Silver at important support

Whether the imbalances are beaten out of the system via a deflationary crash or a massive inflationary spell, silver is likely to be a leading indicator.   Personally, I'm skeptical about any big crash in silver from here.  It has been beaten down for so many years to completely stupid and unrealistic levels of sub $10 that it has, in my view, far more long term upside than anything else.  I don't think the market is going to be generous enough to bash it down there again so that the newly awakened get a second chance at a long term sure thing.  Of course, if the Dow collapses then all bets are off in the short to medium term.

Having said that, silver is at an interesting support point.  It peaked at the exact point where it would form a parallel channel with the lower trend support line.  The correction has been larger than the 38.2 fib but there was definite support at that level on the way down and now there seems to be some resistance testing that level from below.   A break down below the lower support line will likely spell further buying opportunities but holding the line and then breaking back above the 38.2 % fib retracement level will likely signal another leg up.  Silver is still in significant shortage despite the recent sell off.  That exponential peak was put in place due to leveraged margin buying which has now gotten pared way back due to new margin requirements.  The next move up will not be nearly so fragile now that leverage has been greatly reduced in the equation by the COMEX con men.