Regardless, traders and algorithms follow certain technical price levels. Thus, the silver price was trading in a falling wedge pattern for the past four months before breaking out of that trend last week. Typically, a falling wedge pattern is bullish. Yes, it sounds counter-intuitive, but falling wedges are more bullish to the price action while rising wedges are bearish.
As you can see, as the NASDAQ Index fell below its rising wedges, the price action was bearish. Sven at NorthmanTrader.com has been doing excellent updates on these rising wedges and technical setups for the broader markets. Furthermore, Clive Maund, precious metals technical analyst, recently did a Silver Update stating that he thought the silver price would drop considerably along with the broader markets. According to Clive’s technical analysis, silver fell below its falling wedge, which is bearish.
Not only did silver finally break above its falling wedge pattern, but it did so as the Dow Jones Index fell by 1,000 points. Thus, the ongoing rhetoric that the precious metals prices will decline along with the broader markets continues to be an incorrect forecast as gold and silver trade higher during large market sell-offs.
So, yes… TECHNICAL LEVELS do matter to traders and algorithms that control the price action in the market. Unfortunately, I can’t show a price candle for silver today because StockCharts.com doesn’t provide daily chart updates for precious metals, commodities, or energy until after the close of the day.
While the Dow Jones and NASDAQ are trading well above their 200 Month Moving Averages, gold is much closer to its 200 MA, while silver is below it. Furthermore, you will notice the “Production Cost” trend lines I have put in for gold and silver during the 2008-2010 period and currently.
UPDATE: After-market close
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