Overextended Silver and the Pullback

 

The always excellent Frank Holms looked at silver and gold on April 25th, specifically how extended silver had become on its recent run. Here’s his chart …

Frank writes:

Silver … has traveled into extreme territory. Over the past 60 trading days, silver prices have jumped over 58 percent and now register nearly a 4 standard deviation move on our rolling oscillators (see chart). Based on mean reversion principles, odds favor a correction in silver prices over the next few months.

We should be clear: If a correction occurs, this would not mean the rally is over. It would just be a healthy bull market correction and reflect the normal volatility inherent with these types of investments. Investors must anticipate this volatility before participating in these markets.

Read the rest: http://bit.ly/jA7vjB

Frank makes some good points here. In my opinion, the fact that the CME raised silver margins 3 times in 2 weeks is also having a BIG effect.

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