Pitfalls of Silver Price Technical Analysis

Technical analysis of the financial and commodity markets has been used effectively by traders to analyze price movements of commodities and stocks for hundreds of years. Despite being one of the most effective methods for forecasting future price movements, technical analysis can break down and give conflicting signals when certain events occur.

This seems especially true in the silver market, where a number of factors have changed that precious metal's trading dynamic. Reading silver's future can be more accurately done by interpreting a combination of factors, which include price action and participant positioning.

Latest Trends in the Silver Market

As previously mentioned, a number of different factors are contributing to price movements in the silver market. To a person unfamiliar with recent developments, these factors might make market moves appear counter intuitive.

For example, large commercial traders are currently positioned for higher prices, while recent downward price momentum has hedge funds and speculators adding to the downside price pressure.

Furthermore, the ongoing investigations by the CFTC into the manipulation of the silver market have remained inconclusive in terms of identifying any wrongdoing. This is despite the fact that a number of incidences of large "not for profit" orders have moved the silver market substantially since the CFTC's investigations were initiated.

The CFTC has also stalled on setting position limits for silver with a legal challenge, which may affect the tentative limits on positions in 60 days. With each passing day, as more financial institutions get caught in dubious acts affecting the market- such as the LIBOR scandal, MF Global, and now Peregrine Financial Group - manipulation of the precious metals and other markets is becoming harder to perpetuate.

Other Factors

In addition to the above, no results have been achieved in the class action lawsuits against JP Morgan Chase and HSBC, with the lawsuits largely being ignored by the courts. With JP Morgan set to announce a 5 billion trading loss, and a new financial scandal appearing almost on a weekly basis, precious metals prices seem primed for a rally.

Furthermore, as Spain raises its VAT tax from 18% to 21% and riots are fomenting in the streets of Madrid, the Eurozone's ongoing sovereign debt crisis and the reduction of open interest in both gold and silver futures contracts indicate an imminent rise in precious metals prices is now likely.

Conclusions

Given the aforementioned situation, the following conclusions seem reasonable:

• A strategy of continuing the accumulation of silver with dollar cost averaging would probably be best considering current market and geopolitical conditions.

• The structure of the Commitment of Traders report does not give indications of future prices for precious metals, but it can give indications.

• Because traders generally watch the same technical data, technical analysis is a tool that can drive speculators to enter or exit the market.

• It seems only a matter of time before the realities of true supply and demand will eventually move precious metals futures prices to the prevailing street or retail level for the physical metal.

Overall, the case remains strong for holding and accumulating precious metals like silver while prices remain artificially depressed due to market manipulation.

Silver Prices and the Risk of Speculator Double Jeopardy   Pent Up Silver Demand and The CFTC Linchpin   Pointers for Commodity Traders   The Gann Technical Analysis of Price Movements   

Commodity Code Reviews - Does The Commodity Code Really Work?

While it may not be entirely apparent in our everyday lives, the fact of the matter remains that the world as we know it today is in a giant crisis, which is mostly of an economic nature. Some of the world's most powerful countries have accumulated a massive deficit and are now struggling to keep things under control. If you don't believe this, simply take a look at how deep in debt the United States of America government is, how they are trying to tame Forex, how the real estate sector is getting progressively worse, or even how the Euro has caused entire nations to enter an economic meltdown.

While some people are still trying to make things work, it is apparent that the current situation is deteriorating... there are however people who are still unaffected by this and simply go on about their business. The fact of the matter is that in times such as these, it is important to look at what has always worked for us in the past, and in this case we are talking about gold, silver and oil. These highly-coveted commodities will always find a buyer, especially seeing as how they are quite limited on Earth.

The mistake many people make when dealing with these commodities is simply waiting for the prices on them to go up. If humans were capable of living hundreds upon hundreds of years, then perhaps this strategy makes sense. But the fact of the matter remains that the best of us only have a few decades to truly enjoy the pleasures of life, and waiting dozens of years for the prices to become better is simply not something you want to base your life on. The good news is that there is another, interesting way to go about it: The Commodity Code.

The Commodity Code Review - A Look at What it Does

As you can probably imagine, The Commodity Code is based on what is written above: silver, gold and oil. The system behind it is quite simple and can be divided into three main stages.

The first one consists of simply looking at the quotes the banks have on gold, silver and oil. When the banks start to move money around, a certain piece of software referred to as A.M.B.E.R. takes note of it, noting patterns in how it moves.

The second step is where master traders intervene and analyze the information which the program has gathered for them. They use their knowledge and experience in order to determine if a certain trade is going to be beneficial for you.

Finally, the third step happens when these experts have found a profitable deal, upon which they send an approved signal to your MT4 terminal, bringing up the trades window on autopilot.

As you can see from this Commodity Code review, this is basically something which has the potential of making some interesting earnings without too much effort. However, because the program is automatic, it is highly recommended that you not only look into what other people are experiencing with it, but also start off slowly with very small investments. However, because real experts and humans are involved in the second stage there really shouldn't be any problems to worry about.

Silver Prices and the Risk of Speculator Double Jeopardy   Pent Up Silver Demand and The CFTC Linchpin   Pointers for Commodity Traders   The Gann Technical Analysis of Price Movements   Reasons Why China Wants Its Citizens to Own Precious Metal   

The Precious Metal Achilles Heel

In the grand scheme of things, people have traditionally had more faith in silver as a currency than in paper fiat currencies.

Furthermore, since modern paper currencies are only backed by the creditworthiness of the authority issuing them, if that authority goes into default on its debt, the currency it issued could become virtually worthless.

Basically, in order for the fiat money system to keep going, more paper currency must be printed. Also, 'old money' like silver and gold must be kept at arm's length, both literally and figuratively, by the use of propaganda.

Ultimately, a lack of confidence will force this grand paper experiment into default as the essentially flimsy physical reality underlying fiat currencies is gradually exposed to the public currently being duped by it.

Silver Shines When Defaults Seem More Likely

A major series of defaults seems increasingly likely, especially given the LIE-bor gate scandal and the sovereign debt crisis in Europe. Countries around the world are having their debt ratings downgraded as government spending remains unrestrained by fiscal responsibility.

Another factor is the increasingly public exposure of the silver market's manipulation over the last few years. The price of silver has been kept artificially low by futures exchanges allowing short sellers to control whether or not physical delivery into a futures contract actually occurs.

Rather than actually having to deliver silver into a short futures contract, a government can simply print more money to pay for its losses should the price of silver futures rise.

Possible Default Scenarios

In the event of a substantial COMEX default, silver's price would soar mostly because of the scarcity of the metal relative to the underlying demand for it and the greater confidence that investors have in it relative to paper assets.

Furthermore, the exchange would probably set limits on position sizes and price fluctuations. Trading might also be halted or a sellers-only market established.

This sort of default scenario would seriously erode confidence in such one-sided paper futures markets as a way of setting prices for intrinsically valuable physical commodities like silver.

Price discovery for precious metals might gradually move to a more physical-based valuation system. Nevertheless, the retail sector would surge, and the demand for physical silver would likely determine its market value, at least for a while.

One could expect to see long lines with people buying and selling silver at the retail level. Governments might also place restrictions on precious metal holdings to avoid seeing their paper currencies devalue as a loss of confidence in paper assets grows.

Even if a metals futures exchange default is not the event that triggers the final stages of a loss of confidence in fiat money, the reactionary blow off as metal prices are allowed to move closer to a fair value equilibrium price will unmask the great fragility that has lurked beneath the surface of the manipulated paper silver market all these years.

Silver Will Remain a Store of Value

Insufficient supplies of physical silver could mean that the metal may not "flow" enough to become a de-facto currency in a default scenario.

Basically, using physical silver as a currency has some drawbacks, which include:

• An insufficient supply of above ground physical metal to cover massive currency circulation requirements • As demand grows, the price of silver as a commodity goes higher • It is consumed as an industrial and jewelers' metal • Its market suffers from a lack of physical sellers • Low mobility relative to paper and electronic currency • Safe storage challenges

Nevertheless, silver does not need to circulate as currency within a country to be considered a form of money or to act as a store of value.

The fact remains that silver will continue to be a valuable, mobile, liquid, tradable and recognizable asset that is in short supply relative to its true underlying demand.

Silver Prices and the Risk of Speculator Double Jeopardy   Pent Up Silver Demand and The CFTC Linchpin   Pointers for Commodity Traders   The Gann Technical Analysis of Price Movements   

How to Trade Commodities

Trading all over the world is generally based on various types of commodities. However, the trading today includes new commodities because of the advancement in technology. With technological innovations comes online commodity trading which give opportunities for people from anywhere to participate in the trading activities.

Commodities that can be traded are raw materials that come in specific volume or quantity. These products also have to meet certain quality standards to qualify as commodities that can be traded in any of the authorized exchanges. The standards that have been set should be met in order for the raw materials to be considered in international commodity exchanges. There are several types of commodities that traders can choose from. They can trade agricultural commodities such as coffee, cocoa, corn, rice, pork bellies and a lot more farm products that people need. Other traders may opt to deal with energy commodities like gas and oil or they may also choose metal commodities that include gold, silver, copper and other precious metals.

Traders today also have the option to trade new commodities that are brought about by technology like silicon chips and nano-materials or products. The usual way of commodity trading is done by floor traders in commodity exchanges. People may also participate in trading through commodity brokers. The brokers may provide important information to their traders especially those who are still new and who are trying to find their way around. However, these traditional ways of trading commodities is very costly and only a few traders can really participate.

Over the years, discount commodity brokers were created in order to lessen the costs of engaging in the trading business. Today, online commodity trading offers more trading flexibility and opportunities to private investors. New traders who would like to start trading do not have to put a very big capital to be able to participate unlike in the traditional trading platforms. There are various online trading brokers that offer other services to their clients aside from providing the necessary information that they need in order to gain from their trading business.

New traders though have to still learn the basics of the trading business before they actually make their investments. They may be able to make good profit if they know the essential elements that comprises their trading transactions whatever platform they would be using. Online commodity trading may provide them with the most convenient way of participating in this type of market especially if they have limited funds to start trading.

Silver Prices and the Risk of Speculator Double Jeopardy   Pent Up Silver Demand and The CFTC Linchpin   Pointers for Commodity Traders   The Gann Technical Analysis of Price Movements   Reasons Why China Wants Its Citizens to Own Precious Metal   Various Orders in Futures Trading   

Momentum and Pairs Trading Spread Betting Strategies

Two (2) of the most common financial spread betting strategies are the momentum trading and pairs trading. It is in this light that traders need to be aware of these strategies so that they will be able to decide which one is appropriate to use. Of course, there is no "once size fits all" strategy that can be applicable to all instances and events of the market. In other words, there is an even when it is advantageous to employ while there is also an event that it is inappropriate.

It is in this regard that this article will explain both of these strategies briefly in the sections below.

Momentum Trading

On the one hand, momentum trading is a strategy in financial spread betting that involves monitoring the direction of all the traders in the market. The key here is to bet on how those traders will pull their prices. For instances, what this means is that when traders see the rest buying positions and trades in a certain stock, riding that momentum is the right thing to do. In other words, what this requires from a trader is to trade on a position until the momentum is noticeably slowing down. Hence, before the trade totally drops, a trader must get out to that position fast.

However, there is a catch to this. In order for a trader to do this properly, appropriate and reliable data should be available and present. The sets of the market and economic data that a trader needs to look into should be those for intermediate level. This is in order for the prediction and monitoring to be precise.

Pairs Trading

On the other hand, another strategy that is applicable in financial spread betting is the pairs trading. This is about trading in two (2) companies within the same market or sector at the same time. For traders to profit from this strategy, they must buy trades or positions to a company that is performing stronger while selling the one that is currently performing weaker than the other. However, the premise behind this is that it may only work effectively when the sector is getting stronger or performing positively. If the market is on the opposite, then what the trader needs to do is the reverse.

The idea of this strategy is quite straightforward. For instance, if a sector or a position is, in fact, worth more of a trader's attention, then it should receive more. In other words, this requires the trader to buy more on the company that is moving positively stronger rather than those that are weaker. Hence, this gives the traders to win and gain from both bets instead of profiting from just one.

Silver Prices and the Risk of Speculator Double Jeopardy   Pent Up Silver Demand and The CFTC Linchpin   Pointers for Commodity Traders   The Gann Technical Analysis of Price Movements   Various Orders in Futures Trading   

Precious Metals Paper Sellers Conveniently Trapped

The large and mostly naked holders of short positions in precious metals are conveniently trapped, especially in the silver market. Covering in any meaningful way would blow the U.S. Dollar's cover.

The Dollar's increasingly serious valuation issues are also being ignored, but this may only last as long as the Euro continues to remain in the currency market's spotlight as a target for selling pressure as Europe's debt problems deepen.

Financial Repression

Financial repression was implemented after World War II to help melt away the war's oppressive debt burden. It consisted of maintaining the following conditions:

1. A moderate rate of inflation 2. Some amount of growth 3. A compelling situation for large banks to buy debt

Nevertheless, the extra, and unmentionable, fourth ingredient to the official policy of financial repression is modern day coin clipping. Since physical silver has long been absent from circulating currency, the next best thing is to bury its value in paper.

Basically, large banks have been allowed to enjoy commercial status in futures markets, which has allowed giant short positions to evolve. To be fair, this has occurred in all commodities, although the silver and gold futures markets typically see a far higher concentration of sellers.

This questionable access allowed obvious "not for profit" selling, as well as coordinated and manipulative selling, according to whistleblower Andrew Maguire. The result has helped keep precious metal prices low and sentiment poor to confuse the investing public for years.

Pretending That Regulators are on the Beat

In the meantime, not only have those big banks made easy profits, but they also enjoy the ability to buy, control and build long positions in the physical metals market without having any underlying commercial interest like miners and industrial users. They do this by inducing weak specs to sell on the downside momentum they induce.

The futures markets make this manipulation convenient by legitimizing the banks' participation, which typically characterize their market manipulation as hedging customer business or over the counter derivative products.

As a facilitator of this manipulative process, government regulators have turned a blind eye since the process keeps metals and other commodity prices low, thereby allowing some political leg-room for more printing of paper money.

The mainstream media would not dare mention market suppression, since the word conspiracy seems synonymous with lunacy or fringe theories at best. Also convenient is the fact that silver has become of substantial strategic importance in modern times as an industrial commodity.

Despite poor economic indicators overall, perhaps this manipulation serves to support a spurious "hope" campaign that a return to better economic times is likely. For those that remain skeptical, physical silver continues to offer a safer haven than paper currency.

Silver Prices and the Risk of Speculator Double Jeopardy   Pent Up Silver Demand and The CFTC Linchpin   Pointers for Commodity Traders   The Gann Technical Analysis of Price Movements