The Chart du Jour

A Silver Lining as Wall Street Melts

August 18, 2001

By, Barclay T. Leib


Chart produced using Advanced GET End-of-Day

We watched with great attentiveness the equity market decline of last week, but we found little new to report on. If not already short, it is now becoming a bit late in the game (from a pure risk-return point of view) to advise aggressively selling, and yet we still see most chart patterns as being quite some distance from our preferred Fibonacci targets.

We have previously suggested back on July 11th, that after a short term reprieve at that time, 1133 might represent an ultimate downside S&P target -- at least on a short term basis. And from a cycle basis, Dr. John Vyden of UCLA points to August 26th as a turn date in his cycles. We continue to prefer an October low rather than an August one, but if we reach this initial target area into Vyden's date, we will likely take at least a few short chips off the table and potentially look for the downward slide to take a at least a short term breather.

Elsewhere, we post the above chart of weekly silver to show the rather strong reversal week up that this market experienced between August 13 and Aug 17th. After new recent lows the week of August 3, August 17th brought a close above the range of the last five weeks. We think this looks potentially very constructive.

Out of dormant bottoms can sometimes come explosive moves -- and silver's supply/demand balance continues to a longer term positive one. People often say digital photography is going to reduce the demand for silver, but silver is a natural conductor of electricity and is found in almost every electronic chip currently being manufactured. It is constantly getting used up, and scrap recovery makes up just a tiny fraction of annual supply.

We have gone long the white metal in recent days.


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