Silver – Following on from the Break

29th April 2016

After the decent break that took place on Tuesday the 19th, it looks worthwhile to have a quick visit to the Weekly Charts and ratio charts to see how the picture has moved on since the report written a fortnight ago.

Silver Weekly Ichimoku Cloud

The Weekly Ichimoku is notable for showing the first break-up above the cloud in around four and a half years, years in which silver ground lower and then spent range-bound during the last 18 months, in what bulls would hope is a process of long-term consolidation.

Now that the price itself is above the Weekly Cloud, it is important to look for signs of further confirmation to give buyers the confidence that this is a significant break.  The next obvious resistance is the high made on the 22nd  May 2015 of US$17.78, and it would be normal to expect silver to struggle with that on the first attempt. The most powerful technical confirmation  would be for the Lagging Span  to follow the spot price above the Weekly Cloud top. The Lagging Span, visible as the blue line in the chart above, is the closing price translated back 26 periods, or 26 weeks in the above example. This means that the price needs to close above US$18.00 in order to get above the Weekly Cloud top at the moment – a big move. In about 10-12 weeks the cloud top actually declines to US$16.235, so it gets easier for the Lagging Span indicator to follow on up through the cloud itself.

The Daily Point and Figure (20 US Cents box size 3 box reversal)

The chart above has developed another (huge) target since the break, however for all practical purposes we can put it aside as a price target of US$29.40 could take many months or even years to reach.

The hourly 0.428 % log Point-and-Figure
 
The price continues to hit the targets outlined on this chart, although there is a worrying downside target generated on the 22nd  of April. That will be ‘knocked out’ if the price rallies above US$17.72.

The gold-silver ratio (60 min 0.20 box size)

Price action on the gold-silver ratio reached 71.60, just breaking through the support line mentioned on the daily chart in previous commentary.  The target to 75.20 implies a degree of consolidation in silver soon.
 
Futures positioning on the CME – Managed Money sector
Longs added almost 37 million Troy ounces at a VWAP of US$16.33 in the period between April 12th  and 19th. Shorts closed out some 20.585 million Tozs during that period. Longs added almost 44 million Troy ounces at a VWAP of US$15.52 in the period between April 5th  and 12th. Shorts closed out some 19.33 million Tozs during that period.

Another way of looking at the evolution of managed money positions…

ETF positioning
ETF positioning has barely changed since the last week – standing at 637,427,308 Troy Ounces on the 28th  April, a slight decline since last Friday, and up about 33 million since the start of the year.

Silver Eagles

Continue to show good demand, with 4.072 million in sales reported as of the 27th.

Summary
The confirmation signal to focus on in the longer term is the break out of the Lagging Span above the Weekly Cloud top.
Supports basis the weekly cloud as of the 20th  April are:
Weekly Cloud top                US$16.24
Weekly Turning Line            US$15.93
Weekly Cloud base             US$15.60
Weekly Standard Line         US$15.44

Regards
 
Nick Frappell