Silver - False Flag or Real Breakout?

It’s almost like Silver knew tax-payment related selling was coming to an end. But, after months of being about as exciting as watching grass grow Silver finally perked up like it knew Spring was finally here earlier in the week.

With everything happening geopolitically it’s easy to take your eyes off the market. Moreover, with the, frankly, absurd number of false breakouts put in by both gold and silver over the past eighteen months or so, it’s easy to also dismiss any move as being more of the same.

But, that’s the thing about bear markets. They beat you down to the point where you lose interest. They make you think this stock (or commodity) will never get off the mat. Bear markets want not just your money but a piece of your soul as well. So, you’ll swear to yourself never trade that thing ever again just as the bull market begins.

So, we had a nice push upwards on silver this week. Where are we?

Weekly Impulse

This breakout actually began last Friday with the close above the previous week’s high, $16.66 close vs. $16.615 previous week high. We got follow-through action this week which is very strong, pushing through weak resistance at $16.80.

And silver immediately ran up towards stronger resistance near $17.70. The move this week which reached a high of $17.355 is already an abnormal weekly move for silver. So, I’m not surprised to see it back off a bit coming into the end of the week, as profit-taking comes in.

The bigger question is the close. At a minimum this week needs to close above both the mid-point of this week’s range ($17.00) and the previous resistance level $16.80 to have legs and not be yet another short-lived flash in the pan.

Let’s look at the bigger picture.

Monthly Blues

From a monthly perspective silver has been uniquely miserable to watch. It’s obvious that there is a lot of support below $16 (shaded area on chart) but that’s about it. The only bright spot is the recent December low did not approach or break the previous major low in July ($15.15). Note the black arrows on the chart below.

This helps shore up $13.834 as the low for the entire seven year bear market. Because we now have a series of ascending major lows which state the bulls are happy coming in at successively higher levels to support the price, even if they aren’t ready to let it run.

And it helps make the argument that silver is gaining strength for a new bull market sometime this year.

The monthly chart also confirms that $17.70 is the first major hurdle silver needs to best to begin a stronger, more interesting rally, with the initial target being the post-Brexit vote high of $21.25.

This is clearly seen on the quarterly chart.

Draw n’ Quarter

What the quarterly chart is clearly telling us, however, is that all that really matters at this point to believe in a new bull market in silver is a close in June above $17.70 per ounce.

So far Q2, predictably, is still tracing an inside bar, where the price range is still within the range of the previous bar. Once we get a break either up or down, then we’ll have a stronger picture of what happens next.

So, for April, a close above $17.70 would set silver up quite nicely.

Headwinds

The problem is the US dollar is firming up. Oil prices are over-extended to the upside and gold refused to confirm an upside breakout above the post-Brexit high of $1375 to warn of a fundamental shift in sentiment.

If the dollar finally begins to move higher then we could see precious metals selling on liquidity concerns, as I’ve been warning about for months. This is the main reason why these markets haven’t had the courage of their convictions. Sure, the money center and central banks hate gold and silver and work to suppress them at the margin.

But, they cannot set the trend. The market sets the trend. Always. And the next bull market in the precious metals will be the one where confidence in central banking as the principle means of governing financial markets will be questioned sincerely.

This is part of what is fueling the cryptocurrency markets. And now that tax season is over it looks like those markets are waking up as well.

For silver the $17.70 level is crucial first as an intraday level to violate then as a price to close above in successive time periods — first daily, then weekly and monthly. I advocated converting cryptocurrency profits into physical gold and silver to my subscribers at Gold Goats ‘n Guns last year. These are the kinds of major rotations that an make investors solid, if not spectacular returns as these events play out.

Good Luck.

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