Silver markets of been grinding sideways for the last couple of days out, essentially banging around in a rectangle. I see the overall consolidation between the $19.50 level on the bottom and the $20.50 level on the top as a sign of the market trying to build up more momentum. Simply put, we have exploded to the upside recently, and that of course can’t go on forever.
However, as long as there is instability in the world’s financial markets and more specifically the Forex markets, I think that the overall consensus on precious metals is going to be positive. On this chart, I have a yellow rectangle drawn that shows what I believe is the current range. I also have the Stochastic Oscillator at the bottom of the page, and you can see that it is drifting a little bit lower now. This is the four-hour chart, so it is shorter time frame, but in the bigger scheme of things we are most certainly bullish so I am looking at this from a “buy only” type of perspective.
I do think that this market goes higher over the longer term, and therefore every time we pullback and going to look for signs of support. Furthermore, I’m going to be looking for some type of bounce off of the lower part of the Stochastic Oscillator and perhaps even a crossover of the 2 lines in order to tell me that momentum is picking back up to the upside. I have no interest in selling this market, and quite frankly even if we break down below the $19.50 level, I will simply “reset” and look for buying opportunities at lower levels.
I believe that the silver market is entering a longer-term “buy-and-hold” type of attitude, but these things take time. When we see silver do this type of action, I cannot help but think of the old adage “consolidation normally means continuation.” Given enough time, I do expect this market to break out to the upside and therefore I think that buying physical silver has also become very attractive as of late. Longer-term, I believe that silver is going to try to get to the $22.50 level, and then beyond.