3 Reasons For Silver.

Although gold continues to grab most of the attention in the precious metal world, its less glamorous sister, silver, may be more appealing, and for good reason.

First off, silver has many more uses than gold. It's used for numerous industrial purposes and nearly 55% of total silver fabrication is used for industrial purposes. Silver is commonly used in the electronics space and can be found in plasma display panels and printed circuit boards, as well as in the lining of refrigerators, for food storage containers, and for water purification. Additionally, the metal can be used as an antimicrobial to fight bacteria and as an antiseptic to treat fungal infections. Silver’s industrial uses even span to the solar energy industry. As economies around the world continue to expand, the industrial demand for silver will likely follow.

Another force that's likely to support silver is that valuations appear to be strong. In a nutshell, silver is cheap and depressed on a historical basis, when compared to its sister metal, gold. Gold is trading much higher than its long-term ratio of 16 times the price of silver, indicating that there's plenty of room for silver prices to run. Additionally, silver is nearly 70% below its all-time high witnessed in 1980 and well below its near-term high of $21 per ounce seen in 2008.

Lastly, diminishing supply is likely to bolster the metal. According to a study conducted by the United States Geological Survey, silver is nearly twice as rare as gold in the long term because it's not recycled at the same rates as gold and at current consumption rates all of the silver that's in the Earth’s crust will diminish away in the next 25 years.

When investing Silver ETFs, it's important to consider factors that could potentially hinder the price of silver like an unexpected surge in the dollar. A good to way to protect against these factors, as well as against the inherent risks involved with investing in equities, is through the use and implementation of an exit strategy that triggers price points at which an upward trend in gold could potentially be coming to an end.

Talking About S&P 840.

With the magical 1040 level being tested in the S&P 500, many technicians and talking heads are looking at this level as the final step before Armageddon. Running through the various newsletters and blogs, a common theme seems to be that if 1040 doesn't hold, then the 960 level is the last stand before traders get a one-way ticket to test the March 2009 lows of 666. From that point, it's death and destruction to the American economic system as we know it, or so the naysayers would have you believe.

From my perch,I agree that 1040 holds a lot of psychological weight. If a break of this level holds, it should turn many market participants fully bearish and cause a downward cascade that will be difficult to stop. The proverbial line in the sand has been drawn,and the S&P is clawing and scraping at this very moment to remain with its head above this low water mark.

Trying to stay two steps ahead of the action, I roll out the weekly charts to anticipate the next areas of support. I've marked several areas on the weekly chart above that have been battlegrounds in the past. No, these aren't Fibonacci retracements but merely areas where the action stalled as traders, investors, and mutual funds jockeyed for position.

While I've included all of the usual suspects on the weekly chart, it's my belief that the 840 area is often overlooked by the majority of market participants as a battleground. In fact, just looking at the weekly chart, there's not enough information to even cause a trader to pause and consider that level. So let’s roll into the daily charts of that time period and see what we can make of this potential support.

On the daily chart of September 2008 through July 2009. All congestion are right around the 840 level. The truly interesting aspect of this to me is that 840 didn't offer a crisp “one and done” reversal point but instead found itself in the middle of the action for weeks upon weeks. Throughout October 2008, 840 was hit and held several days. Of course, as is the case at the start of any new support levels, there was no way for a trader to even begin to imagine the significance of this level. And even as 2008 came to a close, 840 was bantered around on both sides but was only just beginning to firm up as a key level.

The first two months of 2009 would have been the first time traders might have taken note of how much air time 840 was receiving. Prices seemed to be drawn back to this area like sheet metal to a magnet. When selling pressure resumed and the S&P hit its eventual bottom at 666, 840 was the last area of consolidation. In textbook fashion, 840 once again was an area of consternation and tight play as the S&P bounced off the lows. From there, there was no turning back as the S&P raced to 1200.

Now turn your eyes back to the weekly chart for a bigger-picture view. 840 and 960 may never come into play as the markets could catch a second wind and be off like a racehorse. But if 1040 does relinquish control to the bears, then all eyes will be fixated on the next levels of support. It's my opinion that 840 should be added to the discussion, and that 666 isn't inevitable as we struggle for footing. 960 to 666 is a long step off the end of the plank, but my bet is on 840 being a safety net. So yes, I’d be a buyer of the S&P… at 840.