Silver Market Update
Originally published January 4th, 2009.
Although silver does not look as vulnerable to a reaction as gold on the charts, it will likely drop in sympathy should gold go into reverse near-term as expected. On the 1-year chart we can see that overall silver still looks good, with it having broken decisively out of the downtrend of the latter half of last year and also clear above its 50-day moving average, which has now turned up, with the MACD indicator trending upwards too. These positive developments have created the conditions for a new uptrend to get underway. However, it may still be in a basing phase, which means it could react back probably to the $10 area short-term but possibly as low as $9 - $9.50, any such reaction being viewed as a buying opportunity as the long-term outlook for both gold and silver remains excellent. Traders may wish to scale back positions now in anticipation of a short-term reaction, and those shorting silver, which is regarded as hazardous here, can place a protective overhead stop above the December high at about $11.60.
The COT chart for silver is similar to that for gold, although gold's COT looks somewhat more bearish.