I examined the commodities that I maintained within the LAWG 647 Model (LAWG) in an effort to find the most interesting story going into tomorrow (Friday 6/2). It was a close call between Japanese Yen, July Hogs, U.S. Dollar Index, and July Silver. After careful consideration July Silver was the winner.
What makes July Silver so interesting?
- It starts with the $1.66 decline from April 17 to May 9
- LAWG showed July Silver became extremely overstretched to the downside
- We then witnessed a $1.40 rally from May 9 to May 30
- This rally corrected the earlier overstretched condition
- Fundamentally in my opinion Silver is tied to the near economic conditions among them
- Tightening labor market
- Likelihood of increasing interest rates
- European economic performance
- LAWG projected trend reversal points
What do we know? According to LAWG July Silver remains in a long term downtrend as of the May 26 close. We will need a close at or above $17.821 on Friday June 2 to reverse the trend. July Silver closed at $17.323 on May 26, well within striking distance of triggering a trend reversal. As I write this July Silver is at $17.205, down 11.8 cents from Friday but still within reasonable striking distance of triggering a trend reversal. I will be watching to see if the market rallies to the $17.821 area and turns it into a battle ground price. If so there might be opportunities for short term trades on both sides of $17.821. But what happens if July Silver does not close at or above $17.821?
If July Silver fails to turn bullish on June 2 the following weekly closes will be needed to turn July Silver bullish. It will take a close at or above at $18.332 on June 9, then $18.227 on June 16, and then $18.585 on June 23. As you can see if it fails to turn bullish tomorrow, it does become measurable more difficult in the weeks ahead. Tomorrow is the best chance for Silver to turn bullish over the next four weeks.
What to do? Obviously should it turn bullish I will be recommending areas to be long for the anticipated up move. If it fails to trigger a reversal I will be recommending an aggressive selling strategy as I am of the opinion that should a commodity get close to reversing the LAWG and fail the ensuing move can be very significant.
The risk of trading futures and options can be substantial. Each investor must consider whether this is a suitable investment. Past performance is not indicative of future results.