If You Held A Short Position In Silver, You Hit The Bull’s-Eye
2022.05.12 12:07
In short, practically everything that I wrote earlier this week and hear remains up-to-date. The profit-take levels in silver were hit, so those of you who chose to hold a short position in silver have likely reaped nice profits yesterday. Congratulations!
Silver Daily Chart
In Monday’s analysis, I commented on silver in the following way:
The downside target that I featured was $21.23 (for silver futures, which some might choose to call a form of “paper silver,” by the way), and it was reached Tuesday—the intraday low was $21.16.
The downside targets for related ETFs were reached too. Will silver soar immediately? This might or might not be the case, as the general stock market might decline some more in the near future. Since silver (and mining stocks) are quite correlated with the former, they could move even lower.
Still, it doesn’t mean that it’s worthwhile to stay in position at all times. Since silver moved so close to its 50% Fibonacci retracement level Tuesday, it could be a situation where the downside is very limited and the upside (for the short term) is bigger.
For now, I’m not suggesting going long (to profit not only on the decline, but also on the rebound), but this might change very soon.
Please note that despite all the “peak silver,” “silver is manipulated so it has to rally,” and “silver shortage” theories, the white metal is now much lower than it was when it got really popular in early 2021.
Don’t get me wrong: I think that the silver price will move into the three digits, but I would like to emphasize that just because something is likely to happen eventually doesn’t mean that it has to happen right away.
Silver’s purchasing power can decline before soaring, and that’s exactly what it’s been doing for more than a year now. It doesn’t seem that the medium-term decline in silver is already over.
Speaking of the general stock market, it moved slightly higher Tuesday (in terms of closing prices), but the move was not significant enough to invalidate the breakdown below the neck level of the head-and-shoulders formation.
Therefore, the breakdown is now almost confirmed, and the situation is already more bearish than it was Tuesday.
ES Chart
At time of writing, stocks are once again trying to rally, but so far the rally is not as big as Tuesday’s pre-market rally that was just erased. Thus, I doubt that stocks will be able to avoid falling in the near term.
The S&P 500 is currently confirming a breakdown below its head and shoulders pattern. Once confirmed (just one more close below the neck level is required), the formation will be complete, and the next target will be below 3,500. So, yes, I expect the S&P 500 to decline below its 2021 lows in the near future.
SPX Daily Chart
On May 6, I wrote:
If stocks are about to decline (continuing their recent decline),
and in the previous days / weeks.
It would trigger another immediate-term decline in silver and mining stocks in the near term that would be followed by a (quite likely tradable) rebound.
