Each fan line drawn from the upper peak (Buffet spike) has a corresponding fan line at right angles to it from the low point. Fascinating, and perhaps unexpected, no? The right angle correlation (90 degrees) is contrived by adjusting the temporal (horizontal) scale - but the fact that matched pairs actually do exist is not.
I have colour coded these lines into orthogonal pairs. On this chart I omitted any green orthogonal line for clarity, and because no hugely significant ones presented themselves.
What we are witnessing here is a breakout to the upside of a falling pennant formation. Note how the orange resistance has become support.
From the lines drawn on this chart I will attempt to derive a projection for the silver price going forwards. Before I do this I will test the validity of the lines drawn in the first diagram. To do this I look for parallel support and resistance sets of lines. In the case of silver, there are so many I have deconstructed them into two sets for clarity.
The following line sets were derived from our first chart analysis. Secondary lines are shown dotted. Each coloured set contains lines that are either parallel or orthogonal. The pink and orange sets first, derived from the last 2 fan lines above...
Now the grey and green lines are expanded...
With so many to follow how do we know which lines to choose as our primary support/resistance lines? I am taking a guess here that the ones that combine to produce maximum symmetry and correspondence to data will prevail.
After much humming and hawing, trial and error (which if you want to sound fancy you can call empirical analysis), cups of coffee and glasses of red wine from DROOY territory, a picture emerged. I deleted a myriad of rough work lines to leave this very simple picture.
Three significant lines point to 'A'. Will silver hit $11 in 2006?
Notes to above
1) I have superimposed on the chart a symmetrical Isosceles triangular pattern repeat generated from the green and pink fan lines and the grey base line from our first chart
2) I have pointed out a larger Isosceles triangle A B C, formed by three directors generated from the first chart, colour coded pink, grey and orange. The right hand side of this Isosceles triangle should provide base support for silver going forward - in fact at time of writing this means that silver should never fall below about $4.75 again, and that baseline is rising quite steeply to well above $5 by December 2003, which is why I believe my little spread bet on silver must pay off.
3) The rising trend looks like going up through 2004, possibly breaking through support long enough in 2005 to fall back to $6+ minimum, in doing so completing the inverse head and shoulders formation shown by the yellow curve. Then we should really be off to the races.
4) Massive upside resistance for silver may be presented by the left hand side of the ABC Isosceles triangle. This stands at around $9 today and $11 at the apex, around end 2006. Of course, some time in 2006 silver will have to break out of this triangle too.
5) A short squeeze on silver may well propel it straight off this chart at virtually any time and with little or no warning. If the left side of the white Isosceles triangle is breached I expect this to become support, since it is such a strong line.
6) Note how the chart seems to move from a red triangle into a green triangle into a red triangle. Green triangle next?
7) Note also how the price chart seems to follow the Isosceles triangle perpendiculars in both red and green triangles when powering down. This should give timing points for position exit and entry strategies.
HIP HIP HUI
The HUI is behaving as predicted
Next stop 275 -350?
I still do not know why the amplitude of successive waves seems to be increasing - I would really have expected a parallel support/resistance on a log scale. Still, you have to accept facts as found. Here is a recent update to the sine analysis I did of the HUI. Every time I return to it, new previously hidden or un-noticed features emerge.
Notes to the above
1) Blue wave icon : a forked wave denotes launch of a big move - mostly up. I have noted this feature before in
SHORTING THE DOW2) Note the diagonal dotted support/resistance lines. They will hit the upper and lower wave limit in 2-3 year's time. Perhaps that will signal a trend correction? (Note: there is another line - the mean of the sine trend, bisecting these diagonals - not shown on the chart but currently at around 200-220. This might be the interim resistance some forum posters are seeing. Once through, 270-280 is a given IMHO) Should we make it through to 350 then my target for the next wave up (late 2004) rises from about 550 to 750.
3) Note the yellow 'searchlights' ACD, A'C'D' & A"C"D", part of fan formations drawn from the wave peaks. These seem to contain large down moves, with the exception of the GW2 POG which kicked through the upper searchlight resistance to the next fan line prematurely IMO.
Conclusion
The above analyses of Silver and the HUI share common themes.
1) The macro trend for the PM complex is up for about 3 years.
2) Both charts point to a significant turning point in mid to late 2006.
3) Apparently random chart action can be mapped onto highly
symmetrical grids when a log price scale is applied.
You can see where my October 275/350 target for the HUI is coming from - there is a clear sinusoidal going through major support/resistance lines. Silver, however is more complex. To realise what is happening here it is necessary to look at the bigger picture - as shown in SILVER LINING. Silver is coming out of a dip in a 2 century cycle. Now, I have projected a 2006 + 'event' affecting both silver and the HUI, but not the direction. It is inconceivable that silver would be on a long-term rise while the HUI fell. By long wave analysis silver should rise, and possibly dramatically. Therefore the HUI should also be set to continue to rise beyond 2006. The HUI is displaying an unusually bullish amplifying sinusoidal. It may be that the HUI here is discounting a steep ascent in the metals, especially silver.
This may also predicate a sudden increase in certain undervalued PM stocks that have little value below a certain threshold in the metal price, but escalating value above - those with 'expensive' in the ground metal. Us sound engineers call this process 'gating' or noise gating - no signal below a certain voltage threshold is allowed to pass through, while all the signal may pass once the gate is opened.
The more I look at charts the more I am convinced that silver will outperform gold - all the silver PM shares price charts of companies with any longevity show a slanted parabolic formation a la CDE - LIONHEART -. This corresponds to the 200-year turn in silver. BEMA is one of the few gold shares I've done that shows this also. Here is an older chart I did of BEMA. It has done very well since.
The angle of inclination is not quite as bullish as CDE & HL. Still super-good though! Sorry no scale but it is a log chart.
Rodin
7 September 2003
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