Silver Poised to Explode

Should the silver price break above $5.50/ounce, the measured move target derived from the following Point and Figure chart is $7 - $8 / ounce.
(Source: StockCharts.com)

This measured move could overshoot by 100% - to around $10.50 - and this would still be within the bounds of "Technical Analysis" parameters.

The question as to whether or not the silver price will break above $5.50 is answered by the Point and Figure charts of SSRI, PAAS, HL and CDE all of which have broken to new highs and are showing variations of the following:

Only SIL has not yet broken out to a new high - but its chart is also showing a buy alert.

Even Macmin in Australia (MMN) (in which I have a substantial position) is giving an On Balance Volume buy signal on the monthly chart, and is now trading above its 48 month Moving Average. It has also given a price based buy signal on the daily chart (Source: Bigcharts.com).

As it happens, based on Fundamental Analysis techniques, $10.40/oz is precisely the level that silver mining share prices appear to have been factoring in for some months now.

What is driving this price behaviour?

There are two "conventional" arguments:

1. Inflation is being anticipated, as shown in the following Commodities Research Board Chart (measured move target approximately 280-300):

2. The position of the US Dollar - as the World's currency - may be coming under threat (measured move target around 60 if it breaks down below 87):

There may also be a less conventional "driver" of this price activity. Of significance is that the terrorist bombings in Mumbai (India), and Najaf (Iraq) were but two in an apparently escalating series of incidents.

There is a web site which I follow as a matter of curiosity - which tracks something called a "Rapture Index" . It attempts to quantify an Index of the manifestations of Biblical (New Testament) prophecies. (www.raptureready.com/rap2.html)

As at August 25th (before Najaf) the Index stood at 162 against an all time high of 182 as measured on September 24th 2001, and with >145 being the "red alert" level.

The reason I am curious about this index is less related to "End of World" prophecies and more related to the fact that it quantifies the state of the social environment in which we are living. As an objective fact, our social environment has been deteriorating - which may be ultimately why Precious Metals have been coming back into favour. To me it is no co-incidence that the "accumulators" of Precious Metals in the recent past have been people and countries in those geographic regions where there is a heightened sense of ancient history; viz India, Asia and The Middle East.

But a more significant question that is being begged by all of this is: "So what do we DO about this deteriorating social environment?"

As a matter of pure pragmatism, it is not sensible to just stand and watch this evolving deterioration. Neither is it sensible to attempt to douse the flames with gasoline; which is what the White House - aided and abetted by the U.S. Federal Reserve Board - appears to have been attempting.

There is more than just money at stake here. There needs to be a PARADIGM shift in thinking!