Structures of Silver
Silver Triangles
The Isosceles silver triangles first identified here in the summer of 2003 were successfully used to predict the path of the latest spike in silver, which hit approximately $8.50. Here's a view from the longer term perspective..
*****erratum**** The above chart should say 'The triangles on the right hand side...'
Silver Cycles
In the two-decade bear market for silver the price has, for the most part been confined within a declining channel. Within this channel I have identified a triangular wave whose length is approximately 11 years. Excursions beyond and above the channel indicate periods of increased positive interest in silver as a speculative investment. Three are grouped around the early 1980's. One was of course very recent, and probably presages more activity moving forward. Note that the 'Buffet' spike did not exceed chanel resistance. (Also there was one minor excursion below the channel to which I currently attach no special significance)
Channel resistance corresponds to the neckline of the well-known 15-year inverse head & shoulders which calls for higher prices than the peak achieved for 2004 so far.
Silver Waves
An exponential decay is a natural process whereby a system returns in time to equilibrium after a disturbance. A plucked guitar string or hit drum decays exponentially. (I used the sound wave of a percussive instrument as an illustration as it is from my field of expertise).
The Hunt Brothers in the late 70's helped provoke a non-linear event in the silver market, and the ramifications echoed thereafter. Eventually the envelope of the price oscillations flattened out. (Whether this process was aided by a road-roller in the form of manipulation is a moot point). Whatever, silver has been exhibiting exponential decay since 1980. Silver broke out of this decay pattern on this last spike. We talk about support and resistance - well silver has pierced exponential resistance to the upside.
This next chart uses a mathematically accurate (as opposed to merely illustrative) exponential decay curve.
The exponential decay function is falling to an asymptote at just under $8. Its reflection rises to just under $4.00. A median lies at around $5.50. Of particular interest is the fan whose apex is at the intersection of the median and the 1980 spike.
Silver recoiled @ around $8.40 back into the envelope. Intra-day it hit the median line at around $5.50 (which also is a region of massive frame support) and closed higher - on an impact fan line.
(Update : Silver is again testing the median as of 10th May 2004)
Silver Frame
The orange lines form a set of equally spaced parallel lines - what I call a 'frame'. I use this criteria for identifying trend angle wherever possible as it is harder to settle on the wrong slope with such a strict definition.
I don't think I can recall drawing a better-defined frame. Each solid orange line is subtended by a profound silver spike. This cannot be a coincidence, surely? If we are in the initial stages of another 'impact' event in silver, then I would expect the price to quickly jump quantum frame levels as per 1979. The lower line of the frame could offer some price support, though one should not discount a temporary re-test of the turquoise or lilac wedge breakout lines.
Silver Ellipses
Elliptical functions also seem to proscribe silver action since 1980. Pink elliptical resistance has yet to be broken, as has white elliptical support.
Silver Forks
It is possible to draw two pitchforks - one incoming and one outgoing, that have approximately equal and opposite angles of inclination, and also have similar spacing. It looks as though silver may be held within the tines of the pale green fork(s).
Silver Spectra
The silver spectrum calls for a return to $50 around 2006. I use spectra to try to identify mirrored peaks and troughs. However, the reliability of spectra to predict the timing of events is still an open question.
Conclusion
Both conventional and what I call 'quantum' technical analysis methods are predicting substantially higher prices in the future - initially testing the 1980 high. There is very strong support for silver at around $5.50, maybe a little lower. The fundamental case for silver is pretty overpowering. Just the fact that it is historically cheap right now should get your contrarian investment juices going. As to what will happen to the value of silver if we do suffer a global financial collapse, perhaps this analysis of the famous 600 year chart of silver in 1998 dollars might offer some clues…..
www.contrarianthinker.com/Oil%20Ca2.jpg
Rodin 10 May 2004
Please visit www.contrarianthinker.com where you may learn things. We have bullion silver to sell (& store if required) until further notice. Premiums vary from 6-8% over spot depending on quantity (we don't deal with chump change). Storage is secure and costs 1.25% per annum based on the cost of your order (this element may have to be reviewed if silver goes ballistic).
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