Silver – 4 hour chart

Silver fell through critical chart support at the $33 level early in the session but instead of generating further selling, it rebounded sharply bouncing up and away from that level on very good volume. It certainly appears from the price action that buyers of silver see value near $33. As of right now silver has established a trading range with $33 or so on the bottom and $39 on the top. We’ll have to see how this shapes up in the days ahead. One thing is now absolutely certain – as long as silver holds today’s low and keeps above $33, it will be okay. That level has now taken on significant weight on the technical price charts. Failure for any reason to hold will send it down very quickly to $30.

I noticed that once crude oil began to move off its worst levels, and the S&P began moving higher, both of the metals, gold and silver, moved up strongly off their worst levels as well. It is evident that there was widespread commodity buying occuring at the lows this morning. That needs to continue to push the CCI, Continuous Commodity Index, back above the 640 level, which it will need to do in order to avoid confirming the double top on the daily price chart.

Accompanying this move higher in the stocks and commodities was a downdraft in the long bond which moved higher on yesterday’s widespread hedge fund selling in the broader markets. Same goes for the Dollar which has not been able to clear the 50 day moving average and stay above that important level as of yet.

It seems as if traders on both sides of the markets, longs and shorts, are extremely jumpy and are rapidly rushing in and out on a moment’s notice. The exceptions to this right now are cotton and unleaded gasoline, both of which are trading sharply lower, cotton locked limit offer on demand fears.

I should also note here that the XAU has rebounded exactly when it has needed to in order to avoid a crushing wave of further technical related selling. It pushed through the low for this year down near 195 but ricochetted back higher and is now trading up for the session. It is a bit too early but if it can maintain this type of price action heading into the closing bell, it might very well have hammered out a spike bottom. It is currently pivoting around the 50 day moving average which is brining in buying from longer term oriented traders.

As mentioned in yesterday’s post, it is trading at levels commensurate with $1300 gold, not $1500, so something had to give.


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