Silver closed down today 17 cents. The two week and two month high was last Friday at 12.52, and was not challenged today. Today's candlestick was a small bear with a small upward tail. Friday and today both have upward tails starting at 12.37 which creates a good resistance at this point-also very close to 50% retracement of the May/June correction from 15.21 to 9.45 which would be 12.33.
Many eyes are cast toward the fed as they meet to decide to hike lending rates to 5.5% tomorrow.
The futures pits are pricing in a low probability of a rise(~20%.)
Other major financial news today was the announcement from BP that they would close Prudhoe Bay for 3 weeks or more due to pipeline corrosion.
http://thescotsman.scotsman.com/international.cfm?id=1147952006
A 20 day shutdown would only lower yearly production by 8 million barrels or .025 MB/d. If it is shutdown for the rest of the year it would reduce yearly production by 60 million barrels or .18 MB/d
Futures for oil rose by two dollars on the day.
With oil at $77, and the Commodities close to its all-time high, it would be a strange time indeed to end a rate-raising cycle. This really is a critical meeting. If the Fed continues to raise rates, it will signal that they are determined to decrease money supply, even at the expense of the economy. If they pause, it is more ambiguous, but leaves the door open to more inflation.
What does this all mean for trading silver? Well, we have had a seven week advance, and last week alone prices jumped more than a dollar. To me, this means that prices are vulnerable. That being said, there is strong positive momentum in silver prices right now, and $13 seems to be reasonable target. So. . .strong positive momentum with vulnerability means enter a limit sell above current prices. If you are currently long silver enter OCO limit sell order at 12.30; stop sell at 11.70. If you are flat on silver, you could consider a short at 12.30 or could just continue to sit tight and wait for the next good buying opportunity(10.70). If short silver, stop buy at $13 and target to close short at 10.70.
As it stands, silver is an excellent 5 year bull market, but is in the midst of a sizable correction from 15.21 that started in May. My opinion is that better entries will be found in the next few weeks. If the fed surprises the markets with a rate hike tomorrow, I think that will have a negative bias toward silver prices over the next couple of weeks. If the Fed pauses tomorrow, I think that will be neutral to prices, and given the current vulnerability of prices. . .I'm still bearish. If the Fed surprises markets with a rate cut tomorrow, then silver will probably continue higher to at least $13.
Silver and Gold not responding to oil's $2 advance today also leads me to believe that there is inherent weakness in the PMs this week.
Good Trading and may you be the Silver Lining,
Matt
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