|
TRADING COMMODITY FUTURES AND OPTIONS INVOLVES SUBSTANTIAL RISK OF LOSS AND IS NOT SUITABLE FOR ALL INVESTORS.
On the heels of the FOMC announcement (1/25/12, 11:30 a.m. ctrl),COMEX SILVER FUTURES spiked once again.
MY ANALYSIS
Fundamentally, as the Federal reserve announced on Wednesday that it will keep interest rates low for an extended period of time, perhaps through 2014, the Comex Silver Futures market rallied almost immediately. In fact, the market had a trading range of $1.88/ounce on the day with a low of $31.52/ounce and a high of $33.40/ounce. That vast majority of the move came right after the announcement at 11:30 a.m., when over the next 30 minutes Silver rallied exactly $1/ounce from a low of 32.03/ounce to a high of $33.03/ounce (see chart # 2, below). Wednesday Silver settled at $33.12/ounce, the highest price since December 8, 2011. This, in my opinion, makes for a very exciting day in the market. Especially when you take into consideration the leverage that comes with trading futures. With the contract size of one Silver Futures contract being 5,000 ounces, a $1 move in the futures price is equivalent to a $5,000 dollar change in contract value. That means from the low to the high of the day on Tuesday the actual cash amount was $9400 dollars. Remember that leverage can work for you and against you AND options and futures do not necessarily move in tandem. (NOTE: The CFTC defines Leverage as the ability to control large dollar amounts of a commodity or security with a comparatively small amount of capital.)
The outside market influences of this Silver rally are three-fold, with the U.S. Dollar Index, the Euro Currency, and the S&P all playing a potential role on Silver's movement. Typically and historically Silver and the U.S. Dollar Index have an inverse relationship. As the U.S.Dollar Index moves higher or lower the Silver market tends to move in the opposite direction. So the USDX should be watched. Recently I am of the opinion that the Euro Zone and the Euro Currency futures have been the driving force for the Dollar Index. On the move higher of the USDX Index over the last several days, it's been the fall of the Euro that's pushed the USDX Index up due to the Sovereign debt issues in my view. So the Euro Currency should be watched. Finally, Silver Futures trade as both a precious metal and an industrial metal, hence the relationship with the S&P. The industrial aspect of the metal can cause the Silver market to move in the same direction as the S&P because if the market is doing well there can be the idea that manufacturing is up and Silver can be used in manufacturing. So the S&P should be watched. All three of these outside markets can have an impact on my bullish view of Silver. It's my belief that this is just the start of a upward trend in the Silver market and it's nice when the fundamentals match up with my technicals, but it's the ladder that I use to present recommendations and option trade strategies to my clients.
Technically, I see the Comex Silver Futuresmarket still in a SUPER-TREND higher as the market trades above both the 9 day SIMPLE MOVING AVERAGE and the 20 day SIMPLE MOVING AVERAGE as the indicators both point higher on sharp angles. Another important technical in my opinion would be the new high for the move that Silver made here on the last day of the chart. This particular move started back on December 29th when the market bottomed at $26.14/ounce. Notice on a daily chart that each bar represents a day. Finally this is also the highest price for Silver since back on December 8th. See daily chart below.
Chart source: www.Markethead.com/2.0 Quote data provided by Barchart.com
Viewing the market over the past 24 hours via a 15-minute candlestick chart (Wednesday, Jan 25, 2012 morning through 8:30 am Central, Jan 26, 2012) offers a short-term view of the market’s new uptrend.
Chart source: www.Markethead.com/2.0 Quote data provided by Barchart.com
TRADING COMMODITY FUTURES AND OPTIONS INVOLVES SUBSTANTIAL RISK OF LOSS AND IS NOT SUITABLE FOR ALL INVESTORS. YOU SHOULD CAREFULLY CONSIDER WHETHER TRADING IS SUITABLE FOR YOU IN LIGHT OF YOUR CIRCUMSTANCES, KNOWLEDGE AND FINANCIAL RESOURCES.
Learn more about the Long Term Super Trend by downloading my free report HERE (http://www.zaner.com/3.0/mmckSuperTrend.asp?rID=Kitco)
Additional charts, studies, and commentary can be found at: http://markethead.coM/2.0/free_trial.asp?rid=McKinneyKitco
For 25 OPTION STRATEGIES Click Here: http://www.zaner.com/3.0/mmck.asp
Matthew McKinney
****
Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.
|
