Wednesday, April 4, 2012

Silver Finishing Flag Formation with Classic Inverse Head & Shoulders Chart Pattern

Silver Technical chart [Kitco Inc.] Silver continued its post Fed minutes sell-off overnight throughout the Asian and London session, and the slide accelerated with this morning's COMEX open.  Silver traded as low as $31.29 this morning, within a quarter of its lows for the correction placed early last week. 
Silver has now corrected 6% since the release of the fed minutes yesterday. 

The Fed has backed itself into a corner with regards to QE3, but somehow the market continues to allow itself to be manipulated like a bipolar schizophrenic by the ridiculous fed-speak BS emanating from the fed puppets.  QE3 is coming as NO ONE other than the Fed is able and willing to monetize $1.5 trillion of US annual debt issuance. 

The problem for the fed is that gasoline is $4 a gallon today (over $5 for our west coast friends).  It appears that Bernanke would like to talk oil back under $100 and gas back to $3-$3.50 prior to an official QE3 announcement.  Should QE3 be announced with gasoline already at $4 a gallon across the heartland, $5 a gallon by July would be a lock, and that would be it for Obama.  This is the conundrum facing the Fed presently.  That they will ease further there is no question.  However they would like to do so from a starting point of lower oil prices.

Live 24 hours silver chart [ Kitco Inc. ]

Gold also continued its post fed minutes sell-off today, and has now retested the lows for the correction near $1616.  $1600 support SHOULD hold.  Personally we do not expect to see gold below $1600 ever again outside of the possibility of a quick dip below over the next week, and should you see such an opportunity to stack the yellow metal into such extreme weakness, snap it up!

Live 24 hours gold chart [Kitco Inc.]

From a little longer-term perspective, silver is clearly finishing out a 6-month long inverse head and shoulders pattern- an extremely bullish pattern that targets ~ $45-$50. 

Silver Technical chart [Kitco Inc.]

On a 2-year chart, the inverse head and shoulders formation can be seen in the midst of a larger flag formation, also an extremely bullish chart pattern. 

Silver Technical chart [Kitco Inc.]

So while speculators and traders are dumping the metal based on the feds minutes from last month's FOMC meeting, longer term oriented traders and stackers are taking the other side of that trade, and getting ready for a breakout from silver over the coming months.