First Day of 2011 Equities Trading, Silver Intraday Reversal

The volume that had waned last week came back today across the board as the US equity markets were all up substantially to kick off the new year. Bullish sentiment is over 38% and it appears that the longs are in control of this market for the time being. Fundamentals and technicals still are at a disconnect with price activity in the overall market and I am extremely suspicious of the rally we’ve had since September. I am bearish on the economy and do not see that translating into the equity markets. QE is the supposed reason as to why we are rallying, however QE has not boosted housing sales, CPI, or GDP. This leads me to believe that equities are in a bubble and are likely to crash from these inflated levels. The timing however is not so easy and I am not attempting to play it short until there is confirmation that the pin has punctured the balloon.

The silver market reversed intraday today after opening higher in the morning. The candle avoided a bearish engulfing pattern by closing higher than the previous close but the reversal may be a sign of a temporary slowdown. It will be interesting to see how price activity responds tomorrow.

The price may consolidate to the 29.50 but assuming it doesn’t get much lower I expect it to recover fairly soon and test $32 in similar fashion as it tested $31. Momentum appears to be slowing down as the price is no longer continuing to gap higher off of consolidations. Previously, there were times where the price gapped up on the open and closed higher 3-6 days in a row. That hasn’t been the case this time and though silver will likely be the talk of the commodities sector this year, it is still overdue for an actual correction. In any event, I could be wrong and it may continue on past $32, but I believe that $32 may become a resistance point in the near future.

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About Aaron Basile
Market Technician, Equity/Commodity Trader, Austrian Economist, Contrarian Investor

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