Should Investors be Buying Silver 1 OZ 999 NY (XAG=X) at Current Prices?
It’s been a frustrating few months for investors in the silver space (SLV), with the metal underperforming the S&P-500 (SPY) by more than 20% since September alone. This significant underperformance shouldn’t be all that surprising, as an asset class tends to perform terribly when everyone is raising price targets to 25% above current levels (as we saw in late August). Fortunately, it looks like the worst of this correction is over, and we’re finally beginning to see sentiment among market participants become a little more impatient. The drop from 95% bulls to 50% bulls in silver is evidence of this sea change, as is the moderate decline in bullish small speculator positioning last week. While I still do not see any signs of capitulation or disgust for silver, these dents in optimism continue to be a step in the right direction. Let’s take a closer look:
As the chart I’ve built below with the silver price (grey) and small speculator positioning (blue bars) shows, small speculator positioning dropped by over 10,000 contracts last week, from over 52,000 contracts to just over 40,000 contracts. This is a decent improvement a pretty reasonable one week drop, and this shows that some speculators are beginning to tire of this trade or pare back their bullish bets. While this reading on speculative positioning isn’t by any means near levels of fear like we saw in May through June, it is a decent improvement from the frothy positioning we saw in early August through September, with two jumps to nearly 65,000 contracts. I would prefer to see speculative positioning drop below 30,000 contracts to suggest some pessimism, but this recent drop is an improvement, albeit a small one.
If we take a look to see if bullish sentiment is confirming this below, we are seeing similar readings currently. Bullish sentiment on silver, based on Daily Sentiment Index Data (DSI) is sitting 50%, and more than 45% below its peak at 95% bulls in early September. Similar to the CFTC speculator’s positioning, this reading is nowhere near capitulation or fear, but it is suggesting disinterest, which is an improvement. For this indicator, I would ideally like to see a drop below 40% bulls to give me confidence that new highs on silver above $21.00/oz are possible within the next year. Unless this happens, I believe silver might run into problems near the $19.00/oz level on any rallies.
Overall, the bias in prices is: Sideways.
The projected upper bound is: 17.58.
The projected lower bound is: 16.54.
The projected closing price is: 17.06.
A white body occurred (because prices closed higher than they opened).
During the past 10 bars, there have been 8 white candles and 2 black candles for a net of 6 white candles. During the past 50 bars, there have been 27 white candles and 23 black candles for a net of 4 white candles.
Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.
One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 77.8841. This is not an overbought or oversold reading. The last signal was a buy 6 period(s) ago.
Relative Strength Index (RSI)
The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 51.95. This is not a topping or bottoming area. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a sell 75 period(s) ago.
Commodity Channel Index (CCI)
The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is 73. This is not a topping or bottoming area. The last signal was a buy 6 period(s) ago.
The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a buy 5 period(s) ago.
Rex Takasugi – TD Profile
PREC.M.XAG= closed up 0.063 at 17.070. Volume was 8,900% above average (trending) and Bollinger Bands were 61% narrower than normal.
Open High Low Close Volume___
17.007 17.120 16.850 17.070 43,740
Short Term: Neutral
Intermediate Term: Bullish
Long Term: Bullish
Moving Averages: 10-period 50-period 200-period
Close: 16.86 17.23 16.30
Volatility: 17 19 23
Volume: 4,374 875 219
Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.
PREC.M.XAG= is currently 4.8% above its 200-period moving average and is in an upward trend. Volatility is relatively normal as compared to the average volatility over the last 10 periods. Our volume indicators reflect very strong flows of volume into XAG= (bullish). Our trend forecasting oscillators are currently bullish on XAG= and have had this outlook for the last 0 periods. Our momentum oscillator has set a new 14-period high while the security price has not. This is a bullish divergence.
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