Silver update 4/28/11 SLV /PSLV

Submitted by: Francis Soyer 4/28/11

Well... That didnt last long did it? As a follow up to yesterdays post on using this pullback to buy more silver lets review what happened. On Tuesday PSLV / SLV came into us roughly 5 to 6%. This was an opportunity to leg into silver and add. Why? If you look at silver from a 6 month point of view notice that pullbacks of this nature are few and far between. Why are these pullbacks few and far between? Because silver, unlike paper money can not be printed on a printing press, is considered to be money like gold and has been since humans began trading with eachother using something other than teeth for toolmaking, will be the new currency reserve after fiat money blows up the global economy, is a real hard asset that has industrial use other than being considered money, is what foreign governments are scrambling to acquire along with gold and is a safer heaven than paper backed assets. Remember, gold and silver are what humans buy when they lose confidence in governmental systems. I think at this point to restate the obvious that confidence is governement systems or lack thereof is still in the early innings maybe first or second if we were to scale it to a baseball game. I think most would agree that the governmental systems around the world are broken and badly so.

Back to the tactical issue: Looking at the 6 mth also take note of volume. Notice strong volume on the upside followed by a slowdown / cool off and then resumption of the trend. This is a classic supply demand scenario where demand is stronger than supply for bull moves. Strong volume on upside means bears are on the defensive and the opposite applies for bear markets.

Now look at the three day, notice how quickly shares were snapped back to the upside. Leaving barely more than one trading session to react and add to the position. We may still get lucky and hopefully see some fear creap in for newer investors who do not understand the fundementals and are simply looking for the quick trade from a technical point of view. One of the reasons for failing trades in that your short term view should agree with your long term view.

From the three day point of view the pull back on tuesday which went below VWAP volume weighted average price was our signal and will continue to be our signal to add. I do not see silver fundementals changing any time within the next 15 to 18 months so as the days pass by we can keep vigil and be ready to react.

Cheers

Francis Soyer

P.S. New investors to silver should really watch the video posted the other day from the silver producers point of view and the other videos on the blog from Eric Sprott and Max Keiser to get up to speed.