Technical analyst Clive Maund charts the recent downturn in silver, but
also sees reason to be optimistic about the market going forward.
Silver has reacted back as predicted in the last update about a month ago.
On its 9-month chart, above, we can see that it broke down from an
intermediate top, as expected, back toward the important support shown. But
on Friday it had a good rally, which suggests that it may not drop that far,
and could turn up again here.
Overall this is a positive-looking chart and the main question is which
uptrend channel it adheres to. As we can see, there has been a significant
price/time correction since early July that has served to completely unwind
the earlier overbought condition, so Friday's turnaround could mark the
beginning of the next up-leg. Even if it should head lower again soon, it is
thought unlikely that it will drop below the support at and below $18.00,
especially as it is underpinned by an important channel support line. Should
it drop that low, silver would look most attractive.
The long-term, 10-year arithmetic chart gives us a much broader
perspective. This is actually a very positive chart overall, for as we can
see silver's bear market phase from 2011 has definitely ended. However, it
has risen quite sharply in recent months to arrive at a zone of significant
resistance, so the current reaction is quite normal and should set it up to
break above this resistance and continue higher.
The silver optix, (optimism) readings have eased significantly from high
levels that made further gains difficult. The current readings at about 56%
make renewed advance much more possible.
Chart courtesy of www.sentimentrader.com
COTs and Hedgers positions continue to run at a high level and be a cause
for concern, although they have eased a little in recent weeks. Such readings
usually, but not always, lead to a substantial drop, so we should keep this
in mind. On rare occasions they stay high as the uptrend continues. Therefore
current readings won't necessarily prevent a rally here, but can be expected
to act as a restraining influence especially if they get even more extreme.
Chart courtesy of www.sentimentrader.com
Disclosures:
1) Statements and opinions expressed are the opinions of Clive Maund and not
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Charts provided by Clive Maund
