Precious Metals Watch: Silver Technicals

Wednesday March 14, 2012 08:54

This article will focus on the technicals of the COMEX SILVER FUTURES market on three different time frames.


FUNDAMENTALLY, as Federal Chairman Ben Bernake announced back on February 29th that there were no plans for  quantitative easing (QE3) or "printing money" to add liquidity to the U.S. Economy , the Comex Silver market collapsed as much as $3 per ounce in a matter of minutes after being in a SUPER-TREND higher for a few days prior. I, as a series 3 commodities and futures broker for the last 14 years, was totally baffled by the fact that this news would move Silver at all. With the Dow Jones pushing 13,000 and unemployment getting better, the economy is recovering, all be it at a slow pace, I saw no logic in another round of QE3 personally. But I have recommended Silver to my clients for the last several weeks and never once did I say to buy Silver Bull Calls Spreads because there would another round of QE3. Today we have an FOMC meeting (at 1 p.m. Chicago time) here in the U.S. and according to many analysts the Federal Chairman is expected to keep rates at very low levels. Also Greece is expected to receive a second bailout. But the important factor is according to Bloomberg News today (3-13-12), "Euro-area finance ministers signed off on a second Greek bailout and will give formal approval tomorrow, a day before the International Monetary Fund board votes on it's contribution". So, in my opinion there is some work left here.

So the outside market influences for COMEX SILVER FUTURES in my opinion are typically the USD INDEX FUTURES, the Equity Index Futures, like the E-MINI S&P, and of course, the COMEX GOLD FUTURES market. This morning with retail sales fairly good according to CBS's Marketwatch, " Retail sales climbed the fastest in five months in February, as rising gasoline prices weren't enough to choke off U.S. consumers' demand for cars, clothing and other goods, government data showed Tuesday. The Commerce Department said sales rose a seasonally adjusted 1.1%...". This report retail sales report, in my opinion, was bullish for the USD INDEX FUTURES and for the E-MINI S&P INDEX FUTURES. We Shall see later this afternoon how the COMEX SILVER FUTURES market reacts to the FOMC.

TECHNICALLY, this daily chart according to my technical indicators is starting to look quite bearish. The reason for this is that the 9 day SIMPLE MOVING AVERAGE (RED LINE) has crossed under the 20 day SIMPLE MOVING AVERAGE (GREEN LINE) and the market is holding and trading below both of these indicators. The only reason that I would not call this a SUPER-TREND down is because the 20 day SIMPLE MOVING AVERAGE is pointing sideways and not down. So the next area of support in my opinion, is the bottom BOLLINGER BAND (the bottom line orf the light blue shaded area). On the other hand, resistance, in my view, is first the red line which is the 9 day SIMPLE MOVING AVERAGE and then the green line which is the 20 day SIMPLE MOVING AVERAGE. This particular chart with my indicators could present a potentially good set-up with my 3 to 1 option strategies, obviously not without commensurate risk. See Daily Chart Below.

 TECHNICALLY, the weekly chart on Comex Silver tells quite a different story in that the market is not in a SUPER-TREND up, but according to my technicals and in my opinion the trend is still up and holding support even after the fall-out. The 9 period SIMPLE MOVING AVERAGE crossed up and over the 20 period SIMPLE MOVING AVERAGE in the week of February 27th. Now the 9 period SMA is pointing up on a nice upward angle and the 20 is not as strong although is pushing from sideways to upward and one good up day in Comex Silver will curl that 20 period SMA up sharper and push the Silver Market above both SMA's putting the market into a SUPER-TREND up. But also remember that the trend is still up in Silver on this weekly chart , it's just not a SUPER-TREND up. In order to see the SUPER-TREND up on this weekly chart we will have to have the 20 period SMA pointing up on a good angle like the 9 day SMA and the the Silver market trading above both. Remember when trading option positions that go out 45-60-90-120 days until expiry, weekly charts are very important in my opinion. Also notice Comex Silver is holding above the 9 period SIMPLE MOVING AVERAGE that is pointing upward and, in my opinion, that's why the trend is up. Holding here in my opinion is critical for Silver to move higher. See weekly chart below.


TECHNICALLY, on this monthly chart, in my opinion and according to my technical indicators I see the trend up on this weekly chart in Comex Silver. The reason for this is primarily because of the 20 period SIMPLE MOVING AVERAGE (green line) which is pointing up on a sharp angle and the Comex Silver market is trading at or above this indicator. Now the 9 period SMA is pointing down which is bearish so this monthly Silver chart is giving me some mixed signals, but the fact that the 20 period SMA is pointing up and the market is holding at or above that support area, I like it to hold and head higher and then the 9 period SMA could potentially come around. See monthly chart below.

Matthew McKinney
Tel.: 312-277-0115

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.

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