The Devil's Metal, Looking For A Silver Dead Cat Bounce Yet? (SLV, SIVR, PSLV, ZSL, SLW, PAAS)

The death of the silver trade is playing out even faster than the oil bubble popped in mid-2008.  Silver is truly living up to its name “The Devil’s Metal.”  The margin requirements have been raised handily, as they should have, and now the speculators have been forced out of what had been the biggest bullish move of 2011. Bank of America Merrill Lynch’s technical call of $80 silver is looking rather silly now, although it is still within its support lines and was not really meant as a straight-line call to $80…. This has been the worst week for silver in most of our lives going back to the very early 1980s, and it is becoming reminiscent of when the dot-com bubble popped.

We have taken a look at iShares Silver Trust (NYSE: SLV), ETFS Physical Silver Shares (NYSE: SIVR), Sprott Physical Silver Trust ET (NYSE: PSLV), ProShares UltraShort Silver (NYSE: ZSL), Silver Wheaton Corporation (NYSE: SLW), and Pan American Silver Corporation (NASDAQ: PAAS). The drop has become so severe, that it is going to be easy to expect that some traders, speculators, and investors may start looking for a bounce.  It may just be a dead cat bounce, but that is for later.

iShares Silver Trust (NYSE: SLV) and ETFS Physical Silver Shares (NYSE: SIVR) are nearly tracking each other, although we would note that there may be more of a disparity in the asset values versus the market values due to the massive rise that happened last week.  The iShares Silver is down 7.7% at $35.33 and the ETFS Silver is down almost 8% at $35.93.  This has the iShares flavor of silver down 27% from its peak last week of $48.35 and the ETFS flavor of silver is down 27% from the peak of $49.28 last week.  The SLV chart here shows that the latest move could still offer a lot of punishment ahead based solely on the moving averages but there may be support around $33 based upon prior trading.

Sprott Physical Silver Trust ET (NYSE: PSLV) is actually a closed-end fund and it is down 7.7% at $15.70 today and this peaked at $23.00 last week before its premium to the net asset value was highlighted by the media.  Shares went out last Friday at $21.73, making a 27% drop just this week and a drop of more than 31% from the peak.

If you want to see just how zany the silver move has been, there is the ProShares UltraShort Silver (NYSE: ZSL) which aims to be double-short silver.  There is always the chance of tracking errors here and it trades inversely with the price of silver.  The shares are up 14% at $22.22 today versus $13.64 as a closing price last Friday.  Being double-short silver in this vehicle just generated gains of  about 63% in just four trading sessions.

Miners have also been hit but they are actually holding up better than the metal itself.  The stocks didn’t get as much of a boost at the last surge in price, so they are not getting killed as the bubble deflates.  Silver Wheaton Corp. (NYSE: SLW) is down 3% at $36.04 today and has lost almost one-quarter of its value from the peak.  Shares closed at $40.62 last Friday and that is a loss of about 11% so far this week.  Pan American Silver Corp. (NASDAQ: PAAS) is down 1.6% today at $33.96.  Shares are down about 21% from its peak but down only about 6% from last Friday’s closing price of $36.12.

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JON C. OGG