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Silver is back under pressure after recovering towards the $25.00 level recently, as a big price slump in gold, and a drop in October futures prices for the shiny metals starts to worry metals traders.
The stronger-than-expected Empire State manufacturing survey and retail sales data this week pleased U.S. monetary policy hawks, furthering pressuring the gold and silver markets, and pushing the greenback higher.
Global stock markets are also appearing somewhat calmer. Less risk aversion in the marketplace usually hurts certain safe haven asset classes like gold and yen, hence this a negative silver price.
Traders are now looking to next week’s FOMC meeting of the Federal Reserve for more clarity on the timing of any future policy moves from the Fed that are likely to be a tapering of its monthly bond-buying program. This will be a huge event for silver and gold prices, and indeed the U.S. dollar index.
A bearish flag pattern breakout is warning of more heavy losses for silver, in fact a bearish breakout from the flag pattern patter is already underway. Furthermore, positive sentiment towards silver is rapidly rising, providing yet another sentiment red flag as silver cracks $23.00.
The ActivTrades market sentiment tool shows that some 93 percent of traders are bullish towards silver right now. With so many retail traders expecting higher prices it could be a big down move is coming.
Retail traders are often on the wrong side of the trade or have poor market timing. This has been an issue for me this year, with so many calling for higher silver price. Ideally, we need to see the retail crowd actually turning bearish towards the metal in order for it to rally I believe.
Silver short-term Technical Analysis
The short-term technicals for silver shows that a break under a large flag pattern is happening. These patterns often signify large price ranges before an eventual and powerful breakout.
According to the size of the pattern we should expect a price move of some $2.00 over the short-term as an explosive downside breakout from the flag finally starts to take hold.
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Silver Medium-term Technical Analysis
The daily time frame still shows a positive picture for silver, however, we do need to be very careful as the metal could fall much lower to attract silver bulls from bargain levels if price fail to crack $25.00.
For me, a final move under $20.00 makes sense, however, bears need to break the $22.20 level to really get the bear party started. Until happens we should expect a range of between $23.00 and $25.00.
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