Silver Market Update - 3 Main Developments Turn Silver Bullish

Clive Maund | April 7, 2019 - 3:42pm

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There were several developments last week that taken together suggest that the short-term bearish scenario set out in the Gold and Silver Interim update about a week ago is not going to materialize and instead that the original grander scenario described in the last full Silver Market update is going to prevail. This is a relief because any further downside would have ruined the giant positive pattern completing on the long-term charts, especially that completing in gold.

What are these developments? There were 3 main ones. The first is that last week a run of bullish long-tailed candlesticks appeared on silver’s chart, which we can see to advantage on its 1-month chart below. They are bullish because they indicate that the market is rejecting lower prices and show that buyers were snapping at silver whenever it dipped. This past week was also characterized by a run of Doji’s (open and close almost at the same price), which is a sign of indecision and is bullish if they occur after a significant drop, which they did. In addition, there were two distinctly bullish candlesticks last week, a bull hammer on Tuesday and a dragonfly on Thursday.

The second important development last week is that there was a big improvement in silver’s COT structure, with the Commercials scaling back their short positions substantially and the Large Specs their long positions. While positions are not at levels that can be described as all-out bullish, they have certainly moderated sufficiently to permit a significant rally at any time.

Click on chart to popup a larger, clearer version.

The third significant development is that Trump declared after Friday’s close that the Fed should revert to QE again, meaning QE4. If they take him at his word the dollar is going to suffer terribly this time round which will ramp up inflation – good news for gold and silver.

Now let’s swiftly review the other charts, the most important of which as we will see is the 15-month silver chart.

Starting with the 8-month chart you can see the potential Head-and-Shoulders top which got us worried. Although it looks too steep to be valid, there is a parallel flat-bottomed one in gold, which lent this one validity, especially as the volume pattern up to a week ago had been negative. On the plus side the appearance of a string of long-tailed candlesticks at important support last week certainly looks positive, and the flip side of the recently weak momentum (MACD) is that silver is now somewhat oversold with plenty of upside potential.