Silver apparently thinks that it can get the shorts covering ala #silversqueeze. And I am sure a lot of them are running for cover. The important point here is that while I will not at all discount a longer-term bull thesis due to the very positive risk/reward we’ve noted for weeks now in the precious metals complex, we also have noted that silver tends to run like a wild man when it does go.
As such, our extreme bounce target has been to the downtrending daily SMA 200 (21.99). Damn if silver is not squarely eyeballing that level now. Aside from that it’s still a major downtrend and the objective is as it was during the May failure, to take out the noted resistance level, which now coincides with the SMA 200.
Silver/Gold is, however, making some serious noise. Another reason to at least give some credibility to an end of the correction and an oncoming bull phase. It’s above the SMA 200 and even if it breaks through resistance the important thing for a real bull phase is for it to take out the 2022 highs. Unfortunately, the bear market has been so forceful that it takes a lot of rally upside to conclusively break it and change the trends.
Gold is at a logical termination point. That also means it is at an important point to break through if it is going to bust bullish. Yet beyond that there lies a resistance level at 1807 that sees the SMA 200 sloping down toward it. Gold remains technically vulnerable below 1820.
Meanwhile, old Uncle Buck is taking the breather that it needed from its overbought perch. It has now touched support #1. In the previous update we gauged additional levels, should this market rally/USD pullback gain steam.
Bottom Line
Corrections have to end sometime/somewhere. It could have been in September. The fundamentals are still in process and the PMs are rallying with broad markets. That is not a positive. Yet in January 2016 PMs (led by silver) rammed upward first and best… as the fundamentals degraded and the sector got the punishment it then deserved over the next 2 years. But the 2016 rally was certainly tradable.
I plan to operate by the technicals like the above and by the indicators of the macro fundamentals. We’re still in process and not out of the woods. As of now it’s still a bounce. A significant one, but the trends are not yet broken.
