“As the saying goes, a picture tells a thousand words.  I have taken a monthly line chart on silver going back to 1970.  The 1970’s bull market from a technical perspective is picture perfect.  There are a clear 5 waves up (as seen on the chart below), with the largest being the 5th wave which represented a staggering 808% gain for silver. 

This is the norm for commodities as wave 5 is driven by fear and scarcity.  The 70’s corrective waves of 2 and 4 have alternation, where 2 is fast and steep, and 4 is slow, drawn-out and volatile.  The subsequent 20 year bear market made obvious key levels of support and resistance as noted by the yellow circles and horizontal red lines that I have extended into today’s time frame....

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“Moving to the current bull market, I prefer to think it started in 2003 as this is close to the absolute low, and it is also where the price really started to move higher.  I have noted the key breakout levels, the first being at $8.39, and the second at $20.22.  These levels correlate perfectly with obvious resistance established in the prior 20 year bear market.  Both levels were broken to the upside, but  only after the second attempt (clearly seen on the graph).

The latest resistance tested, with a slight false break, was in April of 2011 at the monthly closing level of $48.  The previous all-time monthly closing high was on Jan 31st, 1980 at $38.53 (although the intraday high was slightly above $50).  This price pattern indicates that the silver price should move significantly higher on the next sustained break above the $38.50 to $40 zone.


Today’s fundamentals for fear and scarcity that drives a commodities wave 5 rally are lining up perfectly.  We are seeing the move to reject and outright fear in some cases of fiat currencies, to the low supply and shortages of physical silver.  Within the shortages of supply that exists because of natural demand lies the insidious excessive paper shorts.  This has been noted by your guests Eric Sprott, Richard Russell, William Kaye and others.  Fear will be fueled exponentially by those speculators caught short.


From my analysis, breakout two at $20.22 was the most significant.  It was the first resistance tested in the bear market since October 1980.  Silver has since moved dramatically higher, and the market has not been able to correct anywhere near that level ($26 has been the low). 

Regarding silver’s breakout of a major concave price base of 23 years, as the saying goes in technical analysis, ‘The larger the base, the higher the move into space.’  The minimum topside target for silver is around $200 which is the top of the major price channel.”

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Eric King

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