TraderStef: Silver's Hi-Ho Day Needs a Few Dollars More - Part 2

TraderStef is optimistic about silver, but what will it take to get an even more bullish tone? Find out in this both fundamental and technical update...

by TraderStef via CrushTheStreet (connect with TraderStef via Twitter or at TraderStef's website)

If you missed my most recent articles and analyses on silver, Silver's Hi-Ho Day Needs a Few Dollars More was published on Dec. 26, 2018 and Gold and Silver Bullish Despite the Presstitutes was published on Dec. 28, 2018.

I waited for gold to make a solid move beyond $1,250 again before offering regular technical analyses on the silver charts, as silver always lags behind gold until it steamrolls gold on a percentage basis. As expected, silver broke away from its $15 lateral resistance after gold breached $1,250 with conviction. Silver is making progress towards $16-$17 and will eventually catch up to gold's bull accumulation phase that began in Dec. 2015. Silver will likely breach $16 after gold establishes a solid rally above the $1,300 resistance level.

Before diving into the silver charts tonight, have a look at the following articles and charts.

Silver's all-in cost of production (AISC) per ounce and mine supply chart data are courtesy of SRSrocco Report.

Friday's price action was tremendous on gold's side of the equation, but silver was muted in comparison. The first suspect for the market rally was a WSJ TaperCaper article published at 5:30am EST on Friday. Here is a snippet:

Fed Officials Weigh Earlier-Than-Expected End to Bond Portfolio Runoff... "Federal Reserve officials are close to deciding they will maintain a larger portfolio of Treasury securities than they'd expected when they began shrinking those holdings two years ago, putting an end to the central bank's portfolio wind-down closer into sight. Officials are still resolving details of their strategy and how to communicate it to the public, according to their recent public comments and interviews. With interest rate increases on hold for now, planning for the bond portfolio could take center stage at a two-day policy meeting of the central bank's Federal Open Market Committee (FOMC) next week." - WSJ

Three hours later, at 8:34am, 15 minutes after the COMEX opened for business, the price of gold, silver, and stock market futures began to spike. My Twitter feed filled with folks giving credit to the WSJ article. That did not make sense because no reaction was evident in any market sector during the early-morning trading session in London.

Apparently, the D.C. swamp leaked a few secrets about a deal to end the government shutdown during pre-market trading hours on Friday. Institutional money had a field day and the peasants were not notified until lunchtime in New York. There are too many reasons to elaborate upon as to why the price action across financial markets played out as it did based on the shutdown leak.

Shutdown Deal Reached; Government to Reopen Temporarily - Breitbart, Jan. 25

Here is the 1-minute gold chart from Friday until the 5pm close of $1,303...

Bond Traders Face Plenty of Risk as Powell Ushers In a New Era... "Treasury traders are bracing for heightened volatility next week as Federal Reserve Chairman Jerome Powell ushers in a new era of press conferences after every meeting, while the U.S. and China meet again for trade talks. Officials are expected to keep interest rates unchanged following nine hikes since 2015. But investors see scope for the Fed's statement to tilt dovish, or for Powell to signal as much in his comments, a shift that could help drive yields lower. Also in focus - any hint that the central bank is closer to ending its balance-sheet runoff, which, combined with the deal to reopen the government, could bolster risk sentiment at the expense of Treasuries. But there's more on the calendar: Progress on the trade front may lift yields as it's seen as easing global economic headwinds. And the Treasury is slated to detail issuance plans for the coming three months, with sales projected to be at a record level. January labor data will round out the week, with the effects of furloughed government workers potentially boosting the jobless rate. Add it all up, and traders may have some countervailing forces to contend with. It's going to be a busy week." - Bloomberg, Jan. 26

To view a larger version of any chart, right-click on it and choose your "view image" option.

Silver weekly Jan. 25, 2019 close...

Excerpt from the Dec. 26, 2018 weekly analysis:

"The Adam and Eve Double Bottom candlestick details and the bullish Big Wpattern that developed on its right side since late summer are clear on the weekly. Today's bullish price action resulted in a break above the Big W neckline... The DMI-ADX is crossing into positive territory and the StochRSI already is, which sets up the potential for the price to advance further."

After taking out the Big W neckline, the price chopped within a $0.77 range between the $15.87 high on Jan. 4, and the $15.10 low on Jan. 21 & 22 that retested the neckline and 50 Exponential Moving Average (EMA) for support. The price closed for the week at $15.70, just above the confluence of lateral resistance, the 23.6% Fibonacci level, and the Big W neckline, which bodes well to confirm the Big W pattern. The 100 EMA and trendline drawn down from the 2016 high is only a stone's throw away. The DMI-ADX and StochRSI remain in positive territory. The overall weekly volume is not impressive and raises concern as to if this rally has legs. As usual, gold will determine what silver does in the near-term. Let's dissect the daily action.

Silver daily Jan. 25, 2019 close...

Excerpt from the Dec. 26, 2018 daily analysis:

"The DMI-ADX turned positive with conviction and the StochRSI broke out to positive momentum. Note that the volume spikes in Big W's second half coincide with price spikes. The daily is bullish near-term."

Excerpt from the Dec. 28, 2018 daily analysis:

"The bullish Big W pattern (the Eve side of the Adam & Eve Double Bottom drawn back to Dec. 2015) appears to be history, but Adam & Eve does not confirm until all the moving averages and 2016 trendline are taken out with conviction. The break above the 200 EMA only has a $0.13 spread as of the $15.33 close, so a few more dimes to the upside with a solid push above the 2016-2017 lateral resistance would be encouraging. As with gold, the silver price is approaching several layers of lateral resistance, while the DMI-ADX momentum is strong with an Alligator Tongue set-up, the StochRSI is not as toppy but can remain there until substantial resistance forces a pullback, and buy volumes were strong during the rise in price. The spread for a Golden Cross is $0.45, and the outlook is bullish in the near-term."

If Friday's rally confirms with a continuation throughout next week, the weekly chart will take on a more bullish tone. The daily highlights how the pullback played out to test the 200 EMA and Big W neckline for support after the initial breakout in late Dec. 2018. The 300 Simple Moving Average (SMA) and trendline drawn down from the 2018 high are the resistance that blunted Friday's upside price spike. All EMAs are back below the price and the 50 and 200 EMAs are only $0.15 away from a bullish Golden Cross. The trendline drawn down from the 2016 high is sitting right at $16. If that trendline is breached with conviction, the next Fibonacci level at $16.65 is the first near-term target. Friday's $0.46 rally kept the DMI-ADX in the positive momentum zone and spiked the StochRSI out of an oversold condition into a positive trend. The volumes were falling along with the price since Jan. 4, and Friday's rally did not have an impressive reverse in volume to the upside. The volume must rise along with the price for a rally to be sustainable. I am optimistic about silver but not thrilled to see its price action so reliant upon gold's whims. If $16 is taken out decisively on volume, a sweet spot momo play is certain. It is a "wait and see" situation.

For a Few Dollars More - Pocket Watch Theme (1965)

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