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Cours Or & Argent

Updating the SLV Chart

IMG Auteur
Publié le 03 octobre 2012
745 mots - Temps de lecture : 1 - 2 minutes
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In follow-up to today's earlier post, I decided to take some time out of my day to update the silver chart using the SLV which is the ETF that tracks silver. Its chart is usually similar to that of spot silver but since this is the tool that I use to “trade” the metal, this is the chart I decided to use.


First the chart and then some further notations:




There’s a lot happening right now. First let’s try to dissect the implications for both the bull and bear sides.

Bullish:

  • The SLV (and silver for that matter) have experienced a “golden cross” which is when the shorter (50 day) Moving Average crosses with the longer term (200 day) moving average. This does not always imply a moon-shot to new highs but it does signify that the asset may have moved into a bullish cycle. Caution is warranted because although officially silver may have gone bullish in it’s cycle after being in a bear market since May of 2011, corrections are still possible and likely. However, the 200 day MA should prove as formidable support.
  • Additional money printing will continue to propel the inflationary pressures of such actions which means that the more countries around the world print money, the higher these commodities should go theoretically. I say this because each round of easing has had less impact on commodities.

Bearish

  • I want you to focus on the descending bullish wedge from June until August. When the point of that falling wedge was reached, you saw how the SLV reversed course, broke out of that wedge and had a nice run. The downside is that this has created a bearish rising wedge and we can see that we have reached the end point of that wedge. Making things a little more troublesome is that the SLV and silver for that matter have appeared to also make a double top on this move with the two tops in the SLV at $34.05 and $34.08. Therefore we have to contend with two very bearish technical patterns; the break of the rising wedge and the double top. The SLB will need to rally beyond $34.08 with significant volume to negate the double top and both patterns. But why then hasn’t it already broken down? Note that when the bullish falling wedge hit the point we had a brief period of sideways action before the break upward. It appears as though the same is happening right now.
  • We also have the Daily Sentiment Index that reached 92% Bullish consensus on the last trading day of September. That is an extremely high number usually seen at interim tops. It was at that level in April of 2011 and again in the summer of 2011 before silver had that other very sharp reversal off the bounce. Usually when sentiment is one sided, the opposite occurs resulting in sharp reversals as everyone looks to get out before the next guy.
  • The impact of additional easing has been dampened with smaller moves after every announcement of same;
  • The world appears to be slowing down again and silver, because of its industrial usage, is a commodity that like all other commodities will feel the impact of slowing economies.
  • I’ve probably missed a few things but these items, for me, are the most important ones that I am keeping my eye on.

The rally that started last week when I advised everyone to close shorts was perhaps the last move that contributed to the formation of the double top. The bearish rising wedge is as present as ever and with lower highs and lower lows starting to form on the chart, the SLV and silver for that matter look to be on the cusp of a significant correction here. The positive is though, that given the golden cross, we just see a correction within a new bull market.

I want to make these final comments regarding the “golden cross” that occurred in both the gold and silver markets this week. You will hear a lot about how the last time these chart patterns occurred in the metals they went on to have significant rallies. However, it is worth noting that the last time gold had a golden cross, it proceeded to lose 20% BEFORE it started its climb that ultimately resulted in a $1,000 gain.

Time will tell.

Disclosure: I am currently short the SLV by virtue of going long the SLV October-20-2012 $32.50 puts

 

 

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The powers that Be ; are Defending the $34.00 Line to the DEATH. They just added 1/2 of the World production of Silver, by just Papering over it? As long as they can create Silver with paper we will never have the true price of Physical Silver. It should be Illegal, OH by the way it IS.!!!! It's Called MANIPULATION.
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The powers that Be ; are Defending the $34.00 Line to the DEATH. They just added 1/2 of the World production of Silver, by just Papering over it? As long as they can create Silver with paper we will never have the true price of Physical Silver. It sh  Lire la suite
sparrow - 04/10/2012 à 14:55 GMT
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