UPDATE ON PRECIOUS METALS, BROAD STOCK MARKET and (POTENTIAL) SHORT-TERM SILVER TRADE ALERT (5:15 pm EDT)
There are several technical and timing indicators right now that are suggesting a strong upward move in silver is imminent. This may be a short-term rally, but the move could be significant (possibly up to $17.25) and therefore worth trading. It is very possible this move could be triggered by the Fed's policy statement tomorrow and/or news concerning the Greek debt negotiations. As I mentioned in my last blog, gold and silver have been giving mixed signals recently and have been indecisive in their directional trend. Tomorrow's Fed policy statement could change that. If the Fed and Janet Yellen's statements are dovish (i.e. not in a hurry to raise interest rates), this could weaken the dollar and kick gold and silver prices up. (A resolution of the Greek debt crisis could have the same effect.) On the other hand, if Ms. Yellen and the Fed turn hawkish (i.e. get very decisive and specific about hiking rates, probably sooner than later), then the dollar could turn up and send precious metal prices down. (A breakdown in Greek debt talks would also more than likely strengthen the dollar and weaken gold and silver.)
So which will it be? Of course, we won't know until the Fed's statement is released tomorrow, but silver prices are currently sitting close to a strong support level at $15.60 - $15.80 and, as I stated above, there are several short-term technical signals strongly suggesting a rally in this metal now. Especially significant is the fact that a strong bearish signal appeared in the chart of the U.S. Dollar Index today which makes directional momentum in the dollar now 100% bearish. A bearish dollar is bullish for the precious metals. If we set a tight stop loss on a break and close below the $15.60 support, we will have a good risk/reward ratio for a trade on the long side. The reason I'm not considering a gold trade here is because we are most likely looking at a short-term trade with a percentage gain in silver of possibly 6-7%. The percentage gain in gold would be smaller and perhaps not worth trading considering the risk of a reversal instead of a rally. I am going to wait until early in tomorrow's trading to open a long position in silver as the price could drop further before the Fed statement is released in the afternoon. Longer-term investors may wish to stand aside this trade as the rally may be brief and could be followed by another reversal and correction down. Traders should also keep in mind that silver is more volatile than gold. Price movements can be rapid so stop loss points should be tight and carefully monitored. On the sidelines of gold and silver today but anticipating going long in silver sometime tomorrow morning if technical signals look appropriate.
Greek Prime Minister Alexis Tsipras addressed the Greek Parliment earlier today with a fiery speech in which he accused Greece's creditors of trying to "humiliate" the Greek people and even suggested that the International Monetary Fund had "criminal responsibility" for the current debt crisis. Despite these inflammatory remarks and Tsipras' seemingly uncompromising attitude during the debt negotiations, many analysts still feel a resolution to this financial crisis is just around the corner as none of the players involved wish to see Greece withdraw from the single currency eurozone. This idea seemed to be supported by today's equity markets which rebounded strongly from yesterday's losses. The DOW gained 113 points. We may still be on track for a new high into next week so I am holding on to my long position in the broad stock market with a stop loss on a break and close below 17,700.
There are several technical and timing indicators right now that are suggesting a strong upward move in silver is imminent. This may be a short-term rally, but the move could be significant (possibly up to $17.25) and therefore worth trading. It is very possible this move could be triggered by the Fed's policy statement tomorrow and/or news concerning the Greek debt negotiations. As I mentioned in my last blog, gold and silver have been giving mixed signals recently and have been indecisive in their directional trend. Tomorrow's Fed policy statement could change that. If the Fed and Janet Yellen's statements are dovish (i.e. not in a hurry to raise interest rates), this could weaken the dollar and kick gold and silver prices up. (A resolution of the Greek debt crisis could have the same effect.) On the other hand, if Ms. Yellen and the Fed turn hawkish (i.e. get very decisive and specific about hiking rates, probably sooner than later), then the dollar could turn up and send precious metal prices down. (A breakdown in Greek debt talks would also more than likely strengthen the dollar and weaken gold and silver.)
So which will it be? Of course, we won't know until the Fed's statement is released tomorrow, but silver prices are currently sitting close to a strong support level at $15.60 - $15.80 and, as I stated above, there are several short-term technical signals strongly suggesting a rally in this metal now. Especially significant is the fact that a strong bearish signal appeared in the chart of the U.S. Dollar Index today which makes directional momentum in the dollar now 100% bearish. A bearish dollar is bullish for the precious metals. If we set a tight stop loss on a break and close below the $15.60 support, we will have a good risk/reward ratio for a trade on the long side. The reason I'm not considering a gold trade here is because we are most likely looking at a short-term trade with a percentage gain in silver of possibly 6-7%. The percentage gain in gold would be smaller and perhaps not worth trading considering the risk of a reversal instead of a rally. I am going to wait until early in tomorrow's trading to open a long position in silver as the price could drop further before the Fed statement is released in the afternoon. Longer-term investors may wish to stand aside this trade as the rally may be brief and could be followed by another reversal and correction down. Traders should also keep in mind that silver is more volatile than gold. Price movements can be rapid so stop loss points should be tight and carefully monitored. On the sidelines of gold and silver today but anticipating going long in silver sometime tomorrow morning if technical signals look appropriate.
Greek Prime Minister Alexis Tsipras addressed the Greek Parliment earlier today with a fiery speech in which he accused Greece's creditors of trying to "humiliate" the Greek people and even suggested that the International Monetary Fund had "criminal responsibility" for the current debt crisis. Despite these inflammatory remarks and Tsipras' seemingly uncompromising attitude during the debt negotiations, many analysts still feel a resolution to this financial crisis is just around the corner as none of the players involved wish to see Greece withdraw from the single currency eurozone. This idea seemed to be supported by today's equity markets which rebounded strongly from yesterday's losses. The DOW gained 113 points. We may still be on track for a new high into next week so I am holding on to my long position in the broad stock market with a stop loss on a break and close below 17,700.
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