Saturday, December 17, 2011

"Murder Cross" in Silver [SLV] is Starting to Get Some Serious Attention

Silver is not looking good here long term, sure we can get a few bounces upwards but an event occurred two days ago that put the nail in this precious metal coffin for at least a few months and possible a 15% decline, that event is the "Murder Cross".   The murder cross is similar to the "Death Cross" of the 50 ma crossing below the 200 ma but the "Murder Cross" is the 70 ema crossing the 200 ema.  This cross eliminates many of the false signals that the "Death Cross" can give.  Here is a link to a post explaining it more.

SLV or  the Silver ETF has been on a steady decline from its high of 50.  The decline has wiped out almost all of the gains from the 10-11 run up with SLV retracing more the 61.8% of its move and it looks like more of a decline can be instore.  The "Murder Cross" on SLV happened 3 times in the last 20 years in 06, 07 and 08.  In 06 SLV dropped 23% before it bounced, in 07 it dropped 10% and in 08 in dropped 25%.  If we use this historical information it is possible for more of a decline in SLV.   In fact a drop of around 18% or 17% would put SLV right at support and its long term trend line a logical support level. ( see second chart below)


Below is a chart of SLV and it highlights the muder cross.  Right now SLV has been able to find support at the low 28's and high 27's.  This was a crucial level for SLV this level of support lead to the breakout to the high 50's.  The more important support is at 26, this was the swing low before the run up and the last support level for a while.  Resistance for SLV is at 30.06 and 32.50, a retrest of 30 is likely but it will be hard to get above that.   The trendline from 2010 should be the final resting spot for SLV as it would be a price target for the murder cross and is a strong established uptrend for SLV.  SLV is not looking health for a long term buy on a technical level and with the occurrence of the "Murder Cross" there is even more bearish sentiment to this metal.


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1 comment:

alternative investments said...

I am inclined to think you are correct about silver and that the charts are not great and that it could easily fall another 15% over the next few months. However, from my perspective, that would be fantastic news. Anything close to or below $20, and I am getting on the phone with the precious metals shop I work with and order $10K worth of bars!

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