That strength did not continue for long, but and prices quickly pushed back down to the 26.00 deal; finally firming a low around last Thursday after which buyers came back into the equation. Friday was particularly beneficial to bulls, as a rocky NFP print helped to reunite USD-weakness and this also helped to contribute to that topside move in Silver.
So far this week, bulls have continued to drive, re-claiming ground above the $27 handle as risk resources have been similarly powerful as evidenced by the other fresh all-time-high in the S&P 500 and Bitcoin. I started buying silver a couple of weeks ago as prices had only begun to re-engage with the 27 handle. I emphasized the breakout possible here, with emphasis on the psychological level of 30 sitting above cost action. But, now that that breakout has taken place and buyers were not able to continue the move -- is there hope for bulls that Silver prices might finally leave that $30 amount behind as new highs come in the picture?
One of the common refrains across markets last week as Silver was breaking was that the insinuation that it was another reddit-driven short squeeze situation. Perhaps there is some truth to this, but it might be hard to distill whether that's the case and, further, how much of an effect that this may or may not have experienced.
From the realm of technical structure, the potential for a breakout was there, as I'd pointed out previously. However, for forward-looking circumstances, the issue remains regarding whether or not Silver bulls can continue the trend or whether we're taking a look at a reversal scenario in the not-too-distant future; and there is a case for either, which I will look at below.
Probably the most impressive facet of that Silver breakout was the simple fact that it took place in an environment of general USD-strength. There is more frequently a negative correlation between the US Dollar and precious metal prices, but seemed to matter little as the breakout in Silver flew higher to begin a week's trade.
However, -- the fact that last week's large merely touched the prior high, and fast receded, opens the door to the fact that this may have been a double top formation. This has not been confirmed, and will not be until the'neckline' of the creation is tested through, which I have in my graph around the 21.67-21.89 area. If cost action does breach below this, there might be continued short-side movement since this is how a dual shirt reversal can be approached. There's also the possibility of a sizable measured move below that support, which might place Silver prices back in the range they were investing in about May-June of this past year.
For this to come to fruition, we would probably should observe a very strong run of USD-strength, that will likely need to be driven by headline stream, whether that be from an inflation print such as what is on the calendar for tomorrow, or even any unknown risk variable that reveals from out of the blue.
SILVER BULL THESIS: HIGHER-HIGHS, RISK-ON BONANZA and Mental LEVEL RESISTANCE
Going with the flow may often be the most accommodative way of addressing matters and, large image, the stream in Silver has been normally greater. Last week's immunity inflection could possibly be dismissed by a significant evaluation at a key psychological level that hadn't been in-play for more than eight decades.
Pulling on this series -- Gold costs readily took out that past all-time-high in August. Silver prices didn't, as Silver topped just inside of 30 while the all-time-high lurks around the 50-handle. That divergence, together with a continued shift from the Gold-Silver ratio could possibly support preference to Silver costs, particularly should the risk-on bonanza, driven by USD-weakness or the prospect thereof, proceeds similar to what's shown in the post-election backdrop.
It's not strange for a mental level, especially a major one, to elicit a strong reaction when it first comes back to the film. That may have been the situation with Silver prices and the response over the past few days has been encouraging on this front, as a shorter-term chain of higher-highs and lows has grown on the chart.
On a short-term basis, the exact same zone of resistance that I had looked at a couple of weeks ago is currently functioning as service. A hold here appears key to continuing progress in the short-term bullish trend in Gold.
