Silver – A Look at the Internals (by Leaf_West)

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As a technical trader all I can do is look at the chart internals to get a sense as to the short term outlook for a stock or an ETF …. Silver is one of those instruments that is defying gravity …. how do the internals look??

 

SLV_April20, 2011_Daily_Volume

The last time SLV went parabolic was back in November 2010 … that was driven by a blow-off top in volume as there was a literal panic to buy the silver ETF.  As you can see in the chart above, current volume is actually showing a negative divergence.  This might be suggesting that the current top is different in nature than the Nov 2010 top.  Is the Silver ETF running out of new marginal buyers??  If so then the current topping push could be a top that lasts weeks or even a couple of months.

 

SLV_April20, 2011_Daily_Opinion

The above chart is from Sentiment Trader … they have charts on almost everything that measures the "public opinion" via a multitude of investor sentiment surveys/polls.  The red and green dash lines are 1.5 standard deviations from the 1-year moving average.  As you can see the sentiment is at all-time highs.  To me all-time highs are like musical chairs … not a fun game for those who are not fast enough to find a seat (or exit).

 

SLV_April20, 2011_Daily_ROC

The 10 period Rate of Change Indicator on the above daily chart illustrates as well that SLV is at levels where the market should at least pause and consolidate the recent gains.

 

SLV_April20, 2011_Daily_MFI

One of my favorite indicators for finding divergences is a stock/etf's trend is the Money Flow Indicator.  In short this is a volume weighted RSI indicator so it does more than just track the relative strength of price alone.  To me again, the SLV move here is running on fumes.

 

   SLV_April20, 2011_30min_RSI

 

The above two charts are 30-min charts … again the internals are stretching to levels where a pause is in order.

I plan on hawking SLV/Silver and the US$ to try and catch the change in trend over the next couple of days.

Good hunting everyone …

Leaf_West

Edit at 12:30pm Wednesday … I started a small short of SLV at the break of the 20ema on the 5min chart just a couple of minutes ago at $44.05.  No stop planned as the internals tell me to hold on here.