Silver futures on the Comex division of the New York Mercantile Exchange on Monday surged to a fresh 23-year high of $12.48 an ounce, basis nearby futures. The bulls have hit the accelerator the past couple weeks, having tacked on around $1.50 an ounce since late March. The surge in silver futures prices the past few months has been due in part to the big rally in gold prices and strength in raw commodities prices, in general.
However, the silver futures market has seen an added boost in recent weeks from traders anticipating the U.S. Securities and Exchange Commission approving in the near future an “exchange traded fund,” or ETF, for silver. The fund would allow individuals to invest in the silver market without having to buy the physical product or having to go long the silver futures market. Nonetheless, the silver futures market has seen added buying interest due to the keen interest in the ETF getting final approval from the SEC soon.
The monthly continuation chart for nearby silver futures shows the bulls’ next major upside price objective for the silver bulls is challenging the 1983 high of $14.93 an ounce, basis nearby futures. Above that lies longer-term chart resistance at the September1980 high of $25.00 an ounce. Once silver futures moved above major psychological resistance at $10.00 an ounce in February, that did open the technical door to large upside price potential in the coming weeks or months. Bulls can also argue that on a longer-term technical basis, once nearby silver futures pushed above longer-term technical resistance at 2004 high of $8.211, that produced a bullish upside breakout from a congestion area, or “basing” pattern, on the monthly continuation chart for nearby silver futures that dated back to 1990.
The all time high in nearby Comex silver futures was scored in January of 1980, at $41.50 an ounce. For the bears to obtain some near-term downside technical momentum, they would have to produce multiple closes below what is now major psychological support at $10.00. But to do serious near-term chart damage, May silver futures would have do drop below the last solid “reaction low” on the daily bar chart, which is located at the March low of $9.67. Importantly, for the silver market to continue on its major bull market run, the gold futures market will have to play a supporting role. If gold futures prices start to trend lower, silver futures will follow.
By Jim Wyckoff
NOTE: Jim has just completed an e-book called “The Art of Effective Stop Order Placement in Trading Markets.” You can buy it for $14.95 by clicking on the “SUBSCRIBE” section of his website at www.jimwyckoff.com .