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Silver Snaps January Trendline, Tests 50 MA, MCP Reverses

May 04, 2011 1:15 PM ETGLD, SLV, SPY, UUP3 Comments
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Seeking Alpha Analyst Since 2010

Contrarian Investor, Commodities Speculator, Technical Trader.

As we move later into the afternoon session, SLV is currently trading around the $38.40 mark and has found support a few hours ago at the 50 Day MA though it has broken the trendline going back to January. Yesterday, I said it wasn’t officially a “correction” until this happened so as of now I am a believer that the trend is no longer intact, as opposed to my stance regarding the past three days of selling which despite the volatility, only represented a pullback. Due to the nature of the hyperbolic run silver has had, you can see why I would be skeptical of any losing days as silver had previously shrugged off big days to the downside with high volume. After tapping the 50 MA, expect silver to bounce tomorrow and possibly trade flat to positive on friday, but don’t count on a real rally until there is confirmation of a reversal.

Volume on SLV today is likely to once again match or eclipse yesterday’s record volume.

Notice how gold has not confirmed silver’s move… that is because silver is decoupled from the market.

The dollar has had a lift but there is resistance on UUP at $20.96, right in the area of this morning’s gap. The dollar has been flat to positive this week as I suggested it may be, in addition the S&P has been negative and has followed the suggested path I pointed out on Monday. Expect the S&P to find support at $1340 – right where the 20 MA is currently resting. A bounce off of that level would set up the rising wedge for an intermediate top of $1400.

Yesterday looked like a possible breakout for MCP (would have fooled me) but today we have what looks like a bearish engulfing reversal on volume that will likely match yesterday’s by the ending of the trading session today. If MCP closes below the 20 MA by the end of the week, the downside could be $55-$65 in which I would most definitely label it as a strong buy once again. As of right now, I’d hold common shares but stay away from options and wait for confirmation of its next move before trading this.

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