Based on the reported open interest and volume numbers by the exchange, silver’s rally yesterday was sparked by fresh shorts who sold the bottom last Thursday and Friday and are now having those sky high margins hit them for a change. Perhaps they have now learned that what is good for the goose is also good for the gander.
The market has had a nice pop off the low down near $33 but has yet to regain its footing above the 40 and 50 day moving averages. Until it does, its technical posture, while greatly improved, still remains bearish on the daily chart. You will note on the chart that unlike gold, which has retraced half of its recent losses, silver has not yet been able to recapture the 38.2% retracement level of its recent leg lower.
These steep sell offs followed by steep recoveries are always unsettling. What silver needs is a period of consolidation which will allow this excess volatility to get wrung out and let things calm down a bit. There has been way too much emotion in this market and that is being reflected by these wide price swings.
I like the fact that it continues to move away from the $33 level but I would feel a bit more comfortable from a bullish standpoint if it could at the very least clear last Thursday’s high which is near $39.40. That would also put it above that 38.2% retracement level referenced above.
We will have to watch and see what level the stronger-handed shorts begin to dig in. There does look to be some resistance entering in here above $38 as I write this.
Once again, as usual, the shares continue to weigh on the entire sector.