Although looking a bit "punch drunk" after its recent hammering, the downside for silver is now looking more limited. Price action last week reflected the moves in the dollar, which reacted back from an extremely overbought condition early in the week, only to stabilize and rally again towards the end of the week. Technically, silver is the antithesis of crude oil - the latter is a huge, liquid market which generally behaves itself well, whereas silver is a thin, speculative market, subject to the predations of manipulators, to a degree that is impossible to determine. The practical consequence of this is that it is important not to always take breaks of support and trendline breaks at face value, as such a market is vulnerable to false moves. This is discussed in more detail in the article A Fresh Look at Silver
that went up on 10th January.
With the dollar expected to push ahead to the 85 area on the index short-term, gold is expected to test its support between $410 and $420, form an intermediate base and turn up again, and at this time silver is likely to retreat back towards strong support in the $6.10 area, and should not drop below this level unless the dollar pushes on beyond 87, which is viewed as possible, but unlikely. We will therefore be watching for signs of an intermediate base developing in coming weeks, which will obviously be of key importance to silver stocks which are now approaching key support levels.