Silver Market Update
Subtle but important changes in recent days have substantially increased the chances of upside breakouts by gold and silver. The situation is now very finely balanced with an army of traders either sat on the fence, or, depending on which way it breaks, on the wrong side of the trade. When it does break out - and it is beginning to look like it will be to the upside, there will be a stampede and an upside breakout from here could thus easily involve a $1 - $1.50 up day for silver.
On the 1-year silver chart we can see how, after looking decidedly vulnerable to further retreat, silver has held support in the $12.20 area and turned up, in the process breaking the red downtrend line shown on the chart, and thus appears to be completing a minor base, the top of which is defined by a resistance level at $13.20 - $13.30. The important point to note here is that although it has made very little progress price wise, the sideways action at this juncture has greatly improved silver's technical condition, tangible evidence of which is provided by the MACD shown at the bottom of the chart crossing above its moving average, a frequent precondition for a new uptrend. It is also noteworthy that this minor base, although it cannot be confirmed as being complete until it has broken above $13.30, has formed ABOVE the trendline drawn from the June low, implying increasing strength and improving the chances of silver breaking above the important resistance at the highs of last April and May on the next run.
Given that gold can be expected to stage a powerful advance if it breaks out upside from its large trading range, it would appear that silver, which has been stronger than gold in the recent past, should have little trouble in breaking out to new highs. The now bullish outlook will remain intact as long as silver remains above the lower uptrend line shown.