We are believed to be on the verge of a substantial advance in silver. This is because gold and gold stocks have broken higher, the dollar has broken down from its intermediate uptrend, and a bullish "hammer candlestick" appeared on the silver chart as it probed support on Tuesday.
It is no coincidence that both gold and silver staged marginal breakdowns from their long-term up trends, and both have held key underlying support, which in the case of silver is at about $6.80.
On the 2-year silver chart we can see the marginal breakdown from the very large symmetrical triangle pattern that developed following the April 04 peak at an overbought extreme. Following this break the price has drifted sideways in a narrow range above the important support.
Many silver investors are probably somewhat dismayed right now that while gold and gold stocks have broken higher, silver appears to be languishing, but as we will shortly see, it has already signalled that it is going higher very soon.
On the 6-month chart we can see that on Tuesday the price dropped quite steeply intraday to probe support towards $6.80, but then bounced strongly to close very near to the day’s high, forming a very bullish hammer candlestick. Even during ordinary times, this action would at the least signal an end to the downtrend immediately preceding it, but in the current situation with gold and gold stocks having broken strongly higher, and the dollar having broken down, this is believed to be the start of a very significant uptrend that is expected to break the price well clear of the large consolidation pattern of the past 16 months, and a substantial move is certainly due, as silver has been in a remarkably narrow range for months now.
An examination of the COT charts is now normally included in the Silver Market update, which is the reason it is normally prepared at the weekend. However, today’s important developments make an update desirable as soon as possible. The latest COT charts appear on Friday, and so a review of the COTs will be appended to the Silver Market update over the weekend.
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