Photo by Florian
THE NO-THOUGHT WAY TO PRINT MONEY
I wanted to revisit the silver and metals trade and check in on our latest call post QEIII that all metals would be awesome.....forever and beyond. Since Bernanke made his unlimited and unending threat just like Draghi to sterilize and monetize away every bond on the planets, we have suggested that it is quite a good strategy to simply buy metals, watch, and wait.
So far, that mindless and plodding strategy has paid off and we haven't even had to be patient since just one week ago QE has essentially blasted SLV into the stratosphere with an overhead test coming at $35.00
SLV CHARTING (Click on the Chart for a Better View)
http://scharts.co/QGaYV9 - WEEKLY CHART
Let's look at SLV's chart and I'll pull out some items that suggest we are going higher and I'll also highlight points that at least make me believe we'll slow a bit and digest these very short-term gains.
THE BULLISH CASE
First, we note that the QE announcement pushed SLV out of its declining channel which had been holding since the peak in silver of May 2011.
There was a crossover just yesterday on my charts of the 14 Week EMA and the 40 Week EMA AND it was upward sloping. This is a longer-term indicator of significance and has proven for me to be a powerful tool in making very profitable longer term swing trades.
The daily CCI chart I add to the bottom of my SLV has also shot into wildly bullish territory. The guy I picked up the use of this indicator from calls this the Crazy-Investor Indicator and it really measures the herd mentality of the market participants. In this case, when the CCI goes into the "Green" area this is a significant signal that there is real momentum. You would stay out and not purchase when in the red.
CCI - CHART FOR SLV
THE BEARISH CASE
I see a couple of things on the chart that might cause you to pare positions if you were a shorter term trader in hopes of loading up again in the future.
Overhead resistance at $35.00 There is no doubt that the $35.00 level for SLV has been rejected twice now and this will be the third attempt to thrust through that area.
The green Bollinger Bands I use are set at 2 standard deviations above and below. Notice how SLV nicely fits in that moving envelope and can only briefly ever plow through these levels. Obviously trading prices above or below the outer bands suggest you should quickly reduce position or buy and this is why I use them. In the most recent case, SLV has been hugging the upper Bollinger band and in fact has been outside them for several weeks. This does leave me wondering if we're a bit overdone in this most recent move.
FINAL SLV THOUGHTS
The $35 level will once again fall and SLV will move higher eventually, but not yet. In the short-run I do think that all the "good news" is out and we don't have much to look forward to except for the bad stuff (China and Europe slowing more than anticipated). Headline concerns like continuing short-falls in the periphery of Euroland, Greek elections in October, and the looming fiscal cliff and elections will serve to put a lid on SLV's upward trajectory until we see more inflation information in the coming month.
CHART OF GOLD
I was looking at a few other charts and so wanted to post this one of gold as well. Clearly $1800 is strong overhead resistance.