The Levels to Be Watching In Silver

While many point to the Federal Reserve as the tide that raises all ships, the boats carrying commodities have all but sank over the last couple of years. Silver ($SLV) has fallen nearly 30% since it’s 2014 high alone and made a series of lower highs and lower lows. It’s hard to argue against the notion that the Silver is in a bear market as each rally gets faded. We can also see signs of this bear market in momentum, with each march higher hitting a brick wall at the upper end of a bearish range.

Below is a weekly chart of the iShares Silver Trust ETF ($SLV) going back to late 2012. After a large drop in 2012 and 2013 silver began to consolidate at created support near $18. However, each rally was unable to get back above the 50-week Moving Average and momentum began defining the range for which it would eventually remain for the coming year. After multiple tests of the support at $18, price eventually broke through and tagged $15 for this ETF. As with many levels of support, once it breaks it often becomes resistance. Which is what we can see took place at the start of this year when Silver bulls tried to gain the majority. But they were unable to get the popular opinion and price failed at $18 and again was unable to break the 50-week MA.

Now with price re-testing $15 for $SLV we have a bullish divergence in the Relative Strength Index (RSI). We saw a similar divergence in June of last year before small rallies took place but ultimately failed. With the RSI making a higher low as price tests a prior low, this a potentially positive sign that price may begin to rally. What’s important to understand with this chart is the defined level of resistance in momentum. The bearish range that the RSI is in has put a quick end to any attempt to see price appreciate and we’ve yet to see the indicator break above this level yet.

Going forward I’ll be watching if the RSI can get materially above 50 and if price can once again break above $18 as well as its 50-week MA. This will likely not be an easy feat for Silver bulls to take on, but it’s important to know where ‘price memory’ is and the levels to keep an eye on.

SilverA second chart of Silver I want to take look at involves Sentiment. The chart below comes from SentimenTrader.com and is a proprietary mix of varies sets of sentiment-related data. As Silver consolidates near $15 I find it interesting to see sentiment begin to put in a series of higher lows from what is deemed an “excessive pessimism” level. Each test of this level in price has been accompanied by, what appears to be, less and less bearish sentiment. This may help give some self-esteem to the bulls as their camp begins to grow in attendance.

Prior rallies from $15 in $SLV have seen sentiment stop out around 60, if we do see price rally I’ll be watching to see if sentiment can break above these two prior highs as a possible sign that a shift in taking place in the Silver market.

Silver Sentiment

 

Disclaimer: Do not construe anything written in this post or this blog in its entirety as a recommendation, research, or an offer to buy or sell any securities. Everything in this post is meant for educational and entertainment purposes only. I or my affiliates may hold positions in securities mentioned in the blog. Please see my Disclosure page for full disclaimer. Connect with Andrew on Google+, Twitter, and StockTwits.

Can Long-Term Support Hold Up For Silver?

Like gold, silver hasn’t had a great 2013, really it hasn’t a great last three years. What is now, in my opinion, a long-term down trend, its good to look at the historical price action of a market to see if there are any levels of support that might come into play.

Today’s chart is a monthly view of the spot silver ($SI_V) market going back to 2002. The trend line on the chart below looks at the lows off 2003 and 2008. This line has provided pretty good support this year, acting as a base for the nearly 25% advance in August.

We are now back this long-term trend line as well as the 100-month Moving Average. There’s no doubt that the bears are currently in control of silver as shown by the significantly lower lows from the 2011 high. Will this trend line off the 2003 low and 100-MA act as support? So far sellers haven’t eased off the gas or given any hints to the end of their conviction, but we’ll see what happens if we do in fact get a break or if the selling subsides.

silver

Disclaimer: Do not construe anything written in this post or this blog in its entirety as a recommendation, research, or an offer to buy or sell any securities. Everything in this post is meant for educational and entertainment purposes only. I or my affiliates may hold positions in securities mentioned in the blog. Please see my Disclosure page for full disclaimer. Connect with Andrew on Google+, Twitter, and StockTwits.

Is Silver Breaking Out?

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.

silver

Disclaimer: Do not construe anything written in this post or this blog in its entirety as a recommendation, research, or an offer to buy or sell any securities. Everything in this post is meant for educational and entertainment purposes only. I or my affiliates may hold positions in securities mentioned in the blog. Please see my Disclosure page for full disclaimer. Connect with Andrew on Google+, Twitter, and StockTwits.