The chart pattern on the 4 hour basis shows us pretty much the same thing as yesterday - Silver runs into strong selling whenever it approaches $36. Part of this can be attributed to the vagaries of the crude oil market which is swinging up and down depending on traders' perceptions of the events in MENA.
When crude dips, silver seems to lose upside stream; when crude rises, it moves up. The problem is the same as yesterday however; there is very little upside volume. All of the volume is on the downside moves. That continues to trouble me. If the bulls cannot muster any more power to the upside, some of the older longs are going to get stale and will probably liquidate unless the metal can take out overhead resistance above $36 and HOLD ABOVE this level.
As noted on last evening's chart, silver has tended to work off the bearish chart signal on the MACD (other indicators not shown as well) by moving sideways above a horizontal support level and thus consolidating while it then builds enough of a base to launch another leg higher.
What concerns me is the fact that during the last consolidation phase, the dips lower in price were on low volume while the blips higher were where the strong volume was. Clearly buyers were eager to come in. Now we are seeing a change from that pattern where the buyers seem more eager to run on the way down.
It is not the end of the world but as stated above, the bulls will need to hold horizontal support near and just above $35.50 for a repeat of the prior performance the first week of this month.
On the delivery front for the March contract - we finally saw a decent number of deliveries - 79 to be exact - with Morgan and BNS issuing the bulk of those and Barclay's the biggest stopper of the metal. Morgan was issuing for customers and not for the house account. The EFP's were all done in the May once again, 1,612 of them; nothing in the March. If Morgan is supposedly paying a cash premium to longs in lieu of delivering, it is not showing up in the March contract. Could they be doing this in the May? It is unclear at this point. Perhaps we will be able to decipher some of this come Friday's COT report but I doubt it. Incidentially, there are 1,516 contracts still open in March silver.
See the chart for some short term support and resistance levels. The key for silver will be whether or not it can hold $35.50
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