Silver about to Break Out
Clif Droke
May 14, 2002
We wrote last summer that the dominant long-term and interim silver cycles were converging around the October timeframe and that a major long-term cyclical bottom would occur in silver at that time. True to form, the cycles did in fact bottom with 3-4 weeks of our forecasted timeframe and the strong V-bottom spike reversal last fall, not to mention the bullish parabolic bowl forming in the weekly chart, provides overwhelming proof that the long-term downward trend in silver is over and the trend is now turning up. We should see another breakout within days as silver attempts a move toward the benchmark $5 level in coming weeks.
In our study of chart patterns, we have discovered a variation of a classical chart formation that contains tremendous significance from both a time cycle point of view as well as a supply/demand perspective. The pattern, which we have dubbed the "time wedge," combines both price and time, and is a variation of the classical chart pattern known as the wedge, whether in the ascending or descending phase. Time wedges-when they appear-usually take several years to form, often over a decade. When they do form, however, they are highly instructive and permit extraordinary accuracy for predicting major reversals in the stock or commodity they appear in. In the case of silver, a rather large time wedge extending from the 1997 highs to the 2001 lows is visible in the long-term weekly chart of silver. This time wedge pointed to precisely the September-November timeframe of 2001 and it was one of the tools we used to forecast silver's ultimate bottom and reversal. It is instructive to note that silver futures bounced off the upper part of this four-year time wedge, using it as a fulcrum to springboard off $4 and etch its way toward $5, then $5.50. The $5.50 level should definitely be reached by fall if not higher. We cannot emphasize just how bullish silver's 6-month outlook is.
Silver futures have finally come into their own and are about to catch up with gold in terms of upside movement. Silver's dominant short-term and interim time cycles are once again coming into alignment and have lagged the gold market's cycle alignment by a period of several months. But good things come to those who wait. Accordingly, prepare to go long July Silver. A move above $4.80 will open up enormous upside potential in coming weeks. The third and fourth weeks of May and all of June should be an overall bullish timeframe for the white metal.
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