Silver Market Update

May 18, 2006

Timothy Silvers

            Gold and silver began correcting last week from their recent highs. Right now I’m watching their moving averages (MA) and relative strength indicators (RSI) for clues to find the next buying opportunity for my trading position. If you don’t have a core physical silver position I still recommend dollar cost averaging your purchases over the next few months until we get a clear direction from the market. The rest of this commentary is focused more on technical indicators and signals that may be useful for trading. I have not included any charts as I have been pressed for time this week.

            As I mentioned on May 9, I was looking for silver to close above $14.50 for three days in a row to confirm an increasing price trend. That did not happen. Silver closed at $14.94 on Thursday and then began declining. Silver appears to have formed a double top and today it closed at $12.55 with a relative strength of 45. We need to see if it finds support around the 50 day MA of $12.30. If that support fails, then the next level of support is the $11.70 to $11.80 level that silver hit on April 24. If the support holds, and the RSI increases back above 50, then I’ll probably begin going long with some of my trading position. However, in the absence of good indicators from the COMEX Commitment of Traders report, I am watching gold carefully to validate a decision to go back long in silver.

            Gold has not corrected back as sharply as I had hoped and it is oscillating about $10 below its 10 day MA (currently $694). In February and March, gold found support around its 50 day MA (currently $615) and the 10 and 50 day MA’s were much closer together. The bull market in gold would be much healthier if it would first consolidate around the 50 day MA again and then resume its upward trend. Gold is still overbought and I am cautious that further declines here could pull down silver more. Also, the US dollar has rebounded this week from its very oversold position, and if that trend continues, gold should be pulled back down. Gold and silver mining shares have been nose-diving this week and they do not appear to have bottomed out yet.

            I’m watching gold, the US dollar and silver closely for trading signals and I’ll be posting updates as I make trading decisions. If I’m wrong, at least you can be sure that I’m putting my money where my mouth is. One of the reasons I write these articles is that it helps me solidify the logic I use to make trading decisions. I welcome comments and feedback from readers. Best wishes on your investing.

 

God Bless,

Timothy Silvers

 

Disclaimer: This article represents the opinions and personal views of Timothy Silvers and is not intended to be investment advice. If you choose to use this analysis for your personal trading, Timothy Silvers assumes no liability for the direct or indirect losses you may incur due to using this article to make your investment decisions. You are totally and completely responsible for your own investments. At any given time, Timothy Silvers or his friends and relatives may have positions in silver related investments that may or may not follow the recommendations contained in this article. The information in this article may not be completely correct and accurate. Even though Timothy Silvers has done his best to review the content and accuracy of this article, he is in no way liable or responsible for any mistakes or omissions.