When asked about the recent rally in Gold and Silver in a recent interview, Rick Rule stated, "...I think there were a few things happening. Gold was simply oversold. We had a massive move 3 months ago from weak hands to strong. That's a very good thing. Gold moved from weak central banks, sclerotic central banks, to emerging market central banks that were under-indebted. Gold went from overly leveraged futures markets, weak hands, people engaged in hedge funds, people engaged in leveraged carry trades to the physical markets... And, I see that continuing." (Click here to listen to the full interview with Patrick MontesDeOca.)
This week's price action has been indicative of the silver market currently. We are continuing to trade within a trading range between $20-25/ounce. In last week's post, I was hoping for a rally starting the beginning of this week that would take us to the middle of October, but I forewarned everyone that if 21.23 was taken out we could see a retest down to $20/ounce rather quickly instead. That happened this Tuesday when we saw a quick drop to 20.63. With this development, I'm now expecting a retest of the $20/ ounce level in silver sometime between now and mid-October, which should set us up for a rally possibly in November. I will not be selling any of my longer term holdings. I believe the longer term trend is intact. To see other blog posts, click here.
So let's see what the charts have to say:
First, look at the hourly chart below with the VC Momentum Price Indicator as a guide. You can clearly see how important this line is. Throughout the week there were multiple inflections off the VC Indicator, showing the significance of this swing trade line. This serves as an indication that silver price action for the week was neutral, reinforcing the lack of a trend.
The 4 hour chart below shows clearly where support came into the silver market when it broke down this week. I would not be surprised to see a quick retest of this line sometime before the 15th. The RSI remains neutral and out of its oversold condition, confirming possible sideways-to-lower price action in the coming weeks.
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TRADING DERIVATIVES, FINANCIAL INSTRUMENTS AND PRECIOUS METALS INVOLVES SIGNIFICANT RISK OF LOSS AND IS NOT SUITABLE FOR EVERYONE. PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
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