The extremely overbought technical condition and the key reversal on Friday in December Silver make it tempting to turn negative on that market. But as we have pointed out in recent reports, there may be plenty of more gas in that tank to fuel a continuation of the bull trend.
On the weekly nearby chart, one thing that jumps out is that the market has not even retraced 50% of its decline from the all-time high to the March low, which comes in at 30.62. We cannot rule an eventual test of key resistance at 35.08.
Near-term resistance for December Silver is now at 29.31, with support at 25.56–25.29 and then 23.78. One reason to suspect that the rally may not be complete is that open interest has not even made it back to where it was in March. It has recently reached 207,490 contracts, whereas in August 2018 it climbed to 243,195. Furthermore, the managed money net long position is only 32,162 contracts, compared to 98,845 in April 2017.
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Originally Published on August 7, 2020
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