Silver Outlook For 1.10.11

After a week of five consecutive down days, (something that hasn’t happened in well over a year) silver recovered today for a gain of $.34. Spot price tested support and tomorrow I believe it will test the 50 Day MA.

Here’s a list of reasons why the correction may be over already:

We’re oversold on the full stochastics for the first time in over 4 months, we’re below the 50 line on the RSI for the first time in 4 months, and the MACD is a .375, a 4 month low. Price activity tested support again today and rejected the lows to finish impressively higher on the day. As the 50 Day MA approaches, the top of wedge gets even closer to support, meaning that the price must go one way or the other starting tomorrow. Given the fact that we are in a long term bull market, it’s clear to me that the direction will be up. I expect a “silver tuesday” tomorrow, a test of support in the morning, followed by a reversal and a close at or around $29.50, marking the end of a somewhat brief correction.

In addition to the technical indicators, the COT reports showed that commercial shorts were again reduced despite the price consolidation, and the big options expiration that me as well as others have been talking about for months – that’s right Jan 11 options ex is next friday and the strikes are not quite in the money yet which means that there should be an institutional push from the long side to make those bets profitable.

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

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