Silver Closes Below 50 MA On Chinese Reserve Ratio Hike

Silver closed below it’s 50 Day MA which means that in technical terms, the current trend is broken and weakness is to be expected in the market. I think that this is a case where the chart is broken, and those who are ignorant to the fundamentals of the commodities and equities markets chose to panic on news of a Chinese 50 bp hike. Today reminded me a lot of an article I wrote months ago called “Did The Gold Market Whiff On The Chinese Rate Hike?”. The article was written on October 19th 2010, when the Chinese raised rates by 25 bps. GLD was down 3.11% on the day, and I wrote – “I disagree with the notion that China is going to slow down the purchase of basic materials… on the basis that prices just got 2-3% cheaper.” GLD peaked 2 months later at $139.46, a whole 7% from the close on October 19th where the popular gold ETF was deemed worthy of only $130.11/share.

The fundamentals for commodities, like purposefully created inflation by the Fed and the ballooning silver deficit, by far trump the misguided fundamentals of common equities, which are based largely on the Fed’s ability to create demand. I will continue to drive the point that the Nasdaq is now just over 100 points away from its 2007 high when unemployment was 4.6%. Unemployment remains at 9.4% today. The Fed has not done a good job, and traders are already buying into flawed fundamentals that has equity prices at artificial highs. This trend may continue for some time as Bernanke recently said yet again to prove that his QE works, “equity prices are higher”. So Wall St. again makes money off of taxpayers.

Use the ignorance of others to your advantage and be a buyer when the commodities markets become sluggish. Here’s the chart for spot silver so you can see the price action.

The close didn’t quite take out flat support though the 50 Day MA broke which again in technical terms means that the trend is now questionable. There is a bullish divergence on the 14 day stochastic.

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

One Response to Silver Closes Below 50 MA On Chinese Reserve Ratio Hike

  1. Pingback: CORRECTION, Commodities, Followed, Forecasts | countrieswithnuclearweapons.com

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