Silver (NYSE:SLV) lost more than 2.2% today and looks very oversold on the daily chart. Its momentum indicators are in deep oversold territory and short term sentiment is extremely bearish. Usually silver follows gold (NYSE:GLD) but movement is far more volatile. The one worry for silver investors at present is that Gold’s weekly stochastics are still far too high for a hard bottom to be in. Furthermore long term sentiment in gold is still too high to justify a hard intermediate bottom. We will probably bounce out of these conditions but I am still doubtful as to whether we have printed a firm bottom here.
The technicals are the problem. Despite the 19 point move down today in gold, we just don’t seem to be set up for a hard bottom just yet. You want to be buying when the weekly stochastics are heavily oversold. We are nowhere near that point yet.
Nimble traders may look for a short term bounce here but selling options still looks undesirable due to the low levels of volatility in SLV at present. Swing or cycle traders will probably stay out and look for the improved set-up which will probably come over the next month or so.