Trader: Silver Investors Could See A Silver Price Of $10 In 3 Days
The outlook is VERY bearish...
by Przemyslaw Radomski via Sunshine Profits
Gold and the US dollar - the yellow metal doesn't really move regardless of the greenback. As the strength of their relationship (and even the direction gold takes in response) change over time, let's start today's analysis with a quick look at how they are doing currently. You're probably wondering why didn't gold slide, given that the USDX reversed on Friday.
The reply to this question has been visible on the below chart for days.
Gold and the US dollar - the yellow metal doesn't really move regardless of the greenback. As the strength of their relationship (and even the direction gold takes in response) change over time, let's start today's analysis with a quick look at how they are doing currently. You're probably wondering why didn't gold slide, given that the USDX reversed on Friday.
The reply to this question has been visible on the below chart for days.
The new daily cases in Russia just exceeded 10k.
They were just above 7k in Brazil, and they are now hovering at about 5k per day.
In India, the latest daily increase was just above 2.5k, but we see constant growth in this number.
The numbers from China are extremely low, but it seems doubtful if they can be viewed as realistic.
These countries together constitute the BRIC group, and their impact on gold was supposed to be positive in general, as their growth should have undermined the demand for the US dollar. Of course, that's just a general link and one of long-term nature. What is more interesting from the short-term point of view, is that the situation in these countries is - overall - getting worse at a greater speed than the situation is getting worse (in some states, it's actually getting better) in the US. This suggests that in the short run, we could expect the opposite to the general tendency to take place. People could be buying the USD not because it's perfect, or that the situation in the US is, but because it is better (or improving more smoothly) than what they see domestically.
Taking both factors into account, we have a strong case for a strong dollar. And initially gold - and the rest of the precious metals sector - is likely to respond to it with lower prices. The slide is unlikely to extend for more than a few weeks, but it's still very likely to happen.
Stocks, Ratios and PMs
The situation in the stock market is likely to impact the PMs negatively as well, at least in the short term. We previously commented on the S&P 500 performance in the following way:
During yesterday's session the S&P 500 closed very insignificantly above the 61.8% Fibonacci retracement level and below the upper border of the price gap. In other words, it moved and reversed practically right in the middle of our target area. We wrote that the outlook was bearish, but that "on a very short-term basis, anything could happen in the stock market" and it did - we saw another daily move higher.
The final of the individual strong resistance levels is based on the upper border of the price gap. This gap is at 2972 in case of the S&P 500 index, and at 2964 in case of the S&P 500 index futures. Whether this level is "taken out" or not will depend on the closing price that we see. So far, the S&P futures moved to 2964 today and then they declined - trading at 2948 at the moment of writing these words.
If stocks decline from here, they will confirm the strength of the above-mentioned resistance and at the same time, they would likely invalidate the tiny breakout above the 61.8% Fibonacci retracement, which could trigger technical selling. This would likely have a very negative impact on the mining stock sector.
That's exactly what happened. Stocks invalidated their breakout above the 61.8% Fibonacci retracement, and they have indeed triggered technical selling. The S&P 500 opened the day with a bearish price gap and then declined during the day, pretty much as it had declined on March 6th. On March 9th (which was the next trading day), the S&P 500 once again opened with a bearish price gap. We are writing this a few hours before the markets open in the US, but the S&P 500 futures are currently down by 0.8%, which increases the odds that we'll see a repeat of what we saw on March 9th - another daily move lower. That was more or less when the really volatile part of the decline in the precious metals market started.
Besides, we have a confirmation of this very bearish analogy also from other stock markets. For example, the German stock market is trading about 3% lower today.
The similarity to the first half of March is uncanny.
Speaking of similarities to the first half of March, silver is providing us with an excellent confirmation.
On Thursday, the white metal reversed and declined profoundly on relatively big volume - just like it had done on March 9th. In the following two trading days, it had moved lower, but just slightly so. This time, there was - so far - just one trading day after the big daily decline, and during this day, silver declined rather insignificantly - just like it did in early March. If the analogy is near-perfect, we'll see some back and forth trading also today without a bigger change (a lower close is likely, though). And then...
In March, silver then plunged, and it took the white metals just three more days to slide below $12 from about $17.
As the starting point for silver for now is approximately $15, could it slide to about $10 in just 3 trading days? While we don't want to say that it's inevitable, we do want to stress that the outlook is very bearish, and that a major decline is likely just ahead, even if silver doesn't slide again as fast.
... It seems quite possible, though.
On a side note, please keep in mind that (as we have been indicating, and as most of our colleagues didn't) despite the recent upswing in gold, and the general stock market, the gold to silver ratio didn't invalidate its breakout above the 100 level. Conversely, the breakout was confirmed, and it means that we should expect even higher values of the ratio. And yes, the values near 150 level are quite possible.
Silver investors and traders, look out below!
The full version of today's analysis includes details of our currently open position as well as supports and targets of the upcoming sizable moves in gold, silver and - in particular - the miners. It includes not only the final targets, but also the interim ones that could trigger a rebound as early as this week.