Potential Signal:
I believe the silver probably continues to be bullish for a while. However, I want to see a pullback. Closer to the $27 level I will start to scale into a position, but the stop loss just below the $26 level. The target of course is going to be $28.50, but I will do so with a small position.
- Silver rallied significantly during the course of the trading session on Thursday, breaking above the $27.50 level at one point, only before it turned around to show signs of exhaustion.
- After all, the silver market remains very volatile, but we got a little bit of economic news during the day that caused a bit of a short-term spike in the market.
Weekly Unemployment Claims in the United States came in much worse than anticipated, and it does suggest that we are going to continue to see the idea that the US economy might be slowing down, and therefore the Federal Reserve may have to cut rates sooner rather than later. This of course is the hope of Wall Street, but it doesn’t seem to be the reality. Inflation is going nowhere, which ironically also help silver. The idea of course is that the Fed will loosen monetary policy, we can the US dollar, and therefore make silver trade hotter. However, inflation also can do the same thing, at least in relation to hard assets such as silver, despite the fact that the US dollar may climb against other currencies like the Swiss franc or the Canadian dollar.
Range bound
I believe that this market is going to end up being range bound for a while, as we have recently pulled back to the $26 level, which also features the 50-Day EMA. On the upside, we have the $28.50 level offering a significant amount of resistance, and at this point in time we are essentially in the middle of that overall mess. I think we continue to see a lot of noisy behavior, but quite frankly that’s typical for silver as it is a very volatile market under the normal circumstances, let alone when you have a lot of concerns about inflation, a lot of questions about central bank actions, and then of course plenty of geopolitical concerns.
Ultimately, it’s probably easier to buy dips in this market then it is to short the market, but that doesn’t necessarily mean that you should get aggressive one way or the other. Position sizing will be crucial as per usual in silver because it can really punish you if you get it wrong.
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