Silver Signal: Continues to See Noise

Regardless of the direction the market takes, one can expect high volatility.

• Silver displayed a minor rally during Wednesday’s trading session, hinting at renewed vigor as it continues to hover around the 50-Day Exponential Moving Average.
• With the pending Federal Reserve announcement later in the day, the market is likely to experience heightened volatility. Recently, silver has been used as a hedge for wealth preservation. The question now is whether the apparent “bottoming pattern” will continue to develop.
• So far, it looks likely that there are plenty buyers will to put money to work in order to get that to be the case.

Beneath the current levels, the 200-Day EMA provides support near the $23 mark. Should the market surrender this EMA, it would signal a bearish turn of events. This could potentially open up the possibility of a test of the $22 level, and possibly even the $20 level underneath—a region from which we have previously seen a strong rebound. Should the market drop below both the 200-Day EMA and the 61.8% Fibonacci level, the $20 level is likely to emerge as the target. These areas would be significantly important going lower, but also would show that more likely than not we would see a lot of US dollar strength, as the two markets are quite heavily negatively correlated most of the time.

Conversely, if the market breaks above last week’s highs, we could see a rally toward the $25 mark. This level holds psychological significance due to its round figure and history as a strong support zone, thus it may present some resistance due to “market memory.” However, if the market manages to breach this level, it could pave the way for a move towards the $26 level, and potentially even the $26.40 level where the market previously peaked. Anything above there would be massive in its implications, as it could show this market going much, much higher than even the most bullish think at this point.

Regardless of the direction the market takes, one can expect high volatility. Therefore, traders must exercise caution with their position sizing and consider carefully whether to get aggressive in terms of adding to their positions. At this juncture, the market seems to hold a bullish bias, but all eyes will be on the Federal Reserve’s statement and the subsequent press conference following the interest rate announcement. These events could provide some early indicators of how the market might behave in the aftermath.

Potential Signal: I am still bullish on silver. On short-term dips, it is a buy, and on a break above the $24.50 level, I am a buyer as well. Stop would be slightly below the $24 level, at $23.88, and the target is the $25.20 level.

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