by Clive Maund
If gold is looking set to react back over the short to medium-term, which it does, then it implies that silver, which is weaker at this stage in the cycle, is set to react back too.
On silver’s latest 6-month chart we can see that the fairly tight pattern that has developed over the past several weeks, which is widely interpreted to be a bull Flag, is now looking more like a small Head-and-Shoulders top, and being small, it has correspondingly small downside implications. It projects a drop soon at least to the upper boundary of the channel that silver broke out of in December. Factors making it more likely that the pattern is an H&S top are the way the advance reversed at resistance at the late September highs, with a dramatic high volume reversal candle appearing after a string of bearish looking candlesticks with long upper shadows, and of course the extreme positions evident on the COT and Hedgers charts that we will come to shortly.