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Dollar Flat, Silver Whacked!

|Includes: AGQ, HLLF, iShares Silver Trust ETF (SLV), SLW, UUP, ZSL

 Tonight in the futures market, the Dollar Index (/DX) is relatively flat. Silver Futures on the other hand, are getting pummelled. Has the lackluster performance of the miners (SLW, AG, HL, EXK) as of late been telling us a story? Many believe the current trade to be long the PMs, short the miners as a hedge. We should be playing close attention to see how the miners react. As miners are a more leveraged way of getting silver exposure, it's safe to assume they will follow the expected correction in silver, until they don't.

Who knows how far silver can correct before resuming its run. I'll be sure to have dry powder to scale into new positions. The first stop in silver appears to be around 44.30ish on /SI which is the 10-SMA (pink line). This area has been formidable support since January. Next stop is the 20-SMA, which is much lower, currently at 41.713. This is truly a worrisome area for silver bulls. These types of corrections can be violent, but very profitable if played correctly. At current levels, silver has already corrected 10% from its highs.

First the Dollar Chart, then Silver. On the Silver chart, notice the high volume pattern and the price exhaustion on the last push-up. Also, the highlighted ovals show past occasions in which the prices pinned above the bollinger bands, each time the price has pulled back by approximately 10%.

This correction should be viewed as, healthy.

Exercise extreme caution when trading leveraged vehicles such as futures and leveraged ETFs (ie: AGQ)




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Disclosure: I am long SLW.

Additional disclosure: calls