Much like our ongoing analysis with the GDX ETF, for gold miners, the SLV, ETF for silver, has seen a great rally in August but is now running directly into overhead supply.
The concept of overhead supply dictates that longs who tried to bottom-fish silver back in May at or above $23.50 (after the sizable April gap down, left side of the daily chart below) are much more likely to sell than they are to buy more or hold once they are “made whole,” and the chart arrives back at the scene of the entry. In other words, more often than not we see resistance begin to assert itself here, before we have a chance at seeing a gap-fill higher from April.
Also note that silver continues to have declining longer-term daily moving averages, indicative of an ongoing bear market.
The bull case is that the overhead supply gets worked off through time, sideways, rather than being violently rejected through price lower. EIther way, a pause from the upside momentum here is expected.
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The fine gent over at http://www.marketanthropology.com/ has some interesting insights, might be worth a glance at.
Thnx