The Silver ETF (SLV) put in a Major Bullish Reversal Pattern on the Daily chart, one that I would classify as an "Island Bottom". SLV is also marching toward a Major Gap fill on the Weekly chart with increasing volume.
Why is the island bottom an important chart development? On the Daily chart left hand side below I have highlighted in the Blue Oval a trading range that took place after SLV had gapped down. Any Bearish positions that were put on or Bullish positions that were taken off inside that range are now are feeling "trapped" by the breakout back above the prior gap. This leaves a clear void on the chart between the two gaps and in my experience this will now act as "Major Support". Until SLV trades back below $20.00, this development is Bullish.
Two things are happening here with the surge in volume this week after the breakout, and that is 1. "Panic buying" from the Bulls who feel they may be "missing the boat", and 2. "Panic buying" from the Bears who are short from down below and are cutting their losses by exiting their losing position. This demand is the ignition for new trends.
Take note on the Weekly chart, see right hand side below, of the "Breakaway Gap" ahead for SLV, and this should act as a strong level of Horizontal Resistance.
This week the Commodity sector was showing "Relative Strength" compared to the Paper Asset sector, which I refer to as the US Equity Indexes, the US Dollar Index, and US Treasury Notes. This is a development that I consider to be a "Seismic" shift on the current week toward the "Hard Assets". It is a development that warrants paying close attention to going forward. I am most interested in establishing positions in Hard Assets prior to the "Tectonic" shift that I believe will be taking place down the road for various and what I believe are valid reasons.
I started the Hard Asset Model Portfolio subscription based service on March 1st, 2013 to follow these developments because the chart is what ultimately matters most to me. The intention is of building a long term investing portfolio that I feel would be more "Weather-Proof" than any other "Paper Asset" portfolio in the face of Central Bank Currency creation by the billions each day, and the ever expanding Government Debts, Deficits, and Future Liabilities in the Developed world.
(Click on chart to expand)
Linked In/ Twitter/ or Stocktwits @ ScottPluschau