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The silver contract fell during most of the week, but bounced in the end in order to form a nice-looking hammer. This hammer is just below the $35 level, and it does look like we are trying to break out to the upside. Based upon a measurement of the recent consolidation area, if we do manage to close above the $35 level, it's very possible that we could move towards the $42 an ounce level.
If we break the bottom of the hammer however, this would turn it into a "hanging man", which of course is bearish. However we feel that this bearish signal would simply point out that a pullback was coming, not necessarily a meltdown. Because of this, we are very bullish of the silver markets.
We hold physical silver, also hold the ETF SLV that gives us exposure to not only silver futures, but silver miners as well, and of course will be buying silver futures if we manage a breakout. The market currently looks like it's trying to break higher, and as such we think that the move could be rather explosive. After all, you have the think that the Federal Reserve is working to devalue the US dollar, and it does appear that they are succeeding.
In fact, we feel that the only way we could start selling this market is if we see a break of the $25 level to the downside as it would be a massive momentum shift. Silver certainly looks bullish, and there's absolutely no reason to fight this kind of move. Although the last several weeks have been rather parabolic, you have to understand that moves like this rarely happen in a vacuum, and as such bullishness should continue.
There is talk of the Chinese stimulating their economy over the weekend, and if that happens they would be just another one of the central banks and a long list now that are easing their monetary policy. With this being said, fiat currencies in general should continue to devalue, especially against the physical metal such as silver and gold.