Spot Silver Price Chart - Daily Silver Prices 4th June 2009

Spot Silver Price Chart - Daily Silver Prices 4th June 2009

Following spot gold, silver prices declined sharply as the US dollar managed to recoup some of its recent losses in a day when many commodities found themselves under pressure as the recent equity market bear rally looks to be coming to an end.  Indeed many financial experts expect the downturn to continue and any recovery will not be V shaped and the recent bounce will simply peter out.   As always the fall in spot silver was dramatic with silver prices falling 56 cents to close at $15.38 on the day and as a result producing a wide spread down bar, with wicks to top and bottom.

From a technical perspective, yesterdays bearish engulfing candle has provided an early warning signal, that the current bull rally for silver prices may be running out of steam, a view which is reinforced on the gold chart, however as always with any signal we need to wait for this to be confirmed, and not make trading decisions based on one candle!! Whilst this could indeed be the start of a short term reversal, the fact that the low of the day failed to penetrate the 9 day moving average is a positive sign, and could suggest that this will provide the support for a bounce higher once again in due course. This is often the case in a strong trend ( whether up or down ) where the low (or high) of the day bounces off the moving average, which then provides the necessary support for the trend to re-establish itself once again, and indeed we can see this at work on the daily silver chart over the last few weeks, where small reversals on the day, have been supported by the moving average ( 9 day or 14 day)  which has then provided the springboard for a continuation of the move. Whilst I am not suggesting that we can conclude this from one candle, I am suggesting that we need to wait and see, as this may be the case here. If the bearish signal is to be confirmed, then we need to wait for a sustained break and hold below both the 9 day and 14 day moving averages, coupled with a hold below the most recent support region at $14.45. Only time will tell whether this is a false signal, or an early warning of a change in the trend, and we must therefore wait for today’s trading session in silver to unfold. My suggestion, given the above, and also that we have the NFP data tomorrow, is to take a wait and see approach to trading silver for today, as the unemployment figures could have a strong influence on the equity markets tomorrow which in turn will affect commodity prices across the board.

Support:    $15.230 (yesterday’s low)                                   Resistance: $16.210 (high of 08/08/09)

Support:    $15.130 (low of 29/05/09)                                   Resistance: $16.003 (high of 02/06/09)

Support:    $14.620 (low of 28/05/09)                                   Resistance: $15.760 (high of 29/05/09)