Long and Strong

Tue, Feb 28, 2012 - 4:24pm

Wow! Has does that feel?!? Pretty nice to be on the plus side of a $2 move, isn't it?

After such an amazing day, I'll try to keep this brief. First of all, silver has clearly broken through the horizontal and diagonal resistance which I had thought would give it quite a fight. That silver was able to defeat those levels so easily should give you pause.

So, what the heck is going on here? Silver is up over 30% year-to-date and it just plowed through what-should-have-been significant resistance without missing a beat. Why? How? Are we simply being set up for another takedown of epic proportions? On the flip side, is it safe to jump on board here? How much farther can this go?

I have a sense that we may be entering a completely new paradigm in silver. I'm not ready to make any bold proclamations...yet...but, by later this week, you may begin to get a sense as to why I am so optimistic. Could silver back off tomorrow or Thursday? Of course it could. Normally, you would expect it to. The $36 level is so important that, at any other time, I would be almost certain that a $36 test-as-support would be coming. However, as we are seeing play out, this is not "any other time". If silver does pull back tomorrow or later this week, think if it as a gift. You should be buying all dips until further notice. Miners, etfs, phyzz...I don't care what you buy, just buy the dip (whenever there is one).

Though up nearly $20 at one point, didn't it feel like gold was being held in check all day? It did to me. So, what happens next. Provided silver stays strong, which I think it will, gold will rally. Tomorrow will likely be gold's day. The charts seem to confirm this, too. After breaking through very stout resistance at 1765 last week, gold has consolidated above that level. In fact, it has even tested 1765 as support twice. It made its first attempt at 1785-90 earlier today. I strongly suspect that gold will defeat 1790 either overnight tonight or tomorrow. I still expect resistance at 1800 but after:

  1. The way silver blew through $36 today and
  2. The way gold blew through 1765 last week

I would not be at all surprised if gold erupted through 1800 and began running directly toward the upper end of its trend channel, near 1850.

Look, you may think that I'm letting my emotions get the best of me. I'm certain that there will be comments made to this post that will urge caution and claim that I'm simply chasing momentum. Let me assure you that that is not the case. Use your eyes and your brain. Draw from your own, hard-earned experience. Silver has steadily moved from $28 to $37 in nine weeks. Is that the end or is this just the beginning. I'll try to answer that question in the days ahead. TF

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