Silver prices are clawing their way back this morning following losses the last two days of trading to start the week. As of this post, silver is trading up about $.24 even with a stronger dollar index. Higher crude oil prices and weaker stocks are also likely contributing to silver’s early upside today.
Today is a busy day data wise with the ADP jobs numbers having been released earlier this morning and with new home sales and ISM non-manufacturing set to be released shortly. The market will also closely scrutinize the Fed beige book report later this afternoon.
The ADP jobs data came in much better than expected with an increase of 215,000 jobs. Consensus estimates were for 185,000 jobs. Stocks are lower on this data however, as the debate about the Fed tapering rages on. This type of data would seem to indicate that the Fed could possibly taper sooner rather than later and that has equities investors a bit spooked. As more positive data is seen, it could fuel selling in the stock market as the reality sets in that QE will not go on forever.
As we have stated in previous posts, and contrary to popular belief, the Fed tapering could actually be very bullish for silver and precious metals. The notion of the Fed cutting back on stimulus has now apparently been discounted by the precious metals markets for some time. Once it actually begins to occur, silver could see good investment demand as equities investors look for alternative places to put cash to work. The SP500 has also completed a bearish wedge pattern now, and from a technical standpoint is possibly looking lower over the next few weeks.
From a technical perspective, silver remains in the firm grip of the bears. The daily chart is pointing decidedly lower, and the bulls have a lot of work to do to gain any substantial momentum. The market is still looking as if it wants to test the June lows in the $18.12 area. This could potentially be a buying opportunity as this level may be defended however, precious metals investors may also take a wait and see approach to see if prices begin another leg lower. Should this be the case, silver prices could head for the 200day EMA around the $15.84 level before pausing. If the bulls can stem the recent bleeding at current levels, the key upside target appears to be in the $20.50 area. If the market can maintain trade back above this level, it could attract fresh buying and a sustainable rally could occur. If the bulls cannot get prices back above this level, silver may remain a sell the rallies market until proven otherwise.