There has been a strong tendency to call tops in silver, and frankly that has been a losing bet. Now, of course, is a good time to think about whether we are at an important top. In addition to being wildly over-extended, the all-time high in 1980 was at $48, and we are getting quite close.

Technical targets of this rally have moved up day by day because the price movement is so strong. Right at this moment, the targets are at $47.50 to $48, and that has nothing to do with the old high, which happened 31 years ago.

The following two articles are excellent examinations of the current silver rally from very objective points of view. The first one is a well rounded technical analysis:

http://blog.afraidtotrade.com/look-at-these-etf-charts-slv-zsl-before-calling-a-top-in-silver/

The point of this piece is to convince traders not to short silver here, which is extremely tempting when anything goes vertical. The weight of evidence is simply not there. Now for people who have been watching silver every day for the past few years, the opposite consideration is the issue - whether or not to sell. This article says no.

The next piece is an excellent look at indicators that would strongly confirm or non-confirm a move. Most of these indicators are not ones traders look at day to day, such as PMO or the premium in the price of CEF.

http://www.financialsense.com/contributors/carl-swenlin/silver-still-soaring

Apparently Carl Swenlin is something of a guru in the trading world. That makes sense when you read this. His observation that an implied resistance level at $48 is irrelevant is a good example of someone who understands things deeply. Such areas of resistance often act as repellers of price because people have been waiting for the price to return to their entry and will finally sell at that price, in order to avoid a loss. I remember in the old days waiting for maybe three months, maybe longer, to finally get back there - before I knew better than to get into that situation. But most people will jump in at the top of anything and hang on for dear life because of the psychological bruising that occurs when taking a loss.

The point he makes is that 31 years is simply too long ago. If there is anyone holding onto a position in silver from 1980, they have bigger problems than financial to deal with. But sure, when gold broke through its 1980 high of roughly $800, it hemmed and hawed a bit. In this case, it turns out the $48 price is an actual target, and that has more to do with what will happen than the old all-time high price.

As readers of this blog know, the reasons behind silver’s rise are many and extraordinary. We are seeing consistent short covering in recent days, and the short position held mostly by JP Morgan is monstrous. I think the rough estimate of how large a loss that position represents is about $150 billion at the current price of roughly $46. The standard conspiracy theory about this short position is that JP Morgan is doing the bidding of the Fed in order to suppress the silver price and by extension (and a smaller short position) the gold price. Why? Because the US needs to mask the true weakness of the dollar.

Regardless of the conspiracy theory, such a large short position is what will cause a parabolic, runaway move, and congratulations, you are witnessing history in action. Be careful, there is always the other side of such a move, which is a swift move down. And when things get really extreme, trading can be halted on the exchange, which can trap people in painful positions.

But right now, on this quiet Friday before Easter, the weight of the evidence says silver may run up even higher. The dollar is still in freefall until the Fed whispers anything along the lines of ending QE, which could be as early as next Wed. So let’s see if silver gets to $50 before the Fed rains on the parade. Of course, the Fed may not do that, or they may say something intended to reverse the dollar’s freefall which then gets ignored after an hour - after causing a massive whipsaw in gold and silver. The next NFP on the first Friday in May, which is May 6, could be the actual turning point. Or not. Possible cycle high dates are May 12 and June 18.