Silver markets rallied a bit on Monday but also gave back quite a bit of the gains. Ultimately, silver markets tend to be very volatile, so a bit of sideways action at this point is not a huge surprise. The $22 level underneath will continue to be a significant support level from everything I see, so it is going to take a certain amount of effort to finally get through there. If we do, then the market is likely to break down towards the $21.75 level, and then possibly the $21.50 level after that. If we were to somehow break down below there, then the market is likely to fall apart completely.
To the downside, the breaking of $21.50 could open up the trapdoor for much lower pricing. Breaking down below that level opens up the possibility of going all the way down to the $20 level in my estimation, which would be a very negative turn of events. Anything below $20 would have this market collapsing.
On the other hand, if we can take out $22.60 above, that could send this market much higher, perhaps reaching towards the 50 day EMA near the $23.44 level. Obviously, it is going to take some effort to make that happen, especially as we have been in a downtrend, but it is worth noting that the $22 level has been important multiple times in the past so there is no reason to think it would be any different this time going forward. The $22 level has been tested multiple times over the last couple of years, so I do think there is a certain amount of support in this general vicinity.
I do think that silver will continue to be pushed against if the US dollar continues to show signs of life. Remember that this contract is priced in that currency, so there is a certain amount of negativity in that general vicinity. The market will more than likely go back and forth in this tight range in the short term though, because we are getting close to the end of the year, which of course features a serious lack of liquidity. In that environment, the market will more than likely struggle to find conviction.
