Oil fell $6.40 of Friday, gold $13.40 and silver 50 cents. For the next week silver will probably bounce around the lower half of it’s current trading range of between $12.50 and $14.50, and will probably remain in this area for some weeks. A major amount of psychological damage has been done to the gold / silver investment camp and fear remains dominant, however current charting shows commodities at an oversold extreme and the counterbalance of the USD at an overbought extreme. In gold and silver, the shorts, while they currently remain in control of the market, are vulnerable.
The weeks COT (commitment of traders) reading show a covering of short positions and addition to long contracts of commercial traders which usually predates a significant rally in the metals by about a week or two. Another indication of upside movement potential is ‘timewise’, the passing of the middle of the month, the 15th. The middle of the month usually indicates an extreme, either up or down and a reversal time. The silver market has had 4 weeks of decline, a usual cycle, and now will most likely see four weeks of upside or at least sideways movement, with limited downside.
Volatility remains wild, with 50 cent moves either direction. Any sharp declines in silver will probably not last, as further upside to the dollar, the counterbalance of this market, appears limited, and Friday looked like a final washout of dollar shorts, although another day or two of upside in the USD might be expected. The oil price however showed substantial downside on Friday and suggests follow through in the early part of the week, which could drag down the metals in it’s wake. Barring any dramatic move in oil however, in gold / silver, monday will probably be a back and forth day, tuesday is often a turnaround day, and the following days of the week my guess will be more or less up – note the word ‘guess’. I am looking at small positions in long dated out of the money call options; and will bid conservatively, and keep the farm. Patience pays.
(My opinion only…)
