The silver price trended lower last week after hitting a high of nearly
$16 the prior week. So, what’s in store for silver and the broader
markets this week? If we look at the moving averages and what is taking
place in the broader markets, we may find some clues. It seems as if
the silver price over the past two weeks has been moving in the
opposite direction of the Dow Jones Index and the broader markets.
As the Dow Jones increased 1,800 points since January 4th, the silver
price fell more than 50 cents to $15.40 on the close of Friday. If we
look at the Silver Daily chart versus the Dow Jones Index (Black line)
we can also see that the silver price has been trading between two moving
averages:
The silver price peaked right when the Dow Jones started the second stage
of its correction higher on January 4th. On the close of Friday, when
the Dow Jones Index added another 336 points, the silver price fell more than
$0.20 to $15.40. So, it seems as if the silver price will continue to
be weak as the broader markets move higher.
But, I do believe we are going to see a peak in the Dow Jones
Index and broader markets very soon, likely this week. As I
mentioned in a previous video update, the Dow Jones will probably hit
resistance at the 12 Month moving average (MMA) of 24,875 before the end of
January and will head down by the end of the month and continue the same
trend lower in February:
So, if I am correct that the broader markets will begin to sell off, then
the gold and silver prices will start moving back higher. Of course,
there are no 100% guarantees with technical analysis, but we can check the
markets and see how the price actions traded over the next two weeks.
Now, the Silver Daily chart suggests there is a good support level at
$15.33 (25 DMA-Blue line):
However, the silver price could fall below that $15.33 level to $14.85 (50
DMA-Red line) before reversing when the broader markets peak
and decline sometime in the next week or so. Because the
broader markets are becoming extremely overbought and now a high risk, shown
in the Sentiment Trader Report I receive daily, a reversal lower is soon to
take place:
When the broader markets begin to sell off once again, in what I believe
is an ongoing BEAR MARKET (unless Central Banks step in with trillions of new
QE), the precious metals prices will continue to disconnect and move
higher. Thus, I believe silver will show a reversal sometime
this week or next week at the latest and start moving higher to the $16.40
range shown in the monthly chart below:
Interestingly, the silver price in the monthly chart is right up against
the 12 Month moving average (12 MMA –Brown line). In
December the silver price went right up to it (large white candlestick) and
is attempting to push above it.
If my analysis is correct, then I do believe the silver price will push
above the 12 MMA by the end of January and then start trading above it in
February as it continues up to the convergence of the three moving
averages (25, 50 & 200 MMA), at the $16.40 range.
Lastly, due to the Federal Government shut down, we haven’t had an update
of the COT Report for a month now. So, we have no idea the level of
Commercial Short positions. However, I do believe the Commercials
liquidated some short positions as the silver price has fallen over the past
two weeks. If we look at the Sentiment Trader Silver Optix, or
sentiment chart, we can see that sentiment is still heading lower, but will
probably bottom soon and move back higher with the price.
I will do an update at the end of January to see how the markets
and silver price traded so we can see if my analysis of the moving averages
was correct. If my analysis on a short-term basis is accurate, then we
will be able to understand how the precious metals prices will move higher
over the longer term.
Check back for new articles and updates at the SRSrocco Report.
