The silver market initially plunged on Wednesday but then turned around to show signs of life again. We have formed a massive hammer that suggests we are ready to go much higher. It is worth noting that the $22 level offered significant support multiple times in the past, and we have even tested the breakdown through that area in October during the day. However, most of this was simply the market waiting to see what was going to happen with the Federal Reserve meeting.
Now that the Federal Reserve meeting has come and gone, it does make sense that we would see a reaction in the US dollar. The US dollar has softened a bit as the Federal Reserve was not nearly as hawkish as some people feared, so it makes sense that the market would reverse the US dollar strength. That being said, it now looks as if the market is ready to go against the US dollar, or at least correct a bit. Silver is highly sensitive to the US dollar, so it is likely that we need to see the inverse reaction come back into the picture.
Now that we have recaptured the $22 level, a move above the highs of the day will probably send this market towards the $22.50 level, which is an area that I think is short-term resistance. Breaking above that then opens up the possibility of $20.75 above. Anything above that level turns the entire trend around and could send silver much higher. That being said, the market is likely to be very noisy, as we are trying to figure out whether or not we are going to be able to pick this market up again from this area. At this point, the market is probably going to continue to favor buying on the dips, because the worst of the support has been tested and it held. However, if we were to turn around and break down below the bottom of the candlestick for the session on Wednesday, that would be an extraordinarily bad sign. At that point, we would probably come undone and go looking towards the $20 level. Regardless, I think we have a lot of volatility ahead of us.
