Did everyone have a great weekend? We hope so. Whether we were ready for it to start or not though, the new trading week is now upon is, kicking off with a jolt that should - and I stress "should" - have cemented a bullish swing into place. Although we've been worried (and still are) about the market's valuation, the market is more than capable of defying the odds in the short run. We'll get to the nitty gritty in a moment. First we wanted to respond to two of the e-mails we got from readers this weekend. The first one is from Mat, who writes: Please address the silver issue. I have ETF's that have tanked since I bought them and would like an opinion about a potential recovery. Thanks for the request, Mat. We're glad to respond not just because we want to help all our readers, but because a look at silver after our detailed look at gold on Friday will allow us to make a key point about how the two precious metals are so amazingly different. In fact, let's start with a look at those differences, since it may have a bearing on our analysts of silver. We've talked around this premise before, but I don't recall ever just coming out and telling you this. So, we won't mince words - about 80% of the change in the price of gold is driven by speculation, and 20% of it is actually driven by fundamentals. Silver, on the other hand, is 80% driven by fundamentals, and 20% driven by speculation. It matters, because it means trading gold is very much a psychological chess match, whereas trading silver is something of a science, with predictable tendencies. Being more scientific and less touchy-feely, we can usually interpret the chart of silver at face value... something we can't always do with gold. More important to us (and Mat) right now is, from our perspective, silver is still in the proverbial hunt. Our weekly chart of silver futures below illustrates the idea. While silver is currently in a downtrend, the floors at $18.73 and $18.98 per ounce are still intact. Considering support has been tested and proven three times since mid-2013, we should at least give the commodity the benefit of the doubt until we clearly can't do so. At the same time, in retrospect it's no real surprise silver rolled over where it did last month - there's a very long-term support line where silver futures peaked in early July. As for our take on silver's foreseeable future, we're not particularly optimistic. We're more inclined to steer away from it than into it, although we'll also acknowledge the chart is the final arbiter from here on the fence. Bottom line? At this point we don't think there's much benefit to shedding silver or silver ETFs now, as a major support level is likely to be tested soon. If the support doesn't hold, then you may want to pull the plug on silver. On the other hand, only a break above the long-term resistance line would make silver worth buying again. The good news is, the support and resistance lines are converging fast, so we shouldn't have to wait too long for some sort of conclusion to this story. [Just for safe measure, it might be worth waiting until silver clears its prior high at $21.60 before jumping on board.] Mat's request wasn't the only e-mail we got this weekend worth discussing in today's newsletter. We also got this note from Mike: Today [Friday] was the best market commentary I have read in a long time. Gold: growing stable, but "I don't know" & Stocks: "I don't know". Seriously, folks have a hard time gleaning much from ambivalence and don't realize that "uncertainty is high" is a significant message. That's why weather forecasts never state "50% chance" of rain (they usually round it up to 60% to keep people from thinking the weatherman is just throwing dice in the backroom). Good S&D charts on gold, too. Thanks! Thanks for the supportive comments Mike. They make for a perfect segue into a message we probably don't send often enough. First and foremost (and just for the record),we know not making definitive call can be maddening at times for our readers. Trust us when we say it's even more maddening for us. Much of our livelihood and purpose is in making market calls, and when there's just not one to be made, we tend to get a little antsy. Fortunately we have just enough discipline to do the smart thing and the right thing rather than the interesting thing. And sometimes, the smart thing to do is nothing, except wait for better clarity. See folks, in trading, the name of the game is risk-management and reward-management. Most people basically understand the importance of risk-management, even if they don't do it. But, few people are even aware of the notion of reward-management. It's just the aspect of trading that deals with "how much?" rather than "which direction?" The reason we haven't been willing to risk much of anything of late isn't the market not moving in a particular direction for any length of time. It's been a matter of how far it could realistically move when and if it did break out or break down. With the market not in much of a position for big movement in either direction right now, even low-risk trades haven't been all that compelling from a reward perspective. This is why we don't mind saying we don't know what's coming... it only matters if what's coming is also worth trading. Just a little nugget of trading philosophy for you. Now, let's talk about the market's risks and rewards after today's surprising rally. Over the Hump Well, there aren't too many ways of slicing up today's action. Both the market indices we care the most about right now made it over their humps. We have to take it at face value, and even though we don't see a lot of upside in the cards on the heels of the move (as we described above and will further explain below), it is what it is. For the NASDAQ Composite, what it is is a break above the now-former ceiling at 4487. Today's close at 4508.31 is a new multi-year high, and despite the fact that the upper Bollinger band is just a couple points away, the damage is done. The composite could easily push the upper band line higher for a few days before running out of gas. Also notice the VXN is back into a downtrend, yet still has room to keep falling before finding a floor around 11.4. As for the S&P 500, it punched through a major ceiling too. The mess of resistance around 1955? The S&P moved beyond it today after stalling there on Friday. There's not much else left to get in the way until we get to the upper Bollinger band line at 2000. It's an interesting and possibly problematic placement of the upper band line, as it's also a big round number that tends to be a bit of a psychological hurdle for traders. The VIX also has room to keep moving lower before a hard floor is met, around 10.4. The one thing I don't like about today that could become an issue soon is, once again, the lack of volume behind the buying effort. As long as the 1955 levels holds as a floor for the S&P 500 though, we'll have to give the benefit of the doubt to the bulls. Let's Go For It OK guys, we talked about it at length last week, and having liked what I've seen in the meantime, we're going to go ahead and add JC Penney (JCP) to the SmallCap Network newsletter portfolio. The addition of this one pick brings our total trade count back up to... one. Yeah, it's not a lot, but there are more on the radar. I'd just rather let the market make a full correction before we go fishing. The good news is, we're close to a time of year when the market usually struggles. The average return in August for the overall market is -0.24%, and the average return for September is -0.64%. The fall lull usually sets up a nice Q4 rally, and that's when I'd like to beef up the amount of market exposure we have. If you'd like to know why I'm willing to go ahead and pull the trigger on JC Penney, however, it's a stock I think has a lot of upside in the immediate future regardless of what the rest of the market does next. The daily chart tells part of the story. The market liked last quarter's results on Friday morning. By the time Friday's closing bell rang, however, the market had already changed its mind. That was a concern. But, as we can see from today's bounce, investors are basically ok with everything as it stands. The bigger reason I'm willing to get into a JC Penney position right now is the shape and look of the weekly chart. I'm seeing a cup-and-handle formation emerge. The trigger for the breakout is probably going to be a break above the ceiling at $10.23, but I'm willing to take a shot before we actually clear the cup's brim-line hurdle. I know one trade isn't enough to fill out a portfolio. We're working on giving you more - and better - ideas. Like we've mentioned to you before, though, our other publishing duties don't allow us much time to go hunting for new trading ideas. If you want someone dedicated and giving a full-time effort, the Elite Opportunity fits the bell. We gave you these stats last week, but they bear repeating now - our average gain in this end-of-day newsletter's portfolio this year has been 4.4% per trade, with a cumulative gain of 58% with all thirteen trades. The Elite Opportunity's cumulative gain of all of its trades this year, though, is an amazing 250%, with an average individual trade result of a 5.3% gain. Quantity and quality. What more could you ask for? A free trial you say? Hey, you can have that too. Here's how, or cut and paste this link: https://www.smallcapnetwork.com/?vmpd_ckstr[click_track]=Newsletter&vmpd_ckstr_redirect=/pages/SCNEO/v1/