Potential reversal on markets and metal markets.

How curious is it that the trend line that i have been talking about as potential resistance has held 3 days in a row? This indicates to me that their is a potential reversal in this market.  I do not expect it to get above that purple line after seeing it hold so well, how ever, any very bullish economic data could break that line.  I am debating about shorting the market here but the safe trade would be breaks below the 1040 level for a short.  For going long, I would say if there was strong volume moves above the 200 MA, which is at the 1120 level.

Looking at the hourly:

The indicators are bearish but the most notable signal i see on this chart is the bearish divergence on the Slow Stoch.  The last week and a half you can see the slow stoch has made a lower low but the price action was a higher low.  See Bearish Divergence for more information.  What this signals is that the rally is on false footing and will take out the low of 1040 at some point in the future.  Since the overall trend is down this bearish divergence pulls more weight.  I will talk about Silver next which i believe could also be ready for a pull back to regroup before a push over the $20 - 22 level.  If I exit from some of my positions I may consider a short in the market however it would be relatively high risk until the 1040 mark is taken out.

This is SLV, a silver ETF that mirrors silver price action.  As you can see from the daily, the price action is at the high range of this trading wedge (purple).  The recent rally can be explained from the light blue wedge that was broken to the upside.  The fib levels on the daily show from the first impulse wave of this rally the levels of potential support and resistance.  I believe that if silver was to reverse for a consolidation the 161.8 level is where to expect resistance.  The 18.30 mark on the SLV would be the target which would equate to a 6.1% decrease in silver prices.  This would be in my opinion the last big buying opportunity before the break out.  However, if silver (and other metals) manage to break out of their all time highs, I would continue to be bullish, however it looks like they may be over extended at the moment and a pull back to regain momentum makes a lot of sense, especially if the magnitude of the breakout is as large as some have predicted.

 

Another potential target for a pull back would be the 61.8% retracement of the recent impulse wave which would be just below the 19.00 mark.  My plan of action is to ensure tight stops on my positions if tomorrow is a reversal day.  I wouldn't mind siting on cash for a couple of days to see what plays out by weeks end or the start of next week.