move for silver is going to be. The following is an excerpt from Mr. Maund’s article on Silverseek.com. You can also go to his website at www.Clivemaund.com.

    “On silver’s year-to-date chart we can see how the brutal plunge that wiped out many leveraged small silver speculators, and which enabled us to make a fortune in a matter of days, abruptly terminated at the zone of support shown in Far East markets on Monday, after which silver rallied to close the day almost at its highs, leaving behind a large very bullish “Dragonfly Doji” on its chart which we will look at a little later on the 3-month chart. The ferocity of the decline is thought to be partly or even largely due to a wave of margin calls going out to leveraged small speculators. . . .
    “Big Money is right now having a field day mopping up the holdings of massacred small traders whose corpses are being loaded on to wagons like a scene from the aftermath of The Battle of Waterloo, and there are strong indications that after they have finished rifling through their pockets and taking the fillings from their teeth, silver is going to go storming back up. We had already figured out that silver was undergoing a 3-wave A-B-C correction that would end with a violent C-wave flush-out weeks ago, and labeled it as such. An A-B-C correction is just, a correction, which means that it should be followed by a 5-wave advance to new highs, although it may seem hard to believe looking at the charts right now. Sentiment has been shattered by this plunge, the severity of which would normally imply that the price is set to go lower still. However, there are various indications, principally in the latest COT figures for silver and also for gold and the US dollar, which suggest that silver will not now go lower, although the damage to sentiment may of course require a period of base building for days or perhaps weeks before a new uptrend can gain traction, that may involve the price dropping back down again towards the intraday lows of last Monday. A point worth emphasizing here is that silver is now extraordinarily oversold, as shown by the MACD indicator on its charts—it is at its most oversold since the bull market began, and this fact alone should limit immediate downside.
    “On the 3-month chart we can see much more clearly the huge bullish “Dragonfly Doji” candlestick that formed back last Monday and the climactic volume that accompanied it. This was a clear Reversal Day. Since then it has been in a state of temporary balance - unable to drop much further because it is so oversold, and unable to rally because of the severe damage to sentiment, which normally takes some time to heal. When it plunged it broke below the support level shown in the $33 area, and this will be the first hurdle for silver to clear on the way back up.
    “Now we will look at the truly extraordinary COT situation for silver which suggests that, with weak longs having being nicely shaken out, it won’t be long before it resumes the upward path. The latest COTs show a TRULY MASSIVE DECLINE in Commercial short and Large and Small Spec long positions in silver, which comes on top of earlier declines for several weeks. The Commercials have never been long silver and make money by playing the swings and this is as close as they have got to being long. This is THE MOST BULLISH COT CHART FOR SILVER THE WRITER HAS EVER SEEN. It alone suggests a stunning turnaround in the silver price before long. How could this be? If we couple this strongly bullish silver COT chart together with the strongly bullish euro COT chart shown in the Gold Market update (and the dollar COT chart is very bearish), the story it appears to be telling is that the dollar rally may soon be history, which suggests that some kind of breakthrough may be imminent regarding the crisis in Europe. This would logically involve more integration and the commitment to a massive blast of QE, Fed style, in order to mitigate the liquidity problems arising from the insolvency of member states. Needless to say, if Europe graduates to the elite super QE club, it will be great news for gold and silver . . . .”

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