Silver - the value of dollar cost averaging.

Silver and gold are getting hit again today in an obvious attempt to shake the tree at the very bottom.  In this recent post I speculated that the long standing support line would be broken and it would take the power of a 3rd wave to do so.  I was planning on waiting for the high volume capitulation selloff that oftentimes is required in order to put in a sustainable long term bottom. 

At the same time, calling the very bottom is difficult and there was a good chance that the long term support line would hold.  In that case we could see a very violent vee bottom bounce into the next bull market and I wanted to make sure I caught a good price on that bounce.  So in this post I revealed that I bought 1/3 of my intended tranche of silver metal.  I presented a charting case for my move but like all charting, it is nothing more than the odds of trying to predict chaos (at least chaos to our simple minds; it's unlikely to be chaos at some level of omniscience).

Today the market rewarded me for my impatience with another big step down.  As I had originally thought, it took the power of a 3rd wave to do this.  In fact, the 3rd of a 3rd of a 3rd to do this as the following chart will show (click on it to get a clearer image).  IMO this action is chaotic but not coincidental.  The market had to make a decision at that support line and it pondered on it long and hard and it eventually decided that there were more suckers to fleece (and they were right).  I suspect a lot of stops were taken out by this move.  The logical thing now for markets to do would be to head fake back up and then go down one more time to see if any other sellers can be found.

I, of course, am of the mind that this is the time to be looking to buy, not sell.  I think there is perhaps $2 to the downside and $50 to the upside on this issue.  By the way, green 5 hand drawn in below also corresponds to a very large C and the end of the metals pullback.

Gold is also looking like it could be very near a bottom.  It is flirting with the 38.2 fib right now.  A case could be made for saying it is tracing out a 3rd of 5 of C right now as well.  Of course nobody knows for sure what the herd will do in a panic which is why I am dollar cost averaging into what I strongly suspect is a long term bottom. 

I'm also mindful that the eventual retracement could turn out to be the 61.8% fib or even that this could turn out to be not a C wave but a 3rd wave!  That would mean years more of pain for metals
 holders, pretty much in line with what Bob Prechter expects.  It is never smart to completely ignore Prechter but I am not trading.  I am accumulating for retirement.  I am confident that by the time I retire this retirement metals fund will be in very good shape.  Obama is saying that Bernanke wants out and that he has been in there longer than he wanted to be.  I read this as saying Obama wants Bernanke out because he is not doing enough to prop up the collapsing debt Ponzi.  One day in the not too distant future, the US will have a Shinzo Abe moment - an event marked by the government takeover of the Federal Reserve and the installation of a puppet chairman of it.  There will be a mandate to inflate.  This has been my long standing "super nova economy" view: first big deflation and then massive inflation and perhaps hyperinflation.  It will take years to play out.

The eventual takeover of the central bank by the government is why I'm into the metals as a store of value for the long term.  Until that happens, I'm hoping for lower prices so I can buy on the cheap!  This is the difference in mind set between someone who buys physical metals for retirement and someone who trades the paper based metals funds like GLD and SLV.