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The following article was published in our article directory on June 1, 2013.
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Silver Naked Short Squeeze Circumstance 420

Article Category: Finances

Author Name: Dr. Jeffrey Lewis

Naked Short squeezes typically develop unstable markets, although a brief covering rally based on sudden and agreement purchasing can likewise develop a major boost to liquidity. This can have the impact of lighting the match that will eventually detonate the bomb for markets currently accustomed to substantial quantities of genuine or artificial liquidity.

From a technical viewpoint, silver is currently consolidating in a tight trading array as the marketplace recuperates from an oversold circumstance. The 14-day RSI currently reviews at the 39 level as it floats above the critical 30 point that it dipped below in April, which can substantially hinder extra downward price action.

Silver's rate is trading below many of its essential moving averages. The closely watched 200 day moving average for silver is currently located at the $29.98 level, well above the existing market value of $22.76. That truth-- integrated with its pronounced downward slope-- suggests a bearish medium term technical outlook for silver.

Silver's value activity is also pretty much uncorrelated with any outside market, as the currently far too low silver to gold value proportion falls even further. Volatility has also been declining over the previous week or so, as revealed by a tightening set of Bollinger Bands.

Speculators Biased to the Short Side as Squeeze Looms

The value of silver is currently a minimum of five or six times below the majority of conservative, inflation readjusted estimates of its reasonable value in U.S. Dollar terms.

If large purchasing interest unexpectedly arised over night, the first set of speculators would cover violently as their buy stops get touched off in timeless HFT fashion. The huge commercials would then follow, therefore drawing in more extensive buying interest as values go up and are broadcast by the media.

Up previously, the CME has turned a greatly blind eye to the abnormal Naked Short selling and high volatility that seem intrinsic in the silver market, much of it triggered or intensified by big, algorithmic HFT or High Frequency Trading task.

In the event of a major Naked Short covering rally in silver, would the CME ultimately turn against the big shorts in the name of liquidity? They may be forced to take this choice in order to distance themselves from J.P. Morgan Chase and their cohorts if the damaging press got too bad to swallow.

Generally, if JPM et al were implicated of silver market control in the aftermath of such a rally, the CME might be better off dropping their implied support for the big banks.

It appears like there is room to run in the event of unexpectedly greater silver prices, and the Fed virtually needs an excuse to test whether or not it can cut back on its bond purchasing without trashing the economic climate.

Inflation CPI official measures are still below targets. Letting the precious metals run up a bit might bolster the Fed politically, although the issue is managing the size of the resulting Short squeeze.

Playing Into Real Market Expectations

The terrific fear and hope that have been bolstering the rate of silver recently are the two main emotional reasons investors relocate their funds into silver. Their dream is that silver would ultimately return to reasonable value before the monetary armageddon occurs.

When the minimal worth of paper currency at some point emerges, exactly what does it matter if silver is $500 per ounce in a world where a loaf of bread is priced at $100?

The fly in the ointment with both priceless financial metals, and with silver much more so, is that the initial overshoot and rush to safety can very well move both metals far beyond anything resembling their inflation adjusted price. At that point, a loaf of bread might very well likely be priced in ounces.

While you undoubtedly can not eat an ounce of silver in a crisis, you likewise can not eat fiat money. An ounce of silver will extremely likely purchase you more food in times of monetary difficulty than you will then be able to purchase with its current comparable dollar quantity.

For even more short articles like this, and to remain updated on the most important economic, monetary, political and market events related to silver and precious metals, go to http://www.silver-coin-investor.com

Keywords: Silver short squeeze, naked shorting, silver prices

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