We have some interesting technical developments worth monitoring right now regarding the stock market & precious metals. I posted the first 60-minute chart of /SI (silver futures) below in the trading room yesterday & followed up with analysis of gold & silver in yesterday’s video, stating that a short on /SI or SLV (silver ETF) and/or gold could be used as a pure-play short for a correction in the metals as well as an indirect hedge to a short on the stock indexes.
SI 60-min Aug 28th
With today’s rally in equities, silver & gold are experiencing their largest single-day losses in quite some time with /SI going on to make a very impulsive breakdown of that 60-minute uptrend line, triggering a solid sell signal not to mention a fat bearish engulfing candlestick (as of now but not finalized until 4 pm) on the daily chart of SLV. About 11:45 am today, I posted the following updated chart of /SI in the trading room in which I added an additional price target at 18.105 in which I expected a minor reaction, followed by a resumption of the downtrend & drop towards the first target posted yesterday.
SI 60-min Aug 29th
The next chart below is the current chart of /SI showing that it indeed bounced off the initial tag of that support level and I then just recently mentioned in the trading room that /SI was forming what appeared to be a bear flag continuation pattern just above that 18.105 support & so a break of that bear flag as well as today’s previous low just below it, would likely open the door to the next wave of selling down towards T1 (17.757).
SI 60-min 2 Aug 29th
However, for that to happen, or at least to say with a high degree of confidence that it will happen, we will most likely need to see the major stock indices break out above the resistance levels that they have been testing since shortly after the open today. Should the equity indexes fail here and/or make a brief but failed breakout above those highs (which is what I suspect) and then start to sell off impulsively, that would likely provide a headwind for the silver short trade & may result in a false breakdown below the 18.105 level.
ES NQ RTY 2-min Aug 29th
Essentially, a short on silver (or gold) is largely, but not exclusively, conditional on the equity market continuing to rally substantially from here and at the very least, it is safe to say that a short on the “fight-to-safety” assets such as T-bonds & precious metals as a hedge to a short position on the stock market has worked out well so far, at least so far today. However, I did want to share my thoughts to give everyone a heads-up on the potential for those whipsaw buy & sell signals on the stock market & precious metals in case my preferred scenario of a failed break above today’s highs pans out.
I’m far from married to that “whipsaw” scenario above and still very much open to the indexes making a run at the top of the August trading ranges, which are only slightly above. The takeaway would be to stay nimble or just stand aside & let the bulls & bears duke to out here to see who wins the battle for the August trading ranges. As of now, I’m sitting tight on the shorts in my swing trading account & also currently positioned short in my active trading account with the expectation of a reversal anywhere from those downtrend lines to the top of the trading range. Also, short silver as both a hedge & a pure-play short since we could see both equities & the precious metals correct from here as the two have an on & off correlation for a while now. Of course, my positioning in my active trading account can change on a dime as I’ve been long & short /NQ & /RTY several times just in the past 30 hrs alone.