-- Posted 28 June, 2011 | | Discuss This Article - Comments:

Comex Silver ended the day near the edge of an abyss, threatening to plunge, eventually, to as low as $25 if even mild selling continues for the next few days.  Specifically, our downside target for the July contract would be $25.13 if the futures were to settle for two consecutive days beneath the key low at $32.30 recorded on May 12. That number is what users of our proprietary trading system call a “Hidden Pivot,” and we were initially encouraged when the futures reversed very precisely from it and moved higher over the last few weeks. However, although the rally has looked constructive, it still needs to surpass the two labeled peaks shown in the chart to clinch a bullish outlook for the intermediate- to long-term.

Unfortunately, the rally appears to be dying without having gotten past the two crucial highs, implying that the big A-B-C down-pattern will complete to its ‘D’ target at $25.13.  That number is the Hidden Pivot “sibling” of the $32.30 midpoint pivot, and if it were to be achieved, it would represent an almost precise 50% retracement from early May’s highs. Of course, the futures could still get second wind and steam higher, emerging from the danger zone with a print above 42.325 (Peak #2).  But it would take quite a leap from here – about 25 precent.  Moreover, in order to re-energize bulls sufficiently to vault Silver above $50, the rally would need to traverse the entire $2.85 distance between peaks #1 and #2 without a significant pause. In the meantime, as noted above, the futures will remain vulnerable to a 25% downdraft to $25.13 if they slip decisively below $32.30.

Worst Case for Gold

Although Gold futures have looked somewhat better, the decline of the last several days has brought them even closer to trouble than Silver. For in fact, yesterday’s settlement price for the August contract was significantly below the 1503.10 “midpoint pivot” analogous to the one at $32.30 in July Silver. The good news is that even if August Gold does its worst, we see it falling no lower than 1446.90.  That would represent a decline of only 3.6% from current levels and an 8.3% retracement from May’s all-time high, 1577.70.

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Information and commentary contained herein comes from sources believed to be reliable, but this cannot be guaranteed. Past performance should not be construed as an indicator of future results, so let the buyer beware. There is a substantial risk of loss in futures and option trading, and even experts can, and sometimes do, lose their proverbial shirts.  Rick's Picks does not provide investment advice to individuals, nor act as an investment advisor, nor individually advocate the purchase or sale of any security or investment. From time to time, its editor may hold positions in issues referred to in this service, and he may alter or augment them at any time. Investments recommended herein should be made only after consulting with your investment advisor, and only after reviewing the prospectus or financial statements of the company. Rick's Picks reserves the right to use e-mail endorsements and/or profit claims from its subscribers for marketing purposes. All names will be kept anonymous and only subscribers’ initials will be used unless express written permission has been granted to the contrary. All Contents © 2011, Rick Ackerman. All Rights Reserved. www.rickackerman.com 

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