Silver has been one of those assets that has burned traders for most of 2013. Like many commodities, it has drifted lower as investors fled metals in favor of equities. Well with yesterday’s strong move, we may be seeing early signs of a trend change in the silver ($SI_F) market.
Below is a daily chart of the spot price of silver. Looks pretty ugly, doesn’t it? In the top panel we have the Relative Strength Index (RSI), which has been in a bearish range from February through July. We can see that momentum struggled with the 45 level in the RSI indicator each attempt to move higher. By watching the bearish range in the RSI we were able to avoid these short-lived rallies. But things began to change in August. The Relative Strength Index was able to break out of its range and push to above 70, which is deemed ‘overbought’ – exactly what bulls wanted to see.
In the bottom panel of the chart we have the relative performance of $GLD and $SLV, the respective gold and silver ETFs. As the line rose in the first half of 2013 we could see gold outpacing silver. But the rally in silver in August thwarted this trend and silver began to outpace its shiny counterpart.
Now we had the real test as silver began to weaken again in September. Would it be able to hold on to its new bullish range in momentum by staying above 45? It appears so. Yesterday we saw silver break its short-term trend line while getting back above the 50-day moving average. Going forward I’d like to see this trend line break get some confirmation to the upside as traders become more interested. If things continue to be constructive in the silver market, I’ll be watching to see if its able to get back to its 200-day moving average, just under $25. If things don’t work out, then we could see silver dip back below its 50-MA and watch the longer-term down trend continue.
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“Suprising chart”, for the upteenth time!!!
Oh god, as if the charts tell you anything here. This is the single most manipulated market on earth. You see the chart JPM wants you to see. They’re playing you and all the other TA folks.
If they want to suck some people in and then take it lower, there’s nothing to stop them. Certainly not the feckless CFTC.
We didn’t get the confirmation and we are back below the 50-MA. Shows why having patience and waiting for the breakout to be confirmed is so important.