The ramparts are crumbling hugely now

All the silver investors will have to prepare for the worst of all. Now the deflationary washout is threatening to catch silver as well. After crude oil has been pricing in the US economic data since May that are greatly pointing to a possible US recession from the beginning of 2013, now the time for silver seems to have come to react increasingly to the dropping demand situation of this commodity.

Well, we have to consider silver as a very normal commodity during the deflationary phases. The supply and demand situation determines the price then. The currency aspect totally disappears in the process or it’s to be ignored, respectively. That’s why – and because of the narrow market, during such economic stages silver always reacts with relatively more severe and mostly even with brutal losses than gold does.

The reaction to the last FOMC meeting and statement and the resulting losses in gold and silver are still aware to any precious-metal bull – in their brains and in their accounts. The starting moment of the last decline is the reason why since Thursday my alarm bells have been ringing continuously.

„When price meets time, a change is imminent“. William D. Gann (1878-1955).

On June 10/2012 we worked out that silver in case of a day close below 27.17 would have to produce an unambiguous short signal. Here’s the detail from the monthly chart analyzed in the issue of June 10:

On June 1st silver marked its monthly lows at the extremely important support Gann Angle – 27.17 - then rising to the monthly highs of 29.865 until 06/06. On 06/10 I analyzed that a short entry in case of a daily close below 27.05 would make sense because thus the risk was there that the long-term Gann Angle, dominating since 2008, might fall. (In the chart above I mistakenly labeled this angle as the “2009 Support Gann Angle”). So this angle passes at 27.17 for June 2012 being fallen below for two consecutive days with the Thursday and the Friday close that is at 26.82.

Thus, since the beginning of this correction that began in April 2011 for the first time silver closed below 27$ again! That’s a threat and a harbinger for more to come because a third day close below 27.17 would be a pretty secure sign that the 2008 support Gann Angle could be broken definitely in that case.

Let’s go now to the moment of the first close below this angle. It was the day of the summer solstice, an important Gann date, especially concerning the commodities! It’s a turn date what in the Gann terms may always result in two effects: On the one hand it means that a trend may get to its end, in this case it would signify that silver would have ended its correction with an exhaustion low. Or B) – and this is much more likely that silver will newly accelerate its correction, followed by a break of the important 26.11 support and heading for the 21$ mark now.   

The actual state of the monthly 21 Candle GUNNER24 Up is showing us that also according to the rule of 3 and 4 the time has come to head for the next important target of this correction in the up-trend: the 1*1 Gann Angle that divides the setup into its bullish and its bearish half. The most important magnet in the 1*1 surroundings is to be made out at 21.75, August or September 2012 at the upper line of the first double arc.

The 2008 angle seems to relent in the 4th test. A June close below 26.50 should break the lost motion of this angle. The effect would be a quick sell-off down to the 1*1 angle. Considering the daily situation the 4th test of the long term monthly horizontal support at 26.11 unavoidable, moreover. Next week we’ll have to reckon with it. The 4th test is always the decisive one. In the case of silver the 26 area would have to resist in order to facilitate a continuation of the monthly up-trend in price and time along the 2008 support Gann Angle.

Time – is the next important point. Let’s go to the preparation now. This is neither a forecast, nor a prediction or recommendation… June is on an important time line, the transition from the 2nd to the 5th passed square. Above I marked the passed squares with the orange numbers. Everything can happen on the important time lines – important lows and important highs. At the moment it looks as if June had made an important top at the resistance of the lower line of the 2nd. But still there’ll be five days to come when everything may happen. Do you remember the savage volatilities at Easter 2011? Especially in the overnight trading in a very thin market and in case the 26 will fall next week it will be “theoretically possible” that June still exhausts at the 20.90 magnet. But it’s more likely that the correction is going to drag on till September/October:  

Click the button below and order the GUNNER24 Gold Trader - $39.90 US a month. For 201 members and up - $49.90 US a month.

US stock markets:

Let’s go very briefly to the S&P 500. As analyzed last week and as expected the market rebounded from the first double arc in the actual daily 8 Candle GUNNER24 Up Setup: