“We should not be surprised by prices around 16.00… maybe even lower.” This is the last sentence of an article, called “One Last Breath for Silver”, which we published on July 12th, 2014. When we made that forecast silver was trading slightly above 21.40. So, four months ago we were expecting a decline of at least 25%. Why?
Was it because of the central banks’ reserves or the geopolitical situation? No. Our opinion was based on the Elliott Wave Principle only. Instead of external market factors, it focuses on the information the Market gives through its charts. Every chart is an illustration of the collective psychology of the market participants. The most important thing is that this psychology produces a limited number of patterns, which become visible on a price chart. Now let’s take a look at the daily chart of silver, where you can see how our extremely bearish forecast of silver has been developing for the last four months.
In fact, silver fell significantly lower than 16.00. On November 7th prices touched 15.05, which is a 29.9% decline from the July highs. Some argue that the Wave Principle is a trading tool, which can be used for short-term predictions only. As you can see, this forecast proves them all wrong.
The secret lies in the fractal nature of the wave patterns. This means that each pattern can be found on all degrees of trend, regardless of how small or large. Therefore it brings the same consequences, only the size is different. Now let’s go back to the chart. This 30% sell-off seems to be a fifth wave after a triangle in the position of wave IV. Triangles precede the final movement of the larger sequence. In this case, this is wave V. If this is the correct count, silver’s big downtrend could either be over or approaching to its end.
Silver image by www.wallstreetdaily.com