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June 12, 2008

Silver Poetry

Just a quick note on silver. More of an observation, really. A curiosity. During the corrections which ensued after the parabolic runs of 2004 and 2006, silver corrected very quickly... to the tune of about 40% over 4-5 weeks. Following the 2008 run into the March peak, however, silver has held up rather well. We are down roughly 20% in 14 weeks. In fact, most of the damage occurred in only three days.

One of the explanations I have devised for this behavior is that perhaps the March peak was not the big run for this cycle. Perhaps there is one more parabolic move just in front of us before a larger correction sets in. It certainly would not be out of the question considering the enormous amount of new dollars being issued by Ben "Banana Republic" Bernanke. Along those lines, it is interesting that the current correction seems to rhyme with the previous correction of this run:

commodity chart

Today, silver, with a 50c decline, is violating support. If price manages to recover substantially above support, I will probably add a trading position on top of my core position. The stop would be pretty close... any close below support would kick me out.


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