On its 15-year chart we can see that silver is now at a crossroads – although it has been in a bearmarket for 3-years it has not yet broken down from the long-term uptrend shown on this chart, but if the dollar rally should continue with another strong upleg, that is what we should expect. Should the major uptrend fail there will be no disputing that silver is in a bearmarket. Failure of the uptrend and a breach of the strong support at last year’s lows would lead to another steep downleg.
In the light of recent developments in the dollar, there is no disputing that the 4-year chart for silver looks grim, although there is room for a short-term bounce off the strong support. As we can see a major downtrend is in force and with the pattern that has formed over the past year approximating to a bearish Descending Triangle, silver is coming under increasing pressure to crash the support at last year’s lows, especially as this support has been eroded by repeated attacks on it. However, with the dollar very overbought and in need of a rest, and silver short-term oversold, there is a room for a bounce off the support first. While a big up day on high volume would improve the picture, it would take a break out of the downtrend shown on this chart to start to turn the picture more positive.
The 15-month chart reveals why the support at last year’s lows is so important, as it has supported the price and produced reversals on 3 occasions over the past year, and could do again now, although because of the positive dollar outlook, any recovery could be short-lived. The other reason for presenting this 15-month chart is to enable comparison with the COT chart shown immediately below it.
On the 6-month chart we can see how the persistent downtrend of the past 2 months has resulted in the price arriving at the support level in an oversold condition. In the last update we got fooled by the bearish “Shooting Star” candlestick shown, thinking it was instead a bullish “Inverted Hammer”. This was a permissible error as a shooting star normally comes after a significant advance, and there was virtually no advance preceding this one.
So, we should not be surprised to see a sudden bounce back here from support, if the dollar should consolidate and especially react back, but should the dollar suddenly erupt into a new impulse wave, as it is expected to, then silver is likely to turn back down again and crash the support, which lead to a steep downleg. Please refer to the parallel Gold Market update for the latest dollar charts and analysis.
End of update.
© 2004-2014 Clive P. Maund. Legal & Disclaimer
for billing & subscription questions: firstname.lastname@example.org
for all other inquiries: email@example.com
The above represents the opinion and analysis of Mr Maund, based on data available to him, at the time of writing. Mr Maund's opinions are his own, and are not a recommendation or an offer to buy or sell securities.
Mr Maund is an independent analyst who receives no compensation of any kind from any groups, individuals or corporations mentioned in his reports. As trading and investing in any financial markets may involve serious risk of loss, Mr Maund recommends that you consult with a qualified investment advisor, one licensed by appropriate regulatory agencies in your legal jurisdiction and do your own due diligence and research when making any kind of a transaction with financial ramifications.
Although a qualified and experienced stockmarket analyst, Clive Maund is not a Registered Securities Advisor. Therefore Mr Maund’s opinions on the market and stocks can only be construed as a solicitation to buy and sell securities when they are subject to the prior approval and endorsement of a Registered Securities Advisor operating in accordance with the appropriate regulations in your area of jurisdiction.