Silver Forecast: Volatility Creeps In

• Silver has had a tough day on Friday, as it looks like gravity has returned.
• After all, silver futures had reached $54, and the spot silver market is basically $2 higher, the reality is that backwardation is telling us that eventually silver prices will more likely than not drop overall, but will have to wait and see whether or not the futures markets will get a grip on the overall explosive move in this market.

Technical Analysis

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The technical analysis for the market is bullish over the longer term, obviously, but we also have to keep in mind that the nasty red candlestick for the trading session on Friday suggests that we are going to get a little bit of volatility. This does make a certain amount of sense, because quite frankly, markets cannot go in the same direction forever, and I think you’ve got a situation where sideways action at the very least needs to occur, if not some type of nasty pullback to offer enough value to get people involved. The 50-day EMA is all the way down at the $44.40 level, approaching the $45 level. I think if we were to break down below the $45 level, then we could see that this market will collapse. Between here and there, the $50 level is an area that a lot of people will be watching for support.

If we rally from here, breaking above the $54 level would obviously be very strong, but at this point in time, I just don’t know that there will be enough momentum to make that happen. If we do see that type of momentum, I’d be very cautious because, quite frankly, this is a market that is overbought to begin with, and therefore very dangerous to say the least.

The picture outside of the financial markets also tells us a story. I’m starting to see people talk about silver who have obviously never traded it a day in their lives. Once you start to see random people talk about a market, it means that we are getting closer to the top than not. While I don’t like shorting silver, I certainly don’t like chasing it.

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