To date, I am not nearly as loaded up on commodity trades as I plan to be once certain technical factors line up. With all the current buzz about inflation and the rising producer price index, preparedness for buying languishing commodities makes sense. Currently, the Federal Reserve’s inflation target falls short of the parameters they would like to see before raising rates further. Interestingly though, just about everything can change on a dime. For example, who will lead the Fed come February, is one change we expect to occur. The historically low ratio (has only been this low twice in the last 100 years) between commodities and equities could also quickly change.
Silver is fun to trade when it gets going. It’s the metal I cut my teeth on during the early 1980’s heyday. It’s also the metal that caused me to lose my job with Conti-Commodities as they were the brokers who went belly up when the Hunt Brothers tried (and failed) to corner the silver market. Hence, it became the metal that forced me into a career as an independent floor trader. Hi ho Silver! As we look at the weekly chart, ask yourselves-is that gray hair or a silver lining?
The weekly chart (each bar represents one full week) has several moving averages illustrated. The green line is the 200-week moving average. The blue line is the 50-WMA. The red line is an exponential MA I’ve layered in, but not as important to me as the 50 and 200-WMAs. The 2 black lines are really cool. That is a channel that goes back to the 2015 low and connects with the 2017 lows making it a valid trendline. The top parallel connects the 2015 high to just about the 2016 high. Currently, SLV or the ETF for silver futures trades below both the 50 and 200-WMAs. After a brief stint trading above the MAs in early September, disappointed longs exited quickly, driving the price down back below the MAs. That makes perfect sense as silver has yet to show much to the bulls. I’m watching for SLV to clear the MAs first and foremost. Although I will not hesitate to buy a starter position, aggressive buying is best saved for a clearance of 17.58, the 2017 high. One important tip I can give you about commodities trading-when buyers emerge in droves, the moves happen blindingly fast, defying old resistance points. So, no worries about picking a bottom-or plucking out the gray hairs. When she’s ready, she will sheen.
