All the silver investors will have to prepare for the worst of all. Now the deflationary washout is threatening to catch silver as well. After crude oil has been pricing in the US economic data since May that are greatly pointing to a possible US recession from the beginning of 2013, now the time for silver seems to have come to react increasingly to the dropping demand situation of this commodity.

Well, we have to consider silver as a very normal commodity during the deflationary phases. The supply and demand situation determines the price then. The currency aspect totally disappears in the process or it’s to be ignored, respectively. That’s why – and because of the narrow market, during such economic stages silver always reacts with relatively more severe and mostly even with brutal losses than gold does.

The reaction to the last FOMC meeting and statement and the resulting losses in gold and silver are still aware to any precious-metal bull – in their brains and in their accounts. The starting moment of the last decline is the reason why since Thursday my alarm bells have been ringing continuously.

When price meets time, a change is imminent“. William D. Gann (1878-1955).

On June 10/2012 we worked out that silver in case of a day close below 27.17 would have to produce an unambiguous short signal. Here’s the detail from the monthly chart analyzed in the issue of June 10:


On June 1st silver marked its monthly lows at the extremely important support Gann Angle – 27.17 - then rising to the monthly highs of 29.865 until 06/06. On 06/10 I analyzed that a short entry in case of a daily close below 27.05 would make sense because thus the risk was there that the long-term Gann Angle, dominating since 2008, might fall. (In the chart above I mistakenly labeled this angle as the “2009 Support Gann Angle”). So this angle passes at 27.17 for June 2012 being fallen below for two consecutive days with the Thursday and the Friday close that is at 26.82.

Thus, since the beginning of this correction that began in April 2011 for the first time silver closed below 27$ again! That’s a threat and a harbinger for more to come because a third day close below 27.17 would be a pretty secure sign that the 2008 support Gann Angle could be broken definitely in that case.

Let’s go now to the moment of the first close below this angle. It was the day of the summer solstice, an important Gann date, especially concerning the commodities! It’s a turn date what in the Gann terms may always result in two effects: On the one hand it means that a trend may get to its end, in this case it would signify that silver would have ended its correction with an exhaustion low. Or B) – and this is much more likely that silver will newly accelerate its correction, followed by a break of the important 26.11 support and heading for the 21$ mark now.   


The actual state of the monthly 21 Candle GUNNER24 Up is showing us that also according to the rule of 3 and 4 the time has come to head for the next important target of this correction in the up-trend: the 1*1 Gann Angle that divides the setup into its bullish and its bearish half. The most important magnet in the 1*1 surroundings is to be made out at 21.75, August or September 2012 at the upper line of the first double arc.

The 2008 angle seems to relent in the 4th test. A June close below 26.50 should break the lost motion of this angle. The effect would be a quick sell-off down to the 1*1 angle. Considering the daily situation the 4th test of the long term monthly horizontal support at 26.11 unavoidable, moreover. Next week we’ll have to reckon with it. The 4th test is always the decisive one. In the case of silver the 26 area would have to resist in order to facilitate a continuation of the monthly up-trend in price and time along the 2008 support Gann Angle.

Time – is the next important point. Let’s go to the preparation now. This is neither a forecast, nor a prediction or recommendation… June is on an important time line, the transition from the 2nd to the 5th passed square. Above I marked the passed squares with the orange numbers. Everything can happen on the important time lines – important lows and important highs. At the moment it looks as if June had made an important top at the resistance of the lower line of the 2nd. But still there’ll be five days to come when everything may happen. Do you remember the savage volatilities at Easter 2011? Especially in the overnight trading in a very thin market and in case the 26 will fall next week it will be “theoretically possible” that June still exhausts at the 20.90 magnet. But it’s more likely that the correction is going to drag on till September/October:  


Here, for the first time I present the weekly 3 candle down setup starting from the April 2011 highs. In the chart the important monthly horizontal 26.11 support is sketched. With the third test of this support environment (orange circle) the upper line of the first was again confirmed as an important support in the weekly. The weekly and the monthly supports met there, silver had to react upwards. Then the Blue Arc made silver retrace back to the first double arc. The weekly candles within the bows of the first double arc mean a consolidation at the lows. Hardship is emerging.

Please pay attention to the lows of this consolidation weeks, they are following the lower of the first upwards. The upper of the first limited the weekly highs. The actual candle produced a weekly sell signal closing underneath the first double arc. Target now is the upper bow of the 2nd double arc. If silver keeps on following the support Gann Angle downwards it will meet that one in October 2012 at 19.50.

The last salvation to deny this sell signal and to prevent prices around the 20$ can only be produced by the next possible rebound from the 26.11. But: the monthly time frame is pointing downwards. The daily time frame closed twice below 27$ thus producing a severe short-signal. And now even the weekly setup is showing a sell signal. Technically the 26$ mark is bound to fall as a result!

A clue for all the Gold-Trader subscribers:

As analyzed for gold on Friday, next week may still begin with a recovery. But the first slight short-positions can be gone in immediately at the silver opening. At opening I’ll go short with 100oz silver CFDs – daily position - SL 28.40 MIT. A daily close above 27.17 on Monday is supposed to/might max. lead to a kiss of death at 27.90 by the middle of the week. These marks are other entry points for further short-engagements. Please don’t expect that subsequently the 26.11 will fall definitely in the first go, apart from the overnight trading, here 25 might be possible at once or even 23.50 – also as early as on Monday! Not before a dayly close below 25.60 beneath the weekly support Gann Angle that will pass at 25.70 next week the actual weekly sell-signal will be definitely confirmed because thereby the monthly support is expected to be broken as well. The risk/reward ratio for shorts is extremely good!!

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US stock markets:

Let’s go very briefly to the S&P 500. As analyzed last week and as expected the market rebounded from the first double arc in the actual daily 8 Candle GUNNER24 Up Setup:


On the 13th day of the swing a correction began that ended narrowly below the daily support at 1330. The closing price below 1330 and the possible kiss of death at the 2*1 at the Friday high is now facilitating a correction down to the 1*1 Gann Angle, about 1311. At the latest from there the upper line of the first square is expected to be taken finally as a result and then subsequently the first double arc. For this schedule the market will have to close again below 1330 on Monday. The orange arrow course – as well as the blue – will be denied in case of a closing price below 1308. That would be a short-signal!!

But if the market newly reaches the first double arc until Tuesday – about 1340-1343 – the market will be supposed to follow the blue arrow course until the 1374 target!


Be prepared!

Eduard Altmann

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