Tears and Wailing in the Silver Pits (NYSE:SLV)

las, dear readers, alas, alas!

Last week we warned of the impending implosion in silver prices and this week we got it. And while no one can be certain that this swan dive won’t suddenly stop mid-air and reverse course, we say it would take one hell of a gifted acrobat to accomplish that feat.

Nope, the die is cast for silver for the time being. With apologies to our dear friend and regular reader who wrote:

I appreciate your article, but in my opinion you are way off on your short call for SLV. QE3 is on its way and SLV will be hitting $40 a share long before it hits $30 or below

Our last check on SLV revealed a very fat monkey treading water in a whirlpool (can monkeys swim?). She was last seen at $30.18 while the Dow and gold plummeted all about.

A bit melodramatic, no? Emotional, certainly. So much ‘us vs. them’ here. Is that any way to invest?

The War/Silver Nexus?

Finally, the issue of a new, wider Middle East conflict negatively affecting the price of silver was called into question by a number of readers, and we have to take responsibility for not being clearer.

While we do feel that hostilities are inevitable and may begin almost immediately (within weeks), we wrote that the technicals, and only the technicals, speak to a coming drop in the price of silver. Review the article here.

What we’re seeing here is a potential runaway gap (in black oval, above) that could lead to wild losses in the silver pits – Thursday’s action will prove conclusive on that score. In the meantime, the technical damage evident on the chart is great.

First, price action has gapped below all the major moving averages.

Second, all but the long term moving average (411 day) have rolled over and are now trending lower.

Third, roughly twelve trading sessions back, MACD confirmed an RSI dive below the all-important ‘waterline’. This remains a bearish indication so long as both items stay below that benchmark (in red, above).