Silver Futures Could Tumble

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Equity and bond futures markets have reversed course from recent action this morning, with the US 30yr bond futures trading up 28 ticks and the MAR13 emini SP 500 futures trading down 3 points. Even with US housing starts posting their best 3 months in 4 years, and with the number of building permits issued climbed 3.6 percent in November to an 899,000 annual rate, the most since July 2008, the stock market futures are still taking a breather from their recent rally. What may be tempering another bull run today in the stock market is that apparently Obama has stated he would veto the new Boehner budget plan. We still hold a bullish view of the US stock market and believe the SP 500 will make a run for 1500.

The biggest equity market mover is actually the Japanese Nikkei. The Nikkei has staged an incredible rally starting in mid-November, rallying almost 1500 points since then, fueled by the continuation of easy money policies of the BOJ. Correspondingly, the Yen has continued to get hammered down in that same time period.

In currencies news, the Swiss Franc is continuing the massive rally it has been on over the past few sessions. This morning the MAR13 contract got to 1.1021. This is unlike its ‘safe haven counterpart Gold, which dipped to $1665 this morning before turning positive, likely on the Obama-Boehner news.

We focus on Silver today. Silver is notoriously volatile. Just one year ago in September, silver dropped from 40 to 29 dollars in just a few trading sessions. Now, we notice silver being sold recently along with gold. Silver’s key level to us is $34.50. If silver stays below this level, we view the market is bearish. If silver rallies above this point and builds a base above this level, we would start to view this market as bullish. For now, we believe silver is in a bearish technical picture, with a potential near term target of $27.

Silver Futures chart

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