What Trend Are You Looking At?

The arithmetic scale price chart of the world silver index, above, shows silver reaching an over bought peak in May. While the arithmetic scale is quite useful even for longer term trends, one must also look at a steadily increasing asset with the lens of the logarithmic scale.

You see arirthmetic scales track price movement, visually , 1-2, 2-3, 3-4 and 4-5 being equidistant when charted to graph a point for point change. Logarithmic scaling tracks price visually, but in this case, 1-2, 2-4 , 4-8 and 8-16 being equidistant when charted to graph a percentage change.



The log scale chart for silver showed that this $50 price target was a intermediate peak to be breached later. The problem the bears face now is that in order to threaten any further downside the $32.00 dollar level must be breached. Unfortunately for the bears, the 200 day MA for silver is currently $31.93 and the 50 and 100 day MA are converging, which, in the past, has tended to precede major upward momentum in silver prices. Though I do not feel a quick retracement is upon us, it is likely to start slowly and our base building will earn us the technical support to breach the $38.50 currently acting as a ceiling.



The log "bull" price channel regained it's trajectory in late 2010, after breaking the bull channel in early 2009. Being in this bull channel does not signal any large discounts are around the corner and the "bottom" of this current silver market is likely to be in, the shorts are running out of time... and quick. Silver has very little room to drop before major buying comes in at these keys levels: 200 day MA, the intraday May 12th low, the bottom of the bollinger band at $33.30 the bottom of the long term log trend channel at $29+.