Has The PSLV Silver Trust Fund Lost Its Luster?May 25, 2012
Good morning everybody this is Patrick MontesDeOca with Electronic Wisdom Cycles this is a special report for Saturday, May 26th, 2012.
In this article, I want to take the opportunity to review a report that was published in Seeking Alpha on April 4th, 2012 with the title Silver – The Investment of The Decade.
In this report we analyzed the PSLV. The Sprott Asset Management Silver Trust Fund managed by Eric Sprott, its founder. Eric believes that silver will be the investment of the decade. Sprott Asset Management is a Toronto based management team of leading investment minds. They are independent thinkers and have the courage to act on their convictions. They are united by one common goal, which is to deliver outstanding long-term performance to their investors. Offering a wide variety of investment solutions to Canadian and international investors. Their product offerings include mutual funds, alternative strategies, gold and silver bullion funds, tax efficient corporate class walk through funds and closed end funds.
What I would like to do is take a look at the PSLV energy chart which is produced exclusively by Electronic Wisdom Cycles. As you can see in CHART 1 below, we have been able to prospectively identify the energy or wave pattern of PSLV for 2012. We took a look at and reviewed the Energy of this chart. We indicated in our original report published in Sep 2011, that the highs for this period according to the VC Price Momentum Indicator should take place sometime in March, July and September 2012. Let’s take a look at what happened in March. We see that in March the market made a top and has come down all the way to where we are right now May the 26th. This chart indicated that the lows for this period should be taking place around April. We will review this chart and compare it to the actual silver CHART 2 below . I will share with you what we have discovered.
What the VC Price Momentum Indicator in CHART 1 of the PSLV has indicated is that we are entering what is called an acceleration pattern. According to the VC Price Momentum Indicator the acceleration patterns are directional momentum indicators that identify increasing trend volatility. These should be used to add to your positions according to the thirty day trend patterns. In February, as you can see from the low in January, it anticipated acceleration into the month of March, and this is exactly what happened. In March it was expecting a top, and we came down in April to where we were expecting a low to take place within the cycle time frame period of about April 15th to May 15th. . So if we are on target we should begin to see this acceleration pattern move all the way out to around the middle of July, as indicated in CHART 1.
Now, what I would like to do is to take a look at CHART 2 and see the incredible similarities that we have found in the PSLV wave pattern chart in relation to the price of actual silver. If we take a look at CHART 2, it’s the real price chart of July silver. We can see that the market came down in the month of November into what is a low period, anticipated once again towards the end of December and into early January. Looking at CHART 1 you see we came down in energy from the nine level of the index indicator, all the way down to two. At a level of two or below, the market is becoming oversold. In April, we are at one or below, so therefore the market has approached an extreme level of oversold energy. What seems to be happening here is that this correction has brought the market to potential lows for this period.
Let’s take a look at the rally from January to March on the PSLV chart along with the rally in actual silver price from December 29, 2011 to March 2012 period. We see here on this chart that the market made a high in silver on February 29th at roughly $37 dollars. Actual silver then corrected down to the $26 dollar range. At the same time, the PSLV, VC Price Momentum Energy chart was anticipating a downward correction. As expected the bottoming date of May 15th. So what you see here is an uncanny similarity of the VC Price Momentum Energy chart in the PSLV corresponding almost as a duplicate copy of the actual price of silver. Now, if the VC Price Momentum Indicator is going to be prospectively correct once again, we are looking at what should be an acceleration pattern taking us all the way to around the middle of July. Indicated on this chart, we can expect some kind of a topping formation in the month of July. This is the second time this year that the VC Price Momentum Indicator is projecting a top. On the chart, anything above eight on the index on the left, is overbought and if at nine becomes extremely overbought. So, if we calculate some Fibonacci projections, or if we can identify this pattern in terms of wave counts, we can see the rally from January to March was the first leg. On silver the rally from December 29 low to the high in February 29, was the first leg. The second leg correction completed according to VC Price Momentum Indicator this week with the low we made around the 26.73 levels.
Now let’s see if we can measure some Fibonacci corrections using the high made in February 29, and connecting to lows that we made last week, we get some indications that the market could rally to levels of 29.32 as the first Fibonacci target. The level of 30.92 as the second target and the third target is 32.17. The upper end target of this corrective leg is 33.49.
Now, if we incorporate some Elliot Wave principles in this case what appears to be happening is that we are beginning the third leg up. In order for the market to continue to move higher it has to accomplish reaching the Fibonacci retracements. These are indicators were potentially the market resistance levels could be accomplished. But these are only indicators and it’s a way to simply measure the resistance levels in the market. If the price breaks these patterns it obviously negates the resistance level and then it becomes support. In this case breaking above 33.46, indicating the market could rally all the way up to the 37.57 levels.
Using the Elliot Wave measurement, it was a first leg from December 29 to February 29. The Second corrective wave completion was this week at 26.73. If we analyze the first leg, based on Elliot Wave, the third leg should be double the first. So we are looking at a low here at 26.73 and a high of 37.60. Currently we are looking at a potential rally of about the twenty dollars plus from the low that we made here. So if you add about twenty two dollars, which is almost double the first leg; you’re looking at an objective price on the third leg of about $50 per ounce level target range. This analysis is based on the comparison of the VC Price Energy Momentum Indicator in relation to the actual price of July silver, which is traded on the New York Comex Exchange.
I hope that this has put things into a new perspective for you, thinking out-of-the-box, looking at some indicators that are innovative and are confirming themselves. Once again, thank you for your time and until next time good trading
Additional disclosure: PRECIOUS METALS PRODUCTS TRADING INVOLVES SIGNIFICANT RISK OF LOSS AND IS NOT SUITABLE FOR EVERYONE. PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.