Silver's drop is "Decisive Moment" in bullish "Comma to the Top" not "Dialed In" yet

The first thing you should know is that Fibonacci projections on the long-term monthly charts of silver point toward higher levels before it will make a significant peak. And also, just so you know - Decisive Moment, Comma to the Top, and Dialed In are all among the horses' names from this weekend's 2011 Kentucky Oaks & Derby | May 6 and 7, 2011! Silver is in a race to its top that doesn't look done yet. I've got Fibonacci projections to $58.50, $65.00 and $75.50 because these represent 1.236, 1.382 and 1.618, respectively of the range from the $48 peak in 1980 to the $3.50 low around the late 1990's. Those Fibonacci projections don't represent limitations necessarily; they represent targets. We shouldn't expect any truly serious pullbacks in the silver price until these levels are reached first.

Below are daily, weekly and monthly charts (using the silver ETF, $SLV) plus a point-and-figure (P&F) chart based on weekly data. Unfortunately the P&F chart cannot seem to go back to the 1980's so the main value it provides is to show that silver has a chart warning, which traders already have figured out. That's why there are so many people talking about it now. The monthly chart does look like a huge cup-and-handle bullish chart. Since price is retesting after having broken above $48, it's reasonable to look for silver to resume its upward trajectory.

Tony Caldaro, whose excellent Objective Elliott Wave analysis we feature via his weekly updates (like the one posted earlier today), site in the list at right, and updates feed also at right, wrote an analysis of silver, Silver bull market, posted at his site on Monday May 2, 2011. I recommend reading it for a better understanding of the Objective Elliott Wave markings on his chart I borrowed below (it's the weekly chart, with a yellow background - thanks again Tony!). You'll see he discussed targets from the $60's to the $80's. I'm sure he'll fine-tune those at some point, once we see how the next waves shape up. But I certainly view his projections for "the top" of his expected Wave V as consistent with the Fibonacci projections from the long-term monthly chart.

The daily chart does admittedly show a potential reversal pattern because of the large-volume drop. Yet it isn't definitive because price didn't take out the most significant prior swing low. That's also what allows Tony's wave count to remain intact for the bullish scenario. I cannot make definitive statements about how long the pullback will last or if it'll make another low poke. Price has already tested the second-wave low of the parabolic wave up that's being corrected. It suggests that, weird as it may seem, the low of this pullback might already be in. Or that after a bounce, any new low might not go much lower.

It may take some days before the path of this pullback and next wave up become more apparent. But investors and traders shouldn't get overly bearish on silver at this point. The big move has been made for now. Commodities often have a way of spiking a 4th-wave low that shakes out the crowd, then climbing "unbelievably" higher again. Right now, $58.50 may seem unbelievable. But on the monthly charts it's merely the next, modestly-measured price target for silver ($SLV). Typically the 1.382 extension is just as reasonable so we should have some confidence in looking for at least $65.50 too.