Impending rally in the commodities market?

Oil has dropped like a rock and is out of the discussion for this article. The market still needs to settle out the speculation and digest much of the speculative supply that is rushing into the markets. Other commodities such as silver are now on the radar with a rapidly expanding money supply and a heavily deflated price per ounce.

The metals bust happened far before that of oil and was not as well covered. We drive through town and seen multiples of gas stations all offering gas with a posted price 30 feet above our heads. We don’t though see the daily fluctuations in metal prices, perhaps that’s why the market has ignored the fall in other commodities and focused only on gas and oil.

Silver, ETF, trendline

The silver ETF stock chart looks more than promising with a double bottom forming on the daily candlestick chart. News of federal regulations, increasing liquidity and a total exposure of $7 Trillion by the Federal Reserve, Treasury and the Taxpayer are sure to push up silver prices from here on out. The original silver bubble was built on the fear of ever increasing inflation which is more true today than it was a year ago when silver began is move upward.

The only thing holding silver back is a long term horizontal support and resistance line at $10.63 per ounce. Above this price, silver is sure to sustain a hefty rally upward. The last several touches of the $10.63 line produced huge results first in September of this year where the price of silver rallied more than 20% in just a few days. Subsequent touches in October pushed the price up 10% and then a sell through the line created a huge one day sell off. The market has tested the line twice since then both resulting in a resistance led sell off.

Plain and simple buy on an open above $10.63. Silver is set to rally again soon with both the fundamentals and technicals on the side of a rally.