Silver futures sold of sharply once again yesterday, with the March contract closing at $31.115 per ounce on the day, and ending with a wide spread down bar, adding further downwards momentum to an already weak market. This bearish sentiment was much as expected, and indeed I suggested that we would see a test of the $31 per ounce region in due course, following the breakout of the recent sideways congestion in the $32.50 to $33.50 per ounce region.
This area was duly breached on Thursday, and with an isolated pivot high in the $33.80 per ounce area, this is driving the metal lower, as we now approach another key point – the isolated pivot low at $30.70 per ounce. This triggered a recovery and bounce higher in early November, and is therefore a key point on the daily chart. If we do see a clear break and hold below this price, then expect to see the current bearish trend develop further.
Moving to the indicators, on the daily chart, the sellers have been in control for several days, and with rising selling volume on Tuesday and Wednesday, this is validating the move lower. However, the daily volumes themselves are below average, due to the end of year factors, coupled with uncertainty surrounding the ‘fiscal cliff’.
The three day volumes reflect a similar picture, with the buyers having withdrawn from the market since late November. However, it is interesting to note that the three day trend remains bullish on this timescale, and has yet to transition to a congestion phase or to bearish. If either of these does occur in the next few days, then expect to see silver prices push lower once again, and follow gold which is also heavily bearish at present.