The silver markets as you can see fell very hard during the session on Friday, breaking down below the $18.00 level. While that is a negative signal in and of itself because we broke down below a large, round, psychologically significant number, the truth of the matter is that the $18.00 level is in fact the bottom of a larger descending triangle, which measures for a loss of six dollars. Because of this, I expect this market to then head to the $12 level but it won’t necessarily be an easy trade to hang onto at times.
The US dollar continues to strengthen, and as a result it works against the value of silver. Silver of course is a precious metal, so it does tend to move in the opposite direction of the US dollar. On top of that, the industrial component as far as silver is concerned doesn’t really have much in the way of strength either, so silver should continue to weaken over time. I think that selling rallies will be the way to go going forward, but quite frankly if you have the ability to hang onto longer-term trades, this could be another massive letdown waiting to happen.
Selling rallies, no real signs of buying opportunities.
I will continue to sell rallies on short-term charts, but I also think that there’s really no opportunity to buy this market at the moment. I would need to see a longer-term candle, perhaps on the weekly chart to even begin to think about that. Alternately, we could break above the $20.00 level which would have me buying as well, but that is a long way away.
I think that ultimately silver will bounce from these low levels, but it’s not going to happen anytime soon as the writing is now on the wall. The silver markets are doing the same thing everything else in the world is doing: reacting negatively to US dollar strength. Until that market (The US Dollar Index) breaks down a little bit, I don’t see any hope for the silver market. However, once we do find support at lower levels, buying silver could end up being one of the best trades of the decade.
