Silver $22.77 target? I hope not!
I saw gold and silver both slowing down in their rally yesterday (Tuesday).
Gold was approaching very near its 50% retracement of the downmove, at $1520.19 on my chart and silver near a 38.2% Fibonacci retracement of its down move, at $39.44. Both looking a bit toppy. Interestingly, these Fib levels were also support and resistance where short-lived trading ranges occured in gold and silver on 5th May 2011 in the morning. I fancied going short on a spreadbet but didn’t want to gamble really.
Gold went just beyond the 50% Fib target to 1528 and silver turned almost exactly on its 38.2% Fib target at $39.52 intraday, within 8 cents. Now it's Wednesday and both have turned down from these points.
I asked Al and Roger Wiegand if they thought silver is going below the $33 low to form a big A-B-C correction? A 38.2% upside retracement of the $49.75 to $33 crash is very stingy, nowhere near enough to form a nice bullish flag. An equal sized downleg of $16.75 would take the price from this interim high of $39.52 to $22.77 if that occurred!
This comment was posted by me earlier today at:
http://www.kereport.com/2011/05/10/big-al-trader-rog-answer-question-listener-brad/
Here are my CMC markets trading screens. Both prices are nearly at Fibonacci levels that are also prices that were trading sideways going into 5th May during the crashes:
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The retracements for this selloff in silver have been analysed by Roger Wiegand and Ben Davies with respect to the move from the last low of $26.35 to the high of $49.75 to give an idea of the story so far.
I wondered if the correction might be in respect to the entire bull market wave from the low of $8.40 in the 2008 credit crisis to the high of $49.75. Ross Clark on Howestreet has just mentioned this for possible analysis in his interview this week.
Those Fibonacci targets would be:
38.2%: $33.95 / 50%: $29.07 / 61.8%: $24.20.
These were calculated from:
49.75-8.40=41.35 move from 2008 low
41.35*38.2/100=15.80 retracement
41.35*50/100=20.68 retracement
41.35*61.8/100=25.55 retracement
Targets are:
38.2%: 49.75-15.80=$33.95 - just about reached today 05/05/2011.
My trading screen showed $34.15 at 9:15 pm in the UK.
50.0%: 49.75-20.68=$29.07
61.8%: 49.75-25.55=$24.20
See chart:
So we have just about had a 38.2% retracement of the entire move from $8.40 to $49.75. That's pretty significant, especially with nearly all of it coming in only 4 days!
I watched the opening of Asian gold and silver trading. Gold gapped up about $10 on the start at 11:30 pm British Summer Time (BST) on Sunday night 1 May 2011. Silver ralled about 30 cents, then ...
I was reading some articles and listening to a podcast. When next I looked at my trading screen I saw a huge drop on the silver chart. I coudn't believe the scale running down the side. From about 48 to 42?!
Gold was down about 20 dollars and SILVER DOWN 6 DOLLARS IN 15 MINUTES!
This occurred from about 23:20 to 23:35 BST. It was basically a vertical drop in silver. Gold rallied a bit and then did another wave down to finish $33 down in the next half an hour while silver 'stabilised' between $42 and $44.
The price changes were (top to bottom from my chart):
Gold: $1577.51-$1543.67=$33.84 down
Silver: $48.177-$42.152=$6.025 down!
THAT'S ABSOLUTELY OUTRAGEOUS!
Looking at it later, I have labelled the times on the upper left. The vast majority of the smash occurred in 11 minutes between 23:26 and 23:37 British Summer Time on Sunday evening. There is not a single green 30 second candle for the lower $4 of the fall!
Of course, liquidity is probably thin; it's the middle of the night in london and NYC after all. If you look at the latest COT report on http://www.traderdan.net/, Dan Norcini shows that there are a lot of small speculators long at the moment - I guess they will have been wiped out pretty much by this move if leveraged.
If I switch to any other time frame on my live charts, even daily (covering the last 10 months) or weekly charts (going back to 2007), this 15 minute move shows up. The drop looks huge on the daily chart.
Is this why there are no limits up and down for silver now?
% moves:
Silver: -6.025/48.177*100= -12.51% in 15 minutes
Gold: -33.84/1577.51*100= -2.15% in about 40 minutes
Gold:silver ratio at start of move:
1577.51/48.177=32.74
Gold:silver ratio at end of move:
1543.67/42.142=36.63(That will make Bob Hoye happy!)
$ move ratio Au/Ag:
33.84/6.025=5.62 as against actual price ratio of ~35:1
% move ratio, i.e. silver's leverage to gold
6.025/48.177*1577.51/33.84=5.83
Silver moved down nearly 6x as fast as gold.
That's consistent with last Monday's fall of $5 in 24 hours and the last part of the rally just before that fall.
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