Silver closed today's trading session 4.5% down. Silver bulls are rightfully worrying about the high volume which came with the price decline. The first chart shows the price decline along with the high volume in the blue rectangle.
What does this mean?
Basically, we see two possible scenarios playing out. The first one is exhaustion selling. On the other hand, we see the potential for capitulation, which is good and bad news for silver bulls.
Capitulation will be very painful as prices could go as low as $10 per oz. The "good" news is that it will probably end the 4-year bear market in precious metals.
The other option, exhaustion selling, is a possibility because silver has reached the last key retracement level after the rally which started in 2004. The next chart shows that silver should bounce strongly from this price level in order to validate exhaustion selling.
Given the seasonally strongest period of the year for precious metals, it is not a healthy sign that silver is performing badly. We do not exclude capitulation, because basically there is no support on the long term chart until the $12.50 and $10.00 area.