Note that hedge funds while remaining net longs, had also begun playing silver from the short side as the European sovereign debt crisis had most investors looking at the slowing economic growth environment as one in which to short both copper and silver. Yesterday's change of wording in the FOMC Statement sent shock waves through the shorts who ran like hell setting the stage for a signficant amount of technically related buying in today's session which commenced in Asian trade last evening.
I am expecting the following chart to change significantly in tomorrow's COT report, even though it will only capture this Tuesday's price action and not the big upmoves Wednesday and today.
We should note here that around noon Chicago time, St. Louis Fed President Bullard, seemed to put the kibosh on the QE 3 party. That promptly took the wind out of the bulls' sails dropping crude oil into negative territory and dragging gasoline lower with it. Silver and then gold both dropped off their best levels during this time frame however both markets remain solidly higher heading into their pit session closes.
With the US equity markets falling apart on Bullard's comments, we will have to keep an eye on the mining sector shares as represented by the HUI to see if they can hold their gains. Both gold and silver bulls will not want to see the HUI go negative after pushing to a significant chart resistance level at the 460 point. Short term oriented traders will sell the shares if this index cannot continue to push past this stubborn 460 level.
Silver needs to close out the week on a strong note to punch through the downtrending resistance line noted on this weekly chart. The ability to put a handle of "30" in front of the price is extremely helpful from both a psychological and technical perspective but a solid trending move is still not yet in the cards until silver can decisively gain the $32.50 level. Even at that, dip buyers should begin making their appearance in this market as the technical posture has changed significantly this week.
Your awesome man! thanks for your generousity with your expertise. Its a rarity these days.
ReplyDeleteBest of luck to you
Dan I appreciate your commentary and analysis. I have noticed that there seems to always be one more hoop that silver or gold has to jump through before the trend is established. But it would seem that by the time the trend is established a large part of the move has passed. So at some point one must wade in and test the waters. There doesn't seem to be any sure indicator which tells when to do this. So I have been doing some wading in with tight mental and physical stops.
ReplyDeleteThanks for your analysis
Terry - resistance levels on the chart, when taken out, are considered buy in points. Support levels, when taken out, are considered sell points. Failure at resistance levels are considered sell points. Support that holds is considered a buy point.
ReplyDeleteTrading involves moving in and out of markets often very quickly at times as sentiment shifts are quite rapid in today's computer driven trading environment.
Long term buyers of PHYSICAL METAL can buy on the way down if support levels hold.
Dan - How much credibility do you give to the monthly & weekly trendlines that date back to Sept 2008? I count more reaction points on that line than I do the post May 1 downtrend.
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