Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Inflation and the Crazy Crypto Markets - 23rd Oct 21
Easy PC Upgrades with Motherboard Combos - Overclockers UK Unboxing - MB, Memory and Ryzen 5600x CPU - 23rd Oct 21
Gold Mining Stocks Q3 2021 - 23rd Oct 21
Gold calmly continues cobbling its Handle, Miners lay in wait - 23rd Oct 21
US Economy Has Been in an Economic Depression Since 2008 - 22nd Oct 21
Extreme Ratios Point to Gold and Silver Price Readjustments - 22nd Oct 21
Bitcoin $100K or Ethereum $10K—which happens first? - 22nd Oct 21
This Isn’t Sci-Fi: How AI Is About To Disrupt This $11 Trillion Industry - 22nd Oct 21
Ravencoin RVN About to EXPLODE to NEW HIGHS! Last Chance to Buy Before it goes to the MOON! - 21st Oct 21
Stock Market Animal Spirits Returning - 21st Oct 21
Inflation Advances, and So Does Gold — Except That It Doesn’t - 21st Oct 21
Why A.I. Is About To Trigger The Next Great Medical Breakthrough - 21st Oct 21
Gold Price Slowly Going Nowhere - 20th Oct 21
Shocking Numbers Show Government Crowding Out Real Economy - 20th Oct 21
Crude Oil Is in the Fast Lane, But Where Is It Going? - 20th Oct 21
3 Tech Stocks That Could Change The World - 20th Oct 21
Best AI Tech Stocks ETF and Investment Trusts - 19th Oct 21
Gold Mining Stocks: Will Investors Dump the Laggards? - 19th Oct 21
The Most Exciting Medical Breakthrough Of The Decade? - 19th Oct 21
Prices Rising as New Dangers Point to Hard Assets - 19th Oct 21
It’s not just Copper; GYX indicated cyclical the whole time - 19th Oct 21
Chinese Tech Stocks CCP Paranoia, VIES - Variable Interest Entities - 19th Oct 21
Inflation Peaked Again, Right? - 19th Oct 21
Gold Stocks Bouncing Hard - 19th Oct 21
Stock Market New Intermediate Bottom Forming? - 19th Oct 21
Beware, Gold Bulls — That’s the Beginning of the End - 18th Oct 21
Gold Price Flag Suggests A Big Rally May Start Soon - 18th Oct 21
Inflation Or Deflation – End Result Is Still Depression - 18th Oct 21
A.I. Breakthrough Could Disrupt the $11 Trillion Medical Sector - 18th Oct 21
US Economy and Stock Market Addicted to Deficit Spending - 17th Oct 21
The Gold Price And Inflation - 17th Oct 21
Went Long the Crude Oil? Beware of the Headwinds Ahead… - 17th Oct 21
Watch These Next-gen Cloud Computing Stocks - 17th Oct 21
Overclockers UK Custom Built PC 1 YEAR Use Review Verdict - Does it Still Work? - 16th Oct 21
Altonville Mine Tours Maze at Alton Towers Scarefest 2021 - 16th Oct 21
How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
The Only way to Crush Inflation (not stocks) - 14th Oct 21
Why "Losses Are the Norm" in the Stock Market - 14th Oct 21
Sub Species Castle Maze at Alton Towers Scarefest 2021 - 14th Oct 21
Which Wallet is Best for Storing NFTs? - 14th Oct 21
Ailing UK Pound Has Global Effects - 14th Oct 21
How to Get 6 Years Life Out of Your Overclocked PC System, Optimum GPU, CPU and MB Performance - 13th Oct 21
The Demand Shock of 2022 - 12th Oct 21
4 Reasons Why NFTs Could Be The Future - 12th Oct 21
Crimex Silver: Murder Most Foul - 12th Oct 21
Bitcoin Rockets In Preparation For Liftoff To $100,000 - 12th Oct 21
INTEL Tech Stock to the MOON! INTC 2000 vs 2021 Market Bubble WARNING - 11th Oct 21
AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
Stock Market Wall of Worry Meets NFPs - 11th Oct 21
Stock Market Intermediate Correction Continues - 11th Oct 21
China / US Stock Markets Divergence - 10th Oct 21
Can US Save Taiwan From China? Taiwan Strait Naval Battle - PLA vs 7th Fleet War Game Simulation - 10th Oct 21
Gold Price Outlook: The Inflation Chasm Between Europe and the US - 10th Oct 21
US Real Estate ETFs React To Rising Housing Market Mortgage Interest Rates - 10th Oct 21
US China War over Taiwan Simulation 2021, Invasion Forecast - Who Will Win? - 9th Oct 21
When Will the Fed Taper? - 9th Oct 21
Dancing with Ghouls and Ghosts at Alton Towers Scarefest 2021 - 9th Oct 21
Stock Market FOMO Going into Crash Season - 8th Oct 21
Scan Computers - Custom Build PC 6 Months Later, Reliability, Issues, Quality of Tech Support Review - 8th Oct 21
Gold and Silver: Your Financial Main Battle Tanks - 8th Oct 21
How to handle the “Twin Crises” Evergrande and Debt Ceiling Threatening Stocks - 8th Oct 21
Why a Peak in US Home Prices May Be Approaching - 8th Oct 21
Alton Towers Scarefest is BACK! Post Pandemic Frights Begin, What it's Like to Enter Scarefest 2021 - 8th Oct 21
AJ Bell vs II Interactive Investor - Which Platform is Best for Buying US FAANG Stocks UK Investing - 7th Oct 21
Gold: Evergrande Investors' Savior - 7th Oct 21
Here's What Really Sets Interest Rates (Not Central Banks) - 7th Oct 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Silver Analysis

Commodities / Gold and Silver 2016 Aug 20, 2016 - 06:34 PM GMT

By: Tony_Caldaro

Commodities

As I have been noting of late, both gold and silver have been trapped in sideways trading patterns for some time now, meaning that there really has not been a whole lot worth saying about the price action in either metal.

That MIGHT POSSIBLY be changing in regards to silver. The reason is simple – price is down at the very bottom of the sideways trading range that has been intact for nearly seven weeks.


Additionally the price fell through the 50 day moving average today, the first time it has done that since early June although it did recover slightly ahead of the closing or settlement price – just barely however!

One other thing worth noting, the bottom technical indicator has remained in a bearish posture since the middle of July while the ADX/DMI has kept the bulls in charge with the +DMI remaining above the -DMI over the sideways trading pattern. For the first time however, in a long time, we have gotten an actual sell signal in those DMI lines.

As you can see, the actual ADX line itself has been moving steadily lower after peaking in mid-July, a sign that the ferocious uptrend that had been taking place through June was going to be pausing. It continues to move lower indicating the choppy price action during this sideways trading action. With the upside crossover of the -DMI above about the ADX line and the +DMI, this might possibly be the start of a bigger retracement lower in price. It will all depend on what or not today’s low now gives way and silver closes below that 50 day moving average.

That is a key technical chart level and if it is violated on a closing basis, we are going to see some hedge fund long liquidation start up.

The reason why this should concern silver traders is that the current hedge fund long side exposure in this market remains substantially lopsided. While this group of large traders has reduced the size of their once record long positions over the last three weeks, the reduction has been minimal, only about 3500 or so out of the peak at 104,658.

What they have done in a bit more aggressive fashion is to begin taking on some fresh short positions although as you can see from the chart, the overall position is quite muted compared to their aggressive long side bets.

You can see the turn lower in the record NET LONG position by the hedgies. You can also see that the Commercials and Swap Dealers were busy covering some of their large short positions into that hedge fund selling.

I should note here that this is the reason for the sideways trading pattern we have seen in silver recently. Without that constant barrage of heavy hedge fund buying, the market is too heavy to break out to the upside; however, the short covering by Commercials and Swap Dealers has been there to absorb the still modest selling by hedge funds, whether from liquidation of long positions or the addition of fresh shorts.

That would change IF A KEY DOWNSIDE TECHNICAL SUPPORT LEVEL fails. We would see much more aggressive selling by hedge funds which would swamp buying related to Commercial and Swap Dealer short covering efforts.

Also worth noting, while we have seen the hedge fund positions whittled down somewhat on the long side, when viewed as a percentage of the total open interest, something I prefer to use to allow for growth in the futures market participation over the years, the outright long position of the hedge funds remains dangerously high. As a matter of fact, it is barely, just barely, off the record peak.

If the bulls, especially those hedge funds, are going to prevent a deeper selloff/move lower, they are going to have to come out buying in a big way Sunday evening/Monday morning of next week.

The interesting thing about this sideways price action in silver is that it has been occurring against the backdrop of a generally weaker US Dollar.

One would have thought that with the Dollar moving down as much as it has since its peak in late July, that silver would have benefited tremendously and would have gone on to take out its overhead chart resistance and powered higher. That it has not is disconcerting. It could be that the longs are simply exhausted in this market and lack the resolve/firepower to aggressively pile on the necessary amount of new long positions to start a fresh leg higher.

Either way, silver is looking vulnerable here. Bulls will need to get it back through $20 on the topside to blunt some of this building negative pressure.

That should spark some light short covering by some of these recent hedge fund converts to the short side but they would really need to clear at least $20.30 to get something more notable going to the upside.

Here is another point of notice.

I have put up the Bollinger Bands on the daily silver chart along with two indicators – the first is the Bollinger Bandwidth, which measures the distance between the upper band and the lower band, and the second is a simple stochastic indicator.

When a market is trending, the Bollinger Bands are generally widening out, no matter what direction the actual price is going, up or down. In other words, a TRENDING MARKET is accompanied by a widening BANDWIDTH indicator. When the BANDWIDTH is contracting or falling, the market is moving sideways. If it was trending higher beforehand, that means price is retreating but not breaking down sharply causing the market to consolidate in a sideways pattern to see whether or not it has had sufficient time to get end users and sellers some time to become accustomed to the new and higher price.

When a market enters a sideways trading pattern, or is ranging and not trending, the Stochastic indicator is a very good one to employ for taking buy or sell signals. Generally, as the indicator moves down into the oversold level and the lines then complete an upside crossover, traders can buy the market waiting for price to rally sufficiently to move to the overbought level at which point the trade is closed and can then be reversed to go in the opposite direction if that is amenable to the trader.

Notice that when the Bandwidth indicator turned lower, the stochastics would generally soon afterwards complete a bullish upside crossover which corrresponded with the Bandwidth indicator widening out again as price moved higher.

What we have as of today ( Friday) is that the Stochastic indicator shows both lines still moving lower together with neither one suggesting an upward direction change. Also, the Bandwidth indicator is giving some hint of actually turning higher even as the stochastic line move lower. That is a change from the previous action of both indicators when the Stochastics tended to moving higher or about to turn higher as the Bandwidth indicator began to rise or steepen out.

What we MIGHT POSSIBLY be seeing here is a growing potential for some more volatility although this time to the downside.

This next week should be an important one. It will confirm whether or not that fresh sell signal from the DMI lines remains in force and if the 50 day moving average can offer any magic for the silver bulls. It will also confirm if those Stochastic lines are going to start turning higher once again or have further room to fall lower. If this is what happens, it is not too difficult to visualize a rather abrupt drop to $18. We shall see…Bulls have their work cut out for them.

Dan Norcini

http://traderdan.com

Dan Norcini is a professional off-the-floor commodities trader bringing more than 25 years experience in the markets to provide a trader's insight and commentary on the day's price action. His editorial contributions and supporting technical analysis charts cover a broad range of tradable entities including the precious metals and foreign exchange markets as well as the broader commodity world including the grain and livestock markets. He is a frequent contributor to both Reuters and Dow Jones as a market analyst for the livestock sector and can be on occasion be found as a source in the Wall Street Journal's commodities section. Trader Dan has also been a regular contributor in the past at Jim Sinclair's JS Mineset and King News World as well as may other Precious Metals oriented websites.

Copyright © 2016 Dan Norcini - All Rights Reserved

All ideas, opinions, and/or forecasts, expressed or implied herein, are for informational purposes only and should not be construed as a recommendation to invest, trade, and/or speculate in the markets. Any investments, trades, and/or speculations made in light of the ideas, opinions, and/or forecasts, expressed or implied herein, are committed at your own risk, financial or otherwise. The information on this site has been prepared without regard to any particular investor’s investment objectives, financial situation, and needs. Accordingly, investors should not act on any information on this site without obtaining specific advice from their financial advisor. Past performance is no guarantee of future results.

Dan Norcini Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in