Silver Signal: Fights the US Dollar

 I think silver is probably going to find its way down to the $20 level over the next several weeks.

• Silver initially shot higher during the trading session on Friday but has since been crushed as it looks like the US dollar is going to kill everything. Silver is very sensitive to the US dollar, and of course interest rates.
• By shooting straight up in the air and then falling the way it has, this is a market that looks like it’s ready to completely collapse.
• If we break down below the $22 level, I fully anticipate that silver will drop all the way down to the $20 level. The action on Friday certainly suggests we are going to continue to see a lot of trouble.

We’re getting close to having a “death cross” form, with a 50-Day EMA crossing below the 200-Day EMA. The size of the candlestick is rather impressive, and quite frankly this chart looks like death. I have no interest in buying anytime soon, and therefore I think that we’ve got a situation that continues a “fade the rally” type of situation, as the market is likely to continue to be very noisy, and with the action that we have seen on Friday, I think something has just broken. Interest rates are certainly going to be the biggest driver of where we go, and it’s clear that there is no bullish momentum anymore.

With this, I will be a seller of silver going forward, and I think it is probably only a matter of time before we see any rally get crushed. In fact, I am looking at this chart at the very end of the day, traditionally a very quiet time of the day for silver, and it does not seem like we are willing to stop. If that’s going to be the case, there’s almost no way that this market will take off to the upside. I think silver is probably going to find its way down to the $20 level over the next several weeks.

Potential signal: silver is dead money now. While we may get the occasional rally, I’m looking at that as an opportunity to start shorting again, and quite frankly I’m willing to sell here. That being said, you also have to keep in mind that after a massive selloff like we have seen, we could get the occasional vicious rally. Because of this, you need to keep your position size reasonable and understand that we will certainly see volatility coming back in. I stop loss would be at the $23 level, and my target is now the $20 level.

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