Will the Silver Market Pull Up its Shorts to Cover its Growing Crack?
Market Update 8-2
by Edgar J. Steele
February 8, 2008
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My name is Edgar J. Steele.
(Green is the price of silver and black is the level of outstanding silver short sales)
The more I look at it, the more clear it seems to me that
silver is about to jump straight up into the air. Of course, that is
the danger of technical analysis (chartism done in the absence of
fundamental analysis). However, fundamentals all point to the death
of the dollar, and in short order (well, during the next 2-4 years,
Note that, almost every time the price of silver rises dramatically and creates a serious divergence, the shorts get pulled, which accelerates the silver price even more, in a whiplash sort of effect. For example, in July '05, the divergence led to some massive short covering, causing the silver price, which had paused after a healthy upleg to about 6 or 7, to jump in a matter of weeks to nearly 15.
Not always, though, as we had a similar situation setting up
in early 2007 that resulted in a simple sideways movement of the
market for most of the year. The divergence this time seems more
Things move quickly in the silver market when they do move. This is kind of like earthquakes, where tension builds up until a fault line finally breaks, creating a pressure equilibrium via an earthquake. Right now, the tension from the divergence in the silver price and the total outstanding shorts seems almost unbearable. The establishment has been moving heaven and earth to keep the dollar above 75, a losing proposition in light of the amount of "liquidity" (that's Fed-ese for counterfeit money) being spewed by the Federal Reserve in order to prop up banks, hedge funds, mortgage companies and their insurers.
Bottom line: I see a major break coming in the near future,
forcing silver upward in a rush to, perhaps, $25 - 30 per ounce.
I'm not prescient enough to want to say this too loudly, not after touting $20 silver "by the end of the year" back in mid-2005, but you have to admit that the chart is quite suggestive. And the price of silver did double in the winter of 2005/2006 - had I forecast merely $15, I'd be the King of Silver today.
If this happens and I mention it to just a small inner circle, then I'll feel guilty for not sharing it with my whole list, won't I? On the other hand, if it doesn't happen, chances are pretty likely that silver will hold its value vis-a-vis inflation, which is saying quite a bit these days, anyway, so I might as well just say it right out loud.
Likely, there will be yet another doubling opportunity in the next year or two, as well, as silver repeats this process again and again (inevitable, in the face of the death of the dollar).
Copyright ©2008, Edgar J. Steele
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