Wednesday, May 25, 2011

Intermediate term downtrend continues

Three weeks in a row on the downside and we are heading for the forth week. Market made an attempt to move up in the morning but ended in red. As you probably noticed market formed a downtrend channel. Right now market is touching the lower edge. We may see another attempt to climb to the upper edge. However, a move bellow the lower edge will trigger a fast sellout.

Looking again on hourly chart it's easy to notice that EMAs gave a bearish crossing on May 13th. However, please notice that EMAs generate a false "sell signal on May 6th. In all fairness the price didn't move bellow SMA 120 on that date. Right now the intermediate time frame downtrend seem real since not only the price is bellow SMA 120, but also jumped up after the EMAs crossed but failed to go above SMA 120, a move seen very often in a real downtrend. Even better SMA 120 is pointing down now unlike on May 6th.

On longer time frames we have mixed messages. Price moved bellow the September-May uptrend line, bearish event. Then we have market slipping bellow SMA 50, another bearish signal but it did happen two more times in less than two months without being followed by a market collapse.

At the same time looking carefully at the charts one can say that market is doing a lateral consolidation. Except the short lived plunge to 1250 we can say that market traded in the 1,305-1,365 range since the end of January. Of course another slip bellow the support line around 1,305 is going to be bearish long term. Daily DMI remains bearish. However, weekly DMI is slightly positive. 

Silver moved, finally away from $34 to my great relief. It looks to me that the downtrend is over and we may see a decent rally from here. I doubt is going to be as crazy as the one who pumped the price from 26 to 50 in a matter of 2-3 months but the move is going to be on the upside. The problem with commodities is that they are depending on the dollar and the Feds may change their policy at any time bringing the dollar up or down as they please.   

All the best!


No comments:

Post a Comment

Thank you for your feed-back