Yesterday's candle on the silver chart mirrored that of spot gold, ending the day with a wide spread down bar which closed well below all three moving averages and confirmed the bearish engulfing candle highlighted in Tuesday's silver report. More worryingly the low of the day failed to find any support from the 14 day moving average with the 40 day now turning sharply lower. The key as to whether this is a short term reversal, or the start of a longer term trend, will lie with the various support levels as silver prices move lower, with the first of these now firmly on the horizon in the $12.90 per ounce price point. This is a solid block of potential support following the consolidation at the level earlier in the year, but should this fail to hold, then we could see a much deeper move in due course, possibly as deep as $11.80 per ounce. Should this second level fail, then the silver bulls will have to wait for some considerable time to see a fresh attempt to climb back to the $16 per ounce which was our initial long term target for silver prices. The worrying thing at present is that this current move is accompanied with considerable momentum, given the wide spread nature of the candles of the last two days, so any attempt to halt the fall will require some significant buying from the silver bulls. In addition silver prices are also suffering from a return to US Dollar strength as investors shy away from riskier assets and we should not underestimate the recent fall in the Shanghai Composite which saw a 7% sell off the other day. Back in 2007 it was a sell off in this index which heralded the start of the current downturn!
Support 12.92 Resistance 13.34
Support 12.46 Resistance 12.97
Support 11.84 Reistance 12.43
The short term outlook is bearish, the medium term is bearish and the long term is sideways.
