Monday, August 17, 2009

Even if Silver goes nowhere for the next couple of weeks -- a good possibility, I'd say --  we should take longer-term encouragement from the fact that last week's high, 15.185, exceeded a midpoint resistance on the daily chart by a whopping 12.5 cents.  If buyers should take charge, though, pushing past 15.575 this week, that would be enough to set bears' fur ablaze. _______ UPDATE (2 p.m.): Regarding the drubbing the Silver is taking today, my thoughts concerning gold apply: It is not the beginning of some hellish decline, but rather a sudden easing toward buoyancy in a somewhat lower range.  _______ FURTHER UPDATE (2:54 p.m.) At the moment, with Silver trading 14.020 off a 13.820 low, I am expecting a tradable bounce from a little lower: 13.805, a Hidden Pivot that comes from the hourly chart.  An impulsive turn from above that number, however, would be bullish for the near term.

Shorts were mildly on the run when Friday's session drew to a close, but a somewhat bigger picture suggests the prospect of dueling impulse legs this week, with little net loss or gain over the few days.  The first sign of trouble on the hourly chart would come on a print below 157.02.

I don't much trust this bounce, since it came off a whipsaw low on Friday that had exceeded the previous day's low by a single tick.  However, if short covering should push the rally above 79.66 today,  we'd become raving bulls, at least for the short-term.

We shouldn't read too much into the feints, whoops, glissandos and diminuendos of late, since, let's face it, the futures have been stuck in a range since January.  That said, they are about to squander a bullish opportunity if they fall below _____, the point 'C' low that followed the creation of an impulse leg of daily-chart degree in early August. That would foreshadow, not some killer leg down, but, more likely, yet another period of lazy buoyancy at a somewhat lower level. More immediately, the December contract could fall to as low as _____ if it smashes the _____ midpoint associated with that Hidden Pivot. (Note to pivoteers: A=961.30 on the hourly chart, August 14 at 9 a.m.) 

Friday's run-up in the last 30 minutes is being mildly regretted and repudiated Sunday evening, but it's still too early to tell whether the weakness will pr0ve to have been yet another ruse for DaBoyz to accumulate stocks ahead of the next short-squeeze. I wouldn't turn outright bearish, however, unless the selling hits 978.00 today, since that's what it would take to create a bearish impulse leg on the hourly chart. In that regard, Friday's weakness perhaps reflected nothing more than DaBoyz' reluctance to attempt to punch through to a new level without sufficient "good" news to goose shorts. Night owls can attempt bottom-fishing at _____ with a stop-loss as tight as three ticks. The basis for this recommendation is shown visually in the accompanying chart.

Although we had vowed to let the by-now tiresome inflation vs. deflation debate simmer for a while, it came to an unexpected boil last week after some provocative comments were posted by "Senor Cuidado" in the Rick's Picks forum. Like us, the Senor finds it difficult to imagine how all of those printing-press dollars the banks are currently sitting on will find their way into the consumer economy.  So far, the banks have recoiled from the idea of lending out their digital funny-money, using it instead mostly to purchase U.S. Treasury debt.  In the meantime, although bailouts and guarantees offered by the U.S. Government supposedly total close to $13 trillion, the only person we know personally who has gotten a dime of it is our sister-in-law Patti, who recently traded an ancient Volvo for a brand new Honda SUV. The cash-for-clunkers program that enticed her to trade up would seem to be what the inflationists have in mind when they assert that inflation lies just around the corner. After all, the program put ostensibly inflationary printing-press money directly into the hands of consumers, who duly stampeded into the auto showrooms to buy new cars. But if the so-far $3 billion giveaway has produced even a blip of inflation in the auto sector, we have yet to read about it. Granted, the program involved only a relatively paltry sum in comparison to, say, the bailout of a sizable bank. However, we would argue that if cash-for-clunkers had been a $100 billion program, the inflationary consequences would still have been almost negligible. Try to Imagine... Try to imagine what would happen if the automakers were to respond to a $100 billion stimulus in the usual way, ramping up production and building new factories in the South, where union presence is relatively light. Thousands